“Jacinda Ardern is wrong when she says tax cuts can’t happen because they’d be inflationary, she just needs to stop her addiction to spending,” says ACT Leader David Seymour.

“Jacinda Ardern is wrong when she says tax cuts can’t happen because they’d be inflationary, she just needs to stop her addiction to spending,” says ACT Leader David Seymour.

“Ardern said on Newshub Nation this morning that there is a cost of living crisis that everyone is in. Given that admission, she needs to give New Zealanders some relief.

“Tax cuts are not only possible, but necessary for New Zealand’s recovery.

“ACT is the only party that has released a fully costed Alternative Budget. ACT’s Alternative Budget for Real Change shows how the Government could reduce spending without touching any frontline service, and then deliver significant tax cuts to middle income New Zealanders.

“First and foremost our Government needs to control its expenditure. So long as the Government is spending up large, it is creating inflation and competing for resources with households and businesses. That has to stop.

“ACT’s Alternative Budget shows how expenditures could be reduced by $7.2 billion with measures including an end to corporate welfare and returning the number of bureaucrats to the the 47,000 Labour inherited.

“ACT’s Alternative Budget then adds $1.5 billion of new spending for paying good teachers more, matching Australia with defence at two per cent of GDP, and sharing GST on construction with local councils to get housing built.

“That allows $3.3 billion of tax cuts, reducing the middle income tax rate down from 30c to 17.5c in the first year. A Nurse with one child, for example, earning $70,000 would receive around $2,300 in tax relief.

“People earning between $2,000 and $48,000 will get a Low and Middle Income Tax Offset of up to $800 that offsets the additional $980 in income tax. They will also receive an additional $253 in carbon tax refunds for every person in their household, leaving them better off overall. ACT’s tax swap leaves everybody better off.

“The net effect of these changes is that ACT’s changes reduce the deficit by $2.3 billion in the Financial Year 2022/23. The net effect is a reduction in fiscal impulse, pulling back inflation.

“Subsequent further tax cuts, reducing the 33 per cent rate to align with the Company Tax Rate of 28 per cent, would be implemented as soon as inflationary and fiscal conditions permit. Implementing them in Financial Year 2023/24 would allow a Government following ACT’s budget to return to Surplus by 2024/25 on current forecasts.

“Importantly, our plan results in operating allowances that exceed Labour’s from Budget 2021 in most years and equal theirs from Budget 2022 in 2023/24. We are able to deliver tax cuts without touching a single nurse, teacher, or front line public servant. In fact, they will all be better off thanks to ACT”s tax relief.

“However, tax cuts are not only possible, they are essential if New Zealand is going to break out of its post-COVID funk and become competitive in a world crying out for investment and talent.

“Our plan for a simple, fair and competitive tax system would reduce the fiscal impulse – whether fiscal policy is adding to or subtracting from inflation – below Labour’s in the first year and get to surplus in 2024/25.

“We are retaining the option of delaying the cut in the 33 per cent rate to 28 per cent if inflationary conditions continue for longer than expected. However, our goal is a two-rate income tax system by 2023/24.

“Successive Labour and National Governments have made our tax system more complex and less efficient – we now have six tax rates.

“The result is endless opportunity for tax avoidance, and that is not productive activity. Psychologically, it tells you that the money is not yours. We tell kids to study hard, work hard, save hard and invest carefully. Then the Government’s tax system ensnares them in a labyrinth of punishment. Talk about mixed messages.

“We need to put the values of aspiration in our tax system, making it fairer, simpler and more competitive. It’s not only possible, it’s essential.”

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