How does a tax rate cut make super more affordable?

Planned cuts in the top rate of tax weaken the ability of the government to continue to provide universal superannuation in the way all parties agreed to in the New Zealand Superannuation Accord, Progressive Party MP Jim Anderton says.

He has released the Progressive Party’s submission to the 2010 New Zealand Superannuation Retirement Income Review today.

Jim Anderton was one of the signatories of the 1993 Superannuation Accord that aimed to provide long-term stability to superannuation.

The main principle agreed to by all parties was that ‘the net amount provided from public funds for a retired person should reduce as that person’s total income increases’.

That principle could be met by a surcharge on superannuation or by a progressive income tax scale.

“If the National Government makes income tax less progressive in this budget by reducing the top personal income tax rate, then how is it going to meet the Accord principle that ‘the net amount provided from public funds for a retired person should reduce as that person’s total income increases’?

“Either National will ultimately reduce entitlement to superannuation, or it no longer believes that the amount provided from public funds should decrease as a person’s income increases. If it is the latter, then National will be solely to blame if it tries to say the cost of superannuation is unsustainable. Alternatively, if it is ultimately planning to cut publicly provided retirement incomes, then people deserve to be told.”

Jim Anderton’s submission shows that continuing New Zealand Superannuation at age 65, indexed to wages, is sustainable for the long term provided the government sticks to Accord principles.

“The future cost of super is affordable, but the government needs to keep the means to afford it”, Jim Anderton said.

ENDS

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