Friday, May 23, 2008

Has Cullen increased a tax rate for the lower paid?


In the George Orwell novel 1984, I remember a passage about the chocolate ration.
Big Brother cut the chocolate ration, but the state run media said the chocolate ration had been increased, and the 'proles' believed them and were grateful to 'BB.'
Has the New Zealand media fallen for something similar here?
Media coverage mentions a tax rate of 21c but checking the IRD website, I see reference to a 19.5 c tax rate.
So to fund taxcuts has Michael Cullen grabbed a bit of cash at the bottom by a devious and hidden increase in the next-to-bottom rate?
I note the media has faithfully reported how Cullen's taxcuts will mean people will be paying a little less, while ignoring the actual marginal rate.
Perhaps this is something in need of better exploration by tax experts.
It all seems reminscent of what Gordon Brown did in the UK a few months back, when he axed a bottom rate of tax, hitting the lowest paid. So has Cullen done something like it here? Was Budget 2008 another another policy written in London?
But what will the implications of this be? Likewise, a further slump in the polls, just like Gordon Brown has suffered?
Hat tip: Dave Gee

5 comments:

Clunking Fist said...

That funny: I thought it was only me.
I had thought "oh, when did the rate increase from 19.5%? Maybe while I was overseas?"

So I'm NOT mental then.
Well, I am, but not on this.

Clunking Fist said...

Has someone misspoken and meant to say 19.5?

Lindsay said...

Media; "Presently, the tax system has four effective rates: 15 per cent up to $9,500, 21 per cent to $38,000, 33 per cent to $60,000 and 39 per cent for anything above that."

Neither is there a 15 percent rate unless the individual is claiming a rebate. Of course that word "effective" makes it all a mystery to me.

This is exactly why we need a flat tax. Simplicity and transparency. And low. Compliance and economic stimulation.

Adolf Fiinkensein said...

Is there something wrong with my maths? I make the net difference for a salary of $40 to be a lousy S9.80 per week.

david w said...

No Orwellian plot, no Mystery either.

IRD has the statutory rates and stuff has the effective rates once the effect of the tax rebate offered to people earning less than 38000 are taken into account. You get 4.5c off the first $9000 you earn - in order to do this and still have people earning $38 000 be taxed at 19.5% for the whole lot you need to tax dollar 9001-38000 at 21%. Which gives you the four brackets described in the stuff article.