INDEPENDENT NEWS

Twenty Cents In The Dollar In Five Years

Published: Wed 3 Nov 1999 11:54 AM
ACT Finance Spokesman Rodney Hide said today that a twenty-cent top rate of tax was easily achievable in five years.
"All that is needed is for government to respect once again the tax dollars that New Zealanders work so hard for.
"To show the ease with which twenty cents can be achieved the ACT party has put together an alternative Budget. These are not ACT Budgets but rather alternative Budgets based on Treasury's own forecasts to show contrary to what critics have claimed that a top rate of tax of twenty cents is indeed possible.
"ACT is the only Party this election that has costed its tax policies and shown how they are possible.
"The baseline out to 2003 is taken from the Treasury's Pre-Election Fiscal Update while the figures for the subsequent two years are taken from Treasury's Long Term Fiscal Model.
"To show how readily achievable sizeable tax cuts are, all agreed spending is left in place -- that includes allowances for inflation and demographic changes.
"The reduction in government revenue is estimated at its most pessimistic. This assumes not one extra job and not one extra dollar of investment as a consequence of reducing the top rate of tax. Treasury's "Ready Reckoner" updated for the PREFU is used and adjusted each year by projected growth in the tax base.
"Three changes apart from the tax reductions are made. TVNZ is sold. This is sound policy. TVNZ is now run entirely commercially, it ties up approximately 1.6 billion dollars worth of taxpayer dollars, and is now on the government books as a fiscal risk. The second change is to cut out all future allocations for "Future Initiatives" -- there is enough slack in departmental budgets to provide for any new projects that have merit. Existing budgets should be the first port of call for meritorious new projects -- not the taxpayer. The third change is to apply some of the surplus to tax cuts -- 1.2 billion out of 3 billion in 2004/2005.
"The funding of the tax cuts out of "Future Initiatives" and the Operating Balance is exactly how the government is funding its 1 July 2000 tax reduction that is left in place. ACT's control on government spending will take government spending down to 29.5 pecent of GDP -- a target that National has been promising to reach for five years.
"Labour's Dr Michael Cullen has declared that cutting the top rate of tax to twenty cents in the dollar is not possible based on his reading of the PREFU. The ACT party has put its numbers out based on the PREFU. We have yet to see Dr Cullen's," said Rodney Hide.
ACT's numbers available here.
ENDS

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