Friday, 9 May 2008

Tax-free allowance rejected by Cullen

It seems a shame (but not entirely surprising) that Finance Minister Michael Cullen has rejected the idea of a tax-free income threshold, as part of his 3-year tax package expected in this year's budget.

Cullen's announcement came as Australia's Prime Minister Kevin Rudd confirmed his Labour Government's A$31 billion package of tax cuts, after just six months in power.

Rudd has ordered for costs to be trimmed at Government departments there, easily achieving $1.4 billion in savings across the board.

New Zealand is quite unusual amongst Western countries with its lack of tax-free thresholds, where all workers pay 0% tax on the first portion of their earnings.

In Australia, the first $11,000 earned by workers each year is tax free (that will rise to $20,000 by 2012/13). In the United Kingdom, workers can expect a "personal tax-free allowance" of £5,435 (about NZ$13,000) for the coming year, paying 20% on income after that up to £36,000.

Michael Cullen says he discounted a similar tax-free threshold, because "officials said it would benefit few on incomes under $18,000".

What he means is that it would not benefit beneficiaries, although it would give an even tax cut to all working New Zealanders, with a boost that would be felt by most on lower to middle incomes.

The ACT Party meanwhile are pushing for a $20,000 tax-free threshold (for starters), the Maori Party want no income tax for the first $25,000, and even the loopy lefty Greens paused their smoking and striking long enough to call for the first $5,000 of income to be tax free.

Helen Clark has promised a package of "tax relief", which is likely to be mainly made up of more welfare handouts (Working for Families, due for a minimum boost of $100 million).

New Zealanders who aren't married, or don't have children, will continue to fund or heavily subsidise those that do fall within Labour's ever-shrinking target demographics.

* Kiwiblog: No tax free income for New Zealand
* Kiwiblog: NZ vs Australia tax rates
* NZ Herald: Cullen rules out tax-free threshold

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