Guest Post: Roger’s Policy Recommendations

Following on from the earlier guest post, these are the policy recommendations for New Zealand’s situation from Sir Roger Douglas:

• A tax-free income of $52,000 for single taxpayers or $65,000 for one-income families (cost $15 billion)
• A tax of 24 cents in the dollar on income above $52,000. (cost $5 billion)
• A corporate tax rate of 20 cents in the dollar. (cost $ 4- 41/2 billion)
• Yearly savings of $18,200 per year on incomes above $52,000, slightly less for those on incomes below $52,000 (Super $6,240, Health and Risk $11,960).
• Savings paid for by personal tax reductions 50% (9,100), employer 35.7% (6,500)(In lieu of lower company taxes, no super or ACC contributions) individual 14.3% (2,600). (In lieu of ACC and kiwi saver contributions)
• Savings and contributions indexed to an appropriate index.
• A guaranteed minimum income for low-income families (replacing working for families).
• Healthcare – Savings
• $8,660 each year (inflation adjusted to go into individual’s Health Fund.
• $12,480 each year to go into one-income families’ Health Fund. NZ wide savings of $15 billion a year)
• Healthcare – Expenditure – A chronically ill fund to be established with contributions from savers and government.
• – A catastrophic insurance policy to be taken out each year by every New Zealander for events costing $20,000 or more.
• Healthcare – A government underwrite.
• Healthcare during retirement – objective to retire with a fund of at least $80,000 (real) after 25 years, $150,000 after 40 years of contributions. Any balance at death goes to surviving spouse or estate.
• Superannuation
•      $6,240 savings per year (indexed to wages).
•      Savings (earning a real 4%) likely to have a fund size of $750,000 after tax on retirement, given 40-50 years of employment.
• NZ wide savings of $10.2 billion a year
• Risk Cover (unemployment, sickness and accident compensation)
•      $3,300 savings a year.
•      A catastrophic insurance policy to be taken out each year.
•      A government underwrite.
•      No variance in rate of payout if out of work (e.g. ACC same as sickness).
•      Any balance in account on retirement goes into individual’s Health Account.
• Education – an education tax credit for every child whose family wants it.
• Housing and Infrastructure
•      Use 10% of gross yearly savings equal to three billion dollars for housing and infrastructure.
•      Policies to ensure sufficient land is zoned for section development.
• Out of Work Beneficiaries
•      Special training for those who need it (compulsory).
•      Reformed management structure for out of work area.
• Retirement  
• Age of retirement to move from 65-70 over 20 years                                                                                              –     
• Opportunity to retire before 70 if individual is prepared to use own savings to do so.
• Existing government pension to continue at age 70 as it is today.                                                             
• Privileges
• Middle class privileges withdrawn.
• Corporate welfare privileges withdrawn.                                                                                                                
• GST rate of tax increased by 2½%.                                             

• Taxation of Superannuation
•      No tax on income earned by the fund on investments while individual is working and contributing.     

•      A 25% tax applies on retirement to the balance held in the fund.

A great prescription for NZ.