Inflation is pushing people into higher tax brackets, stealthily boosting the Government’s revenue streams by over $2 billion since the last round of tax reforms.
The top tax rate now kicks in at $70,000. Earning that much does not make you rich, indeed nearly half of New Zealand taxpayers will soon be taxed at the top rate. It’s no wonder the Government, having got past the recession and Christchurch earthquakes, is now forecasting fat surpluses over the coming years.
The Government boasts about its budget surplus, but ACT takes a different view. A surplus means the Government is overtaxing – taking more from taxpayers than it delivers in return. Yet that’s what’s happening – the $1.8 billion surplus for Government is a $1.8 billion deficit for taxpayers.
Clearly the Kaikoura earthquake recovery will require spending. We also need to start paying down government debt. But there is still plenty of room for tax cuts.
We could make sure the top tax rate only applied to truly high incomes – people earning over $100,000. That change would reduce the total surplus by $300 million, that is to say, barely put a dent in it.
An even better solution would tax cuts for every worker. The truth is, we can afford to do this while maintaining (or even increasing) spending on core services.
I agree tax cuts are clearly affordable. It is not a case of “spending” all of the surplus on tax cuts, but at least having a portion of the surplus go on reducing the tax burden on families and businesses.