Help Pay For Chch With $462m Cost Of Tax Cut For Top 5%

The country will be $462 million deeper in the red this year because of the cut in the top personal tax rate for those on incomes of over $100,000 a year, Progressive Wigram MP Jim Anderton says.

He says the cut in the tax rate for the top 5% is worth at least $4.6 billion over ten years, which could be used to help meet the cost of rebuilding Christchurch and give young jobless Cantabrians trade skills to rebuild the city.

“The Government says the deficit is very big this year. It could reduce that deficit by reversing some of the tax cut they gave on 1 October, at least temporarily. Earners on incomes of over $100,000 would still get the benefit of tax cuts on income below $100,000 - the same tax cuts everyone else gets. The highest income earners in New Zealand would still get at least $500 million in tax cuts.

“But the country desperately needs the money now. The large deficit means the unaffordable 1 October 2010 top tax rate cut needs to be reversed. Surely NZ’s highest income earners would not object to that course of action”.

A calculation table is available on Treasury’s website at:

http://www.treasury.govt.nz/government/revenue/estimatesrevenueeffects/personal/index.htm#table

It shows income of around $9.3 billion is earned by those with incomes over $100,000. Using Treasury’s methodology, the difference in government revenue is calculated by multiplying that figure by 0.06 (i.e., 6 cents in the dollar, from 33 cent tax rate to 39 cent), and then applying a deflator of 17.3% (because, for example, some of the income won’t be spent and attract GST).

This gives a total cost - and therefore an increase in the fiscal deficit - of $462 million this year.

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