Slash company, personal tax rate to 17.5% — Jamie Whyte

ACT would immediately cut the top tax rate for individuals and companies, to 24%, leader Jamie Whyte says.

Dr Whyte says that would be the first step along the path to reducing both rates to 17.5% by 2020.

Currently the top individual tax rate is 33% for income over $70,000. The company tax rate is 28%.

Mr Whyte made his comments ahead of his party releaseing an alternative Budget (below).

The rate could be achieved by cuts on spending, Dr Whyte told TV3's The Nation during a debate of minor parties. 

"We propose no cuts on health and education," he added, or welfare for lower earners.

His party would cut what he terms "corporate welfare" — a top on which supporter and commenter Matthew Hooton has recently been been focussed on in a series of columns focused on the MBIE super ministery.

ACT would also:

• Lift the age of eligibility for National Superannuation to the age of 67 and index its increases to inflation rather than wages
• Reintroduce interest on student loans
• Sell all state owned commercial enterprises including KiwiBank, KiwiRail, Landcorp and the Super Fund (which currently has total assets of $25.19 billion)
• Close the departments of Women's Affairs, Pacific Affairs and Tourism
• Abolish subsidies to attract big budget movies
• Axe MBIE agencies like Callaghan Innovation, whose $420m in "growth grants" for tech businesses over the next three years are filed under "government waste"

NZ First leader Winston Peters said ACT's proposal would mean a massive cut back on everything.

"If we had a fair tax system, everyone would pay their fair share and you could actually decrease taxation."

Like KiwiBank, interest-free student loans and the Super Fund (or "Cullen Fund" as it's nicknamed) was started under Helen Clark's Labour government. National has suspended payments into the fund, but been loath to abolish it.

Mr Key has said KiwiBank will not be sold under his leadership.

ACT also wants to sell the government's remaining 51% stakes in power companies Meridian ($4.69 billion), Mighty River Power ($3.19 billion) and Genesis ($1.95 billion), and sell off national grid operator Transpower ($1.43 billion) and sundry other Crown assets.

The party  says all up, the asset sales would bring in $20 billion — although some of the state-owned companies such as KiwiRail Holdings ($1.2 billion), Railways Corp ($3.3 billon) KiwiBank, Kordia ($93 million) and Solid Energy ($92 million) arguably have little or no appeal to private sector investors.

The govenment could realise another $25 billion by liquidating the Super Fund and using the money to pay off debt, ACT says.

That's the kind of chunk of change that could address a problem identified by The Economist: the lag between tax cuts, and economic growth spurred by those tax cuts; a lag that can cause a big run-up of debt if government spending is not immediately slashed (an unlikely prospect in the MMP environment).

As things stand, the Fund has been peforming strongly (as former ACT leader Rodney Hide has acknowledged — albeit in the context of lobbying for its demise).

But it is still falling behind its original projections. In an Ask Me Anthing session with NBR readers, Super Fund CEO Adrian Orr said the original target as per the legislated funding formula was for the size of the Fund to peak at around 32% of nominal GDP (NZ's annual production) in the 2030s. With National's halt to capital contributions in 2009, that peak will now not be reached until the 2080s, Mr Orr said.

RAW DATA: ACT's Alternative Budget 2014

See below or click here to view the original PDF.