Treasury estimates revenue effects of income tax reductions

Finance Minister Bill English has said the Government is considering “moderate” income tax cuts.

He told TV3’s “The Nation” that the total cost of the cuts could be $500 million. This suggests that the cuts are going to be small and probably targeted at the lowest income band.

On May 15, Treasury calculated the impact on revenue of a cut in each income tax band of one per cent. The table below shows the revenue impact for each band.


ThresholdCurrent RateReduced RateRevenue Loss
Up to $1400010.50%9.50%$215,000,000.00
$48000 -$7000030.00%29.00%$485,000,000.00
Over $7000033.00%32.00%$335,000,000.00

Treasury’s Pre Election Fiscal Update (released on August 19)  revised downwards surpluses and deficits out to 2018 — it is clear that money will be tight till 2017 at the earliest and then , as Mr English said yesterday, the Government will set aside one billion for new expenditure and allocate the balance (approximately $1.4 billion) to repaying debt and tax cuts. These are the forecast surpluses in billions of dollars. 

Sorry, but access to POLITIK requires a subscription. Subs start at $15.95 per month. (All prices include GST, full details including Ts&Cs on the FAQs page) Subscriptions include the highly regarded daily newsletter, POLITIKToday. (Don't worry, you can cancel at any time.)

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nulla ac tellus sed purus sollicitudin pharetra. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vestibulum nec dolor vel ante egestas fermentum. Sed consectetur libero at mauris commodo efficitur. Nunc malesuada auctor dui in viverra. Suspendisse faucibus lacinia neque, in eleifend sapien dignissim eget. Vivamus ipsum augue, aliquet iaculis aliquam in, ullamcorper ut risus. Aliquam ut elit magna. Nunc id odio libero. Ut egestas magna et ex fringilla tristique. In volutpat elementum nisl. Vestibulum a risus efficitur, fermentum mauris in, malesuada enim.

Quisque ut rhoncus risus. Sed aliquam dui et urna efficitur, a efficitur mi interdum. Suspendisse vitae tortor neque. Duis sed accumsan enim. Morbi sed tincidunt metus. Donec id sollicitudin quam. Pellentesque imperdiet non turpis feugiat vestibulum. Nunc maximus ligula non tortor sagittis, nec malesuada ligula dignissim. Sed consectetur mi mauris. Donec ac ullamcorper lacus. Nulla facilisi. Praesent volutpat feugiat ante, a posuere tortor congue id. Nam posuere rhoncus purus dignissim facilisis.

Curabitur porttitor, orci vulputate rutrum vehicula, leo felis ultrices felis, sit amet commodo odio risus eget magna. Cras tempor neque bibendum metus luctus sollicitudin. Vestibulum vel leo sem. Fusce sit amet porta ligula, vel consequat dolor. Aenean quis vehicula dui, at volutpat arcu. Praesent consequat ac lorem ullamcorper mollis. Proin nec laoreet lacus. Etiam mollis pretium nulla, a facilisis metus placerat id. Ut venenatis odio in urna consequat fringilla eu id justo. Aliquam gravida libero in sapien tincidunt, a iaculis neque laoreet.