Labour has announced a three year tax cut package worth $10.6 billion. Here’s a table showing the changes:
|Up to||$9,500.00||$38,000.00||$60,000.00||$60 K|
What does this mean? Here are the figures for various incomes levels:
|Tax cut $ per year||Income||01/10/08||01/04/10||01/04/11|
|Min. wage fulltime||25,037||$620.00||$917.50||$1,130.00|
There’s no big bang in these cuts, and that might disappoint a simplistic analysis, but it’s actually quite clever. Labour has lowered the bottom tax rate and extended all the thresholds in steps. This means that the tax cuts are well spread across all income levels.
The 50% of kiwis with incomes below $28,000 will be paying from 11% to 26% less tax from October, and from 21% to 31% less tax by April 1 2011. The tax cut for the average employed person will be $16 a week rising to $32 a week, while those on incomes over $80,000 will get cuts starting at $28 rising to $55.
The increase in the 39% threshold will mean 300,000 fewer people will no longer be paying any tax in this bracket by 2011. By then, no-one with an income of $100,000 or less will be paying over 27.4% of their income in income tax and nearly 2 million people will be paying less than 15% of their income in tax.
Of course, income tax is no longer as simple as the simple rates, Working for Families delivers a tax break to 70% of kiwi families with kids, over 370,000 households. The Working for Families payments have been boosted too. The average family has an income of $72,000 (two thirds from one parent, a third from the other) and two children. With the tax cuts and Working For Families increases combined, these families will be $43 a week better off on October 1 and $85 a week better from April 1 2011.
It’s worth noting that superannuation is tied to the average after-tax wage, so a tax cut sees superannuation payments automatically boosted. Coupled with tax cuts, a couple on super will be about $75 a fortnight better off by April 1 next year.
Tax cut calculator (doesn’t include Working for Families).