$47 a week

The Herald reports:

A government would introduce for average wage earners of around $47 a week by 2011, party leader John Key said today.

Details yet to come. This includes the tax cuts we got last week.

UPDATE:

  1. A tax rate of 12.5% on income to $14,000
  2. 21% on income from $14,000 to $48,000 (moves to $50,000 in 2010 and rate drops to 20% in 2011)
  3. 33% for income from $48,000 to $70,000
  4. 38% for income from $70,000 (dropping to 37% in 2010)

Around 80% of taxpayers will pay a top marginal rate of no more than 20%. Hence secondary tax rates will shift to 20% for most.

Also a Independent Earner rebate of $10 to $15 a week for people not getting a benefit, Working for Families, or NZ Super, who earn between $24,000 and $40,000.

The long-term ambition is a top tax rate of 33%, but this will depend on economic conditions improving.

National is going to change Kiwi Saver from a 4% employer/4% employee scheme. It is going to make it 2% employer/2% employee and if conditions permit then lift that to 3% employer/3% employee. Note these are just the statutory minimums – employees can still put in more than 2% and employers can agree to higher contributions also.

The current KiwiSaver scheme (which I have often blogged support for) was set too high at 4%/4%. It was soaking up money needed today. As proof it was set too high, consider this. A 25 year old today on the average wage who went into KiwiSaver would have a higher income when they retire (including NZ Super) than they would have had during their working life (on the average wage). Now it is just nuts to have people earning more in retirement than they did while working. The 2%/2% scheme still has the incentive for the employee, but 4%/4% is part of what led to the projection decade of deficits.

Overall Package

The overall package announced by National isn’t just fiscally neutral – it is in fact fiscally positive by $283 million over three years. A small first step towards ending the projected decade of deficits.

But the bigger picture is growing the economy to pull out of deficit. $283 million won’t do it by itself. Putting more money into people’s pockets, rather than forcing it into super schemes that are currently losing money, will help. And moving to a flatter tax rate at the top end will also help economic growth in the long run.

National is also pulling back on its infrastructure package from $4.5 billion over six years to $3.7 billion over six years. That combined with stuff such as cancelling the MFAt expensaion plans will see debt tracking no higher than the status quo.

National have responded to the economic and financial crisis with a credible package that takes account of world events and a plan for economic growth. What is Labour’s response? Are they really saying that they don’t need to change anything from what they announced six months ago? Surely not. Labour need to reveals its policies and plans – if they have one.

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