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Tax Cut Promise to be paid for by Effective Tax Increase

Tax Cut Promise to be paid for by Effective Tax Increase for 720,000 New Zealanders


22 May 2014

New Zealand Union of Students’ Associations


John Key and Bill English appear to want to go into the next election promising a tax cut – which will inevitably go to the highest earning New Zealanders. However, the New Zealand Union of Students’ Associations (NZUSA) points out that it will be paid for through an effective tax increase – a compulsorily collected reduction in take-home pay – on the 720,000 former students who have a student loan.

“The 2014 budget froze the student loan repayment threshold at $19,084, below the minimum wage and well below the Australian student loan repayment threshold of $53,345. In real terms, this means as wages increase for graduates, low income earners will not be able to put food on the table or pay spiralling housing costs”, said NZUSA President Daniel Haines.

“On top of this, in 2012 the repayment rate increased from 10 cents in the dollar to 12 cents. A graduate earning the average wage of $54,700 will be paying an effective marginal tax rate of 42 per cent. It is mean-spirited that English has trumpeted that average wages will increase by $7,500 over the next four years.

“The cumulative effect of increasing the repayment rate whilst freezing the threshold means of the $7,500 increased wages, $5,000 will be clawed back. By reducing our investment into education and health this Government paid for the surplus. Now graduates have to pay for their proposed tax cuts too, this simply isn’t fair.

“Not that he or his generation need to worry, for them tertiary education was free. Why are those who benefited from the opportunity to access free education and cheap housing removing that right from others?”, said Haines.

ENDS

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