John Key spent yesterday building the expectation of low- and middle-income earners. Photo / Mark Mitchell
John Key spent yesterday building the expectation of low- and middle-income earners. Photo / Mark Mitchell
nzherald.co.nz will have full coverage of today's Budget, with news, comment and analysis from 2pm.
Prime Minister John Key has confirmed that all personal tax rates will be cut in today's Budget.
He has heralded a sock-it-to-the-rich approach towards those who fiddle with their tax liability by sheltering income in trusts and companies.
And, in a bid to counter Labour's pre-emptive attack against the highestpaid getting the biggest tax cuts, Mr Key is promoting it heavily as a "fairer tax system".
"We will be making sure that all New Zealanders, the wealthy included, pay their fair share," he told Parliament yesterday.
"The rich, by and large, do not pay the top personal tax rate. Really wealthy people will probably find they are paying considerably more tax as a result of the Budget ... not less."
Mr Key spent yesterday building the expectation of low- and middle-income earners, at least those not receiving Working for Families tax credits.
He effectively rejected speculation, including in the Herald, that middle-income earners will not get much out of the Budget once the GST rise from 12.5 per cent to 15 is factored in.
He told reporters that all rates - including the 33c rate - would be cut.
But he would not comment on whether thresholds might be adjusted to allow people to earn more before the next rate kicks in.
Someone earning $60,000 a year with no children "who waited 10 years under a Labour Government to get absolutely not a cracker" would be getting more in the Budget than they expected, the Prime Minister said.
He was acutely aware that low-income earners would like to earn better wages, and that was done through economic leadership.
"For nine years [under Labour], we waited for that and it never came. Tomorrow, the bus is arriving here in Parliament."
Personal tax rates at present are 12.5c (on income up to $14,000), 21c ($14,001 to $48,000), 33c ($48,001 to $70,000) and 38c ($70,001-plus).
One scenario would see the 38c rate cut to 33, the 33c to 30c, the 21c to 19c and the 12.5c to 10c.
Mr Key rejected suggestions by Labour leader Phil Goff that curbing tax breaks on investment properties would force rent rises from landlords and add to the burden of the 30 per cent of New Zealanders who rented.
The PM said the Treasury's advice was that the effects would be negligible.
Finance Minister Bill English said the tax system had been "allowed to fall into a state of disrepair". The tax base would be extended beyond the current definition of income.
The present diversity of rates encourages people to shelter income in trusts, companies and portfolio investment entities to cut their tax liability.
The current top personal tax rate is 38c, the trust rate 33c and the company rate 30c. This has led to many on the top rate organising their affairs to cut their tax liability or reduce income for the purposes of receiving Working for Families payments, calculating child support and making student loan repayments.
The Tax Working Group report in January argued for alignment of tax rates.
