Wednesday, May 19, 2010

Spinning on tax cuts for the rich

Stuff has a lovely piece of spin on tax cuts for the rich today:

A $300 million tax dodge – by which half the country's rich don't pay the top tax rate – will be cracked by changes tipped for tomorrow's Budget.

Prime Minister John Key said yesterday that tax-avoidance loopholes were being targeted.

The top income tax rate of 38 per cent has encouraged wealthy Kiwis to move their money into family trusts, which pay tax at 33 per cent, or into companies, which attract only 30 per cent tax.

The Budget is expected to align the top and trust rates, making such evasion (and it is evasion; its being done to avoid paying their fair share) by the rich unnecessary. Calling this a "crackdown" is like saying that you are cracking down on P by legalising it.

Here's a better plan: instead of turning a blind eye to tax cheats, the government could actually crack down on their evasion and make them pay their fair share. But that's not likely under a National government.