National has finally revealed its sweeping tax reforms as the election-bidding war starts to heat up.
Announcing the details in Auckland, leader Don Brash said rather than cutting tax rates National plans to lift the tax thresholds.
- Brash said the package will "substantially reduce" the tax rate faced by ordinary New Zealanders who "work a little harder, or do some extra overtime".
- The features of National's plan include:
- The 15% tax rate, which now applies to income below $9,500 will extend to $12,500.
- For income between $12,500 and $50,000, the tax rate will be 19%.
- The withholding tax rate for secondary employment will be 19%.
- Income between $50,000 and $100,000 will be taxed at 33%.
- Income above $100,000 will continue to be taxed at 39%.
- The lower statutory rate of withholding tax applied to interest and other investment income will be reduced from 19.5% to 18%.
- The threshold for abatement of Working For Families payments will be $30,000 from April 2006, and to keep the effective tax rate on extra income low, the abatement rate will be 20%.
- The company tax rate will be reduced to 30% in April 2008.
- The personal tax reductions will be implemented in two stages in April 2006 and April 2007.
"Under this tax structure, a person on the average wage can work harder, do some overtime, or take secondary employment, and they will from next year keep more than $4 in every $5 they earn," Brash said.
This means a single person earning $38,000 will receive a $630 a year increase from April next year, rising to $690 a year from April 2007.
Someone on $50,000 a year will get an annual increase of $1,470 from April next year, rising to $2,370 from April 2007.
The party's finance spokesman John Key said on Friday that the total cost of National's tax cuts would be $9.4 billion over three years.
National will also scrap the carbon tax, which it predicts will save the average household around $200 per year from 2007.
This announcement might be what National needs to move it up the polls. In the latest One New Colmar Brunton poll on August 21, Labour stayed steady on 45%, but National dropped four points from 41% support to 37%.
In the preferred Prime Minister stakes Labour's Helen Clark is up two points to 43%, while National's Don Brash is down four to 21% support.
National's tax cut plan is being applauded by the Act party, which says the changes would boost the economy and workers' pay.
Act leader Rodney Hide says a simple flat-rate tax structure would be best for New Zealand, but the party supports National's plan as a starting point.
Unsurprisingly Labour Party finance spokesman Michael Cullen has dismissed the plan as an unfair and unaffordable.
Cullen says the plan may be attractive to some people, but they have to think about who would pay for it.
