8 October 2008

Nats' package an assault on savings and investment

National leader John Key today revealed his plans to destroy KiwiSaver and its long-term benefits for New Zealand for the sake of his own pursuit of power, Finance Minister Michael Cullen said today.

"John Key's announcement today that National would slash by half employer contributions to New Zealanders' personal savings, and cut into many employees' contributions, exposes National's short-term agenda and proves how hollow National's so-called economic growth plan really is.

"National's first instinct is to destroy a programme that will help promote growth and to remove important employment rights that protect employees in KiwiSaver.

"If implemented, this would gut KiwiSaver and sells the 800,000 plus members down the river. It would mean the sell-out of many Kiwis' hopes of buying their first home. It would mean the sell-out of many New Zealanders' opportunity to having a little bit more in retirement," Dr Cullen said.

"The past 18 months of major stress in international financial markets has highlighted very clearly that New Zealand needs to strengthen its savings culture and needs to strengthen its savings and investment record. This is why KiwiSaver is so important.

"The short-sightedness of National's proposed attack on savings is matched only by its attack on investment in research and development and in infrastructure. John Key proposes to axe the R&D tax credit that is a fundamental ingredient in raising the nation's productivity and non-inflationary growth rate over time. John Key also proposes no offsetting increase in public sector research and development," he said.

"All for what? A poorly-designed tax package that delivers nothing to 370,000 New Zealand households that receive Working for Families, reduces legislated tax rates and thresholds for the lowest and highest earners and claws back as much as it gives in tax cuts – and more – for current KiwiSavers.

Note: Impact of National's proposals on modest income KiwiSavers

A person earning $30,000 in Kiwisaver under Labour would save $750 a year themselves, receive a $750 contribution from the government and a $750 contribution from their employer: That is $2,250 a year in their account. Labour has protected workers against employers clawing back their (employers') contribution.

But under National's anti-savings plan, the same person would pay in 2%, that is $375, receive $375 from the government but the $375 from their employer would be paid by the employee because of reduced wages: In other words, that worker would still have to pay $750, but their return would only be $1,125 in their account after a year.

Because these people would not get any additional tax relief under National's plan, they would end up losing $1,125 a year from their savings account in order to pay for National's tax cut package which, by design, mostly benefits those already on high incomes, without children and who do not have a personal savings plan.

National Tax Package less Labour Tax Package for Single-Earner Families
Annual earnings No Child 1 child 2 children 3 children 4 children
Apr-09 April-10 April-11 Apr-09 April-10 April-11 Apr-09 April-10 April-11 Apr-09 April-10 April-11 Apr-09 April-10 April-11

$15,000 $0.00 -$1.63 -$1.44 $0.00 -$1.63 -$1.44 $0.00 -$1.63 -$1.44 $0.00 -$1.63 -$1.44 $0.00 -$1.63 -$1.44
$25,000 $10.00 $9.28 $7.31 $0.00 -$5.72 -$7.69 $0.00 -$5.72 -$7.69 $0.00 -$5.72 -$7.69 $0.00 -$5.72 -$7.69
$35,000 $10.00 $9.28 $9.23 $0.00 -$5.72 -$5.77 $0.00 -$5.72 -$5.77 $0.00 -$5.72 -$5.77 $0.00 -$5.72 -$5.77
$45,000 $19.04 $18.32 $14.42 $11.54 $5.82 $1.92 $11.54 $5.82 $1.92 $11.54 $5.82 $1.92 $11.54 $5.82 $1.92
$55,000 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42
$65,000 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42 $18.46 $17.36 $14.42
$75,000 $19.42 $13.51 $10.58 $19.42 $13.51 $10.58 $19.42 $13.51 $10.58 $19.42 $13.51 $10.58 $19.42 $13.51 $10.58
$85,000 $21.35 $17.36 $8.65 $21.35 $17.36 $8.65 $21.35 $17.36 $8.65 $21.35 $17.36 $8.65 $21.35 $17.36 $8.65
$95,000 $23.27 $21.20 $12.50 $23.27 $21.20 $12.50 $23.27 $21.20 $12.50 $23.27 $21.20 $12.50 $23.27 $21.20 $12.50
$105,000 $25.19 $25.05 $16.35 $25.19 $25.05 $16.35 $25.19 $25.05 $16.35 $25.19 $25.05 $16.35 $25.19 $25.05 $16.35
$115,000 $27.12 $28.89 $20.19 $27.12 $28.89 $20.19 $27.12 $28.89 $20.19 $27.12 $28.89 $20.19 $27.12 $28.89 $20.19
$125,000 $29.04 $32.74 $24.04 $29.04 $32.74 $24.04 $29.04 $32.74 $24.04 $29.04 $32.74 $24.04 $29.04 $32.74 $24.04

National's proposed Effective Tax Rates 1 April 2011

Labour National
Income Tax Income Tax
0-20,000 12.5 0-14,000 12.5
20,000-42,500 21 14,000-44,000 20
42,500-80,000 33 44,000-70,000 33
80,000+ 39 70,000+ 37

ENDS

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