Calculating Tax Cuts

May 23rd, 2008 at 10:39 am by David Farrar

The Deloitte team who were behind me in the lockup gave me a copy for the blog of their Deloitte Tax Cut Calculator (now on their website) which is an excel spreadsheet.

It not only shows you how much your tax will be in Oct 2008, April 2010 and April 2011 but also what the same tax would be in Australia.

They have also calculated how much you need to earn to be paying less tax in NZ than Australia. It used to be $1,571,922 but now life gets better in NZ at merely $1,284,992.

The Visible Hand in Economics has also links to three other calculators

  1. Infometrics which gives you the annual and weekly reduction in tax and percentages
  2. Labour, which includes WFF for the breeders :-)
  3. NZIER which has an Excel spreadsheet

Worth remembering that the annual figure for Oct 2008 will be half that, as it only applies for half the year.

helpfully also shows you what your tax would have been in 2000 in both NZ and Australia. So if you are on $100,000 you would have been paying the same tax in 2000 ($22,057 in NZ and $22,446 in Australia). In 2010 it will be $30,588 and $26,569 respectively. This assumes 3% wage growth.

Matt Nolan at TVHE also looks at the impact of both and huge spending increases on inflation. He thinks it is possible inflation may hit 5%, which would suggest interest rates staying high for a while yet.

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10 Responses to “Calculating Tax Cuts”

  1. Kimble (4,443 comments) says:

    For those who wont be going to check, Matt did qualify his estimate and said that the half of the increase would be due to a price abberation last year so the actual increase is more likely to be around 0.5%.

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  2. Matt Nolan (73 comments) says:

    “For those who wont be going to check, Matt did qualify his estimate and said that the half of the increase would be due to a price abberation last year so the actual increase is more likely to be around 0.5%.”

    Kimble is exactly right – I was talking about the possibility that the underlying inflation rate would head to 4-4.5%, which would look like a 5% inflation rate in September because of a one off fall in the price level in September 2007. Furthermore, I wasn’t just blaming tax cuts – I was also assuming that fuel prices would push up towards $150 and that the price of meat would start to climb strongly.

    However, the psychological impact of an inflation number of 5% would probably have quite an impact – and is something the RBNZ will be mindful of when delivering its MPS on the 5th of June. I think Alan Bollard is best qualified to tell us the inflation risks though – and although the tax cuts were significantly higher than those placed in the RBNZ March forecasts I can still see them cutting rates this year if they believe credit condition are still artificially tight (as tight global credit conditions have lifted interest rates without any RBNZ action).

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  3. tim barclay (886 comments) says:

    After nine years of hard Labour all they could come up with is a miserable $16 and some forward programme which they have cancelled in the past. Conversely in Australia, running SMALLER supluses the culmulative tax reduction over that 9 year period has been $100 pw. And the Australians have a forward programme partly financed by expenditure reductions. This Government is not making any cuts to Government spending saying services will be placed at risk. All money is being spent wisely by the Labour Government far more wisely than the individuals who have their wealth confiscated to finance it. Pigs are flying.

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  4. Kimble (4,443 comments) says:

    Just had a delicious idea.

    National should announce that due to the imprudence of the current Finance Minister, the country can no longer afford to cut taxes. Furthermore, National will work in their first term to tighten the belts of government to avoid the need to send the country into debt to pay for the tax cuts Cullen has recklessly made unaffordable and allow continued saving for our collective retirement.

    Really pull the rug out from under Labour.

    Cullen has gone through a dangerous mid-life crisis while still in power and has spent the countries retirement funds on a flashy sports car to impress/punish a spouse who has fallen out of love with him in the last few years.

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  5. Bryan Spondre (556 comments) says:

    DPF: hope you don’t mind but I have posted a video on YouTube of Dr Cullens response to your budget question here: http://nz.youtube.com/watch?v=y2UIy5xWbrQ

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  6. RRM (10,034 comments) says:

    Kimble: but The Tax Cut That Will Fix Everything is currently the one and only major leg that National’s election platform stands on.

    Why would people vote for Our Hero Mr John Key if he won’t even deliver The Tax Cut That Will Fix Everything?

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  7. Kimble (4,443 comments) says:

    RRM, i really dont expect you to understand, but Cullens problem is that tax cuts are affordable when you have a world-record sized surplus and wouldnt be inflationary if they had been accompanied by a reduction (or even a slowing) of expenditure growth at any point over the last 5 years.

    We have been calling for tax cuts for 5 years or more because they have been affordable and justified for 5 years or more.

    It is like a person with a broken leg screaming out for someone to set it for days, and finally when the medic decides to do it, the leg has already healed itself at an awkward angle. That cast isnt going to do anything anymore. Would you vote that medic, Health Carer of the Year?

    What about the other medic that has been calling for the leg to be set for these days as well? When he finally gets the opportunity to help he cant just set the bone and put a cast on it, even though that is what he has been calling for for days.

    He has to rebreak the leg to set it correctly. And now you and your sort will blame the new medic for all the pain and suffering caused by the previous guys incompetence/malice, demand that he be fired, and that the student of the previous medic be given the job.

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  8. PhilBest (5,125 comments) says:

    DPF, hit us with the comparisons between Aussie and here for the LOWEST income groups, would ya? Kind of gives the lie to the NZ socialists alleged representation of the “working poor”. No wonder the Trades in NZ are leaking contract labourers flat out.

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  9. David Farrar (1,902 comments) says:

    Bryan: Not at all mind.

    Philbest: Well if you earn $20,000 in Australia soon you will pay zero tax!

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  10. tom hunter (5,095 comments) says:

    David

    Off-topic but……. I asked yesterday whether the ability to submit images in WordPress had been switched off for this site? I saw an image in one thread a while ago but nothing since.

    I ask because I wanted to submit a couple of poster pictures on the Obama threads.

    [DPF: I have not changed anything in relation to that]

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