Oct 8, 2008

National's Tax Plan

This from John Key's Speech

Details of the plan
I will now turn to National’s tax plans in more detail.
Following on from the tax cuts of 1 October 2008, National will be making further tax reductions on 1 April 2009, 1 April 2010 and 1 April 2011.
We will deliver the bulk of our tax cuts five months from now, on 1 April 2009. As of that date National will apply the following new income tax rates and thresholds.
A tax rate of 12.5% for income up to $14,000.
21% for income between $14,000 and $48,000.
33% for income between $48,000 and $70,000.
And 38% for income over $70,000.
On 1 April 2010 we will shift the threshold at which the 33% rate applies out to $50,000 and lower the top rate to 37%
On 1 April 2011 we will lower the 21% rate to 20%.
This programme of tax reduction will provide welcome relief for households who are feeling the pressure of a down-turning economy.
That means that under National’s tax plans around 80% of taxpayers will be paying no more than 20c in tax for every additional dollar that they earn.
This will ensure that everyday Kiwis can look forward to earning more and getting ahead under their own steam.
As a result of our changes to the tax structure, most workers with second jobs will pay a secondary tax rate of no more than 20%.
National has taken steps to ensure there is substantial relief for those taxpayers who earn less than $50,000 and who are not getting financial assistance from the government.
Those who earn between $24,000 and $50,000, and who aren’t getting a benefit, Working for Families, or NZ Super, will qualify for the new Independent Earner Rebate.
This will start at $10 a week and rise to $15 a week, which they will receive as part of their normal pay cycle.
This rebate rewards those lower and middle income workers who have not received any benefit from large government surpluses over the last few years. It ensures that National’s tax cuts are fair across all income levels and that all workers, no matter their family situation or income level, face incentives to work hard and get ahead.
National will drop the top tax rate to 38 cents in the dollar in 2009 and to 37 cents in the dollar in 2010.
The top tax rate applies to many of the skilled workers our communities rely on – including school principals, GPs, police officers, and many teachers. By reducing the top rate we will show these people that they have a real future in New Zealand where their effort and aspiration will be rewarded.
As I said yesterday, we have made some changes to our tax package in light of the news dished up in Monday’s PREFU. We had planned to move more aggressively to reduce the top personal tax rate over the next three years.
Our longer-term plan for the income tax system is a simple three-tier structure with the highest rate at no more than 33% for income above $50,000. This is what we will work towards as future economic conditions allow.
But we are being realistic about what is affordable in light of the mess Labour will be leaving behind it. We will continue to target a top tax rate of 36 cents and then lower towards 33 cents over time, subject to economic conditions.
I make no apologies for sending a clear message that National values enterprise, hard work, and people getting ahead under their own steam. I think it’s time we all moved on from the politics of envy and embraced a tax system which assists us in retaining our skilled workforce in this country.