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Cullen Must Give Kiwis $35 Just To Break Even

Posted on 13 May 2008

Finance Minister Dr Michael Cullen needs to give Kiwis on the average wage $35 a week just to break even under his management, ACT Leader Rodney Hide said today.

"Over the past nine years, Dr Cullen's failure to inflation-proof personal income tax brackets has robbed Kiwis of $10 billion.  That's the cost of fiscal drag," Mr Hide said.

"Dr Cullen's overtaxing of hardworking New Zealanders amounts to nothing more than a giant tax bracket racket.  Had he raised tax brackets by the amount of inflation each year, New Zealanders' incomes would have been $10 billion higher.
"But, instead, the Government took that money - and wasted much of it on stupid schemes like buying back railways debt.

"A Kiwi on the average wage has been robbed of $4,232 over eight years.  The cost for 2007-08 was $1,198.07 - that's $23 a week.  If nothing changes in the Budget, this year it's likely to go up to $1,405 - or $27 a week.

"Since 2000, the average gross wage has increased 36 percent.  But the total tax paid on that wage has increased 56 percent. 

"Even if Dr Cullen gives a bit more than $35 a week, it won't be a real pay rise.  Suppose, in a fit of generosity, he lets average wage earners keep $40 a week more of their own money - in theory, that would put them $5 a week ahead of the game.
 
"But that would be an illusion because, by March 2009, they'll already be $4,232 behind.  So being $5 a week - $260 a year - ahead won't mean much.  In fact, at that rate, it would take them over 16 years to get square," Mr Hide said.

ACT founder and candidate the Hon Sir Roger Douglas said ACT would make the first $10,000 tax-free for full-time income earners, and inflation-index tax brackets to restore 2000 values.

"That would give the person on the average wage an immediate tax saving of $50," Sir Roger said.

"That's just what we'd do immediately, and I'll be announcing our programme of long-term tax reform later in the year.

"Further, we will abolish the Cullen 'envy tax' rate of 39 cents, and will look to make taxes as low and as flat as possible, in line with international best practice now seen in countries like Russia and Estonia," Sir Roger said.

ENDS

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