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English Needs To Set Tax Target - ACT

Friday 9th Jul 1999
Rodney Hide
Media Release -- Economy

ACT Finance spokesman Rodney Hide said today that Treasurer Bill English must set a tax target to overcome the perception he has created that National is a party without direction on tax policy.

"Bill English must put an end to the tired tax striptease. He must heed the calls of National Party delegates who are saying they want National Ministers to set out clear directions on key policies like tax at this weekend's annual conference.

"Bill English should use the opportunity he has this Sunday to tell the National party faithful what his tax target is. He won't achieve lower taxes for hard working New Zealanders unless he has a clear target. He should be aiming for a top rate of twenty cents in the dollar for income tax.

"Under Sir William Birch government spending drifted up by a billion dollars a year. This lax fiscal control put pressure on the productive sector as we endured high interest rates and high exchange rates. The direct effect is an extra $100 a week out of each and every household's budget. The extra spending has produced no noticeable improvement in social services. The only people to have benefited from this largesse appear to be Mogridge and Wall, high-priced computer consultants and Treaty experts.

"Tax cuts aren't hard to achieve. All they require is fiscal discipline and respect for taxpayers' hard-earned cash. We could have a three-cent tax cut to the top rate of tax each year for the next three years - all that would be required is the sale of TVNZ and for government to stick to its Budget and not let spending drift up by $680 million a year for "future initiatives".

"I hope Bill English will explain to the party faithful why the government should keep TVNZ, why he thinks government can spend tax income set aside for 'future initiatives' better than the people who earn the money in the first instance, and why the top rate of tax should not be cut immediately.

"There is a lot riding on Mr English this Sunday. He has built up the expectation of a major announcement on tax. This was to overcome the disappointment of the lack of tax cuts in the Budget. He can't afford to disappoint a second time.

"The idea being mooted of shifting up the threshold where the top rate of tax cuts in is muddle-headed. It is a very expensive move for the government to make and does nothing to boost investment or jobs. Shifting the threshold from $38,000 to $45,000 would reduce government revenue by about $350 million. Shifting it to $50,000 would reduce government revenue by $760 million.

"This compares to reducing the top rate of tax by one cent which would reduce government revenue by a maximum of $240 million. This is the maximum reduction in government revenue because it assumes no extra jobs or investment as a result of cutting the top rate of tax.

"The desperate need is to boost business and jobs. That needs a cut to the top rate of tax. Cutting the top rate of tax will benefit everyone as it means more jobs and more growth. The top rate of tax is the tax on business and that rate drives the level of investment in New Zealand. Cut the top rate and the result is more investment and that means more jobs and more growth.

"Shifting the threshold up is expensive and does nothing to boost investment. Such tax cuts would be welcome but they won't have near the positive effect on the economy that cutting the top rate would have. That's the rate that should be cut.

"Bill English should explain to the party faithful that good economics is good politics and set a clear target for tax," said Rodney Hide.

ENDS

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