Thursday, October 09, 2008

The KiwiSaver cut

Yesterday, National funded a program of tax-cuts for the rich in an effort to buy their way to power. A key way of paying for this (though that's a misnomer, since they still plan to run enormous deficits for ten years, with no real improvement on the current path) is cutting the employer tax credit for KiwiSaver. That's a cut I agree with - its money employers should be paying, not the public. But National has gone beyond fiscal policy here and has also reduced entitlements under the scheme, capping the employer contribution at 2%, and effectively reducing it from a "4+4" scheme to a "2+2" one. This in turn has flow-on effects for the employee contribution, effectively halving the matching government contribution there as well.

The net effect of these changes is to make everyone in KiwiSaver substantially worse off under a National government. How much? Enough to more than cancel out National's tax cuts, even at the top end; for most people (meaning the 70% of us who earn less than $40,000 a year), the net loss after National's tax cuts is well over $20 a week, though receiving National's "independent earner rebate" can reduce it to as little as $10. At the top end, it just goes up and up and up. And this assumes that employers don't take their cue from National and rip the "employer" contribution right out of their workers' pay packets.

To the 800,000 members of KiwiSaver, the message is clear: don't vote National.