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New Zealand: an over-taxed nation

New Zealanders are over-taxed. The past decade has seen huge increases in the government’s tax revenue – and in government spending.

New Zealand has record budget surpluses, and in the 2006 Budget the government has a once-in-a-generation opportunity to cut taxes significantly.

In a paper to be released on Monday 15 May, Are New Zealanders Paying Too Much Tax?, Phil Rennie examines New Zealand’s tax burden and finds that New Zealand is a highly taxed country on a global scale. In the lead-up to the New Zealand government's 2006 Budget, Rennie argues that New Zealanders deserve to keep more of the wealth they have generated.

New Zealand’s taxation levels are higher than most of its major trading partners – Australia, Asia and America – and only slightly lower than the stagnant European economies.

Although New Zealand’s top personal tax rate of 39% is among the lowest in the world, it applies at such a low level that many families paying the top rate also qualify for government assistance under the Working for Families scheme.

“In nominal terms, New Zealanders pay 50% more tax than they did in 2000. In recent years, government tax revenue in New Zealand has increased at twice the rate of inflation and well ahead of all predictions.”

The government is taking more tax revenue than it can spend, so much so that it could easily return substantial tax cuts to New Zealanders without eating into current spending levels.

“Avoiding debt, and repaying it, is fiscally conservative and a commendable way to manage the accounts. But it beggars belief that room can’t be found for tax relief when the accounts are so healthy.”

Tax thresholds in New Zealand have not changed in ten years, but the average worker is earning more, and paying tax at a higher rate.

This ‘bracket creep’ is taxation by stealth. “Welfare benefits are adjusted on 1 April every year to match inflation. Why should taxpayers be treated differently?”

“Even if the government refuses to lower tax levels, adjusting the tax brackets for inflation would be a small but important first step in reducing our tax burden to a fair level.”

“It would change the presumption in favour of the state back towards the individual, and ensure that when the country does well the creators of that wealth get to keep a fair share of it.”

Phil Rennie is a Policy Analyst working in the New Zealand Policy Unit at The Centre for Independent Studies.

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READ IT ONLINE HERE: http://www.cis.org.nz/IssueAnalysis/ia71/ia71.pdf

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