Will Dr Cullen increase taxes on some?

Vernon Small from the Dom Post blogs his speculation that Dr Cullen may do what he did in 1999, and bring in a new top tax rate, to help pay for tax cuts elsewhere.

How does he stop the highest paid getting the most? Well a threshold movement is better than a rate cut in that regard. Given that all those above any new threshold will get the maximum benefit, it is still limited. For example, if you lift the top threshold from $60,000 to $70,000 then everyone earning more than $70,000 gets 6c X $10,000 a year = $600. Between $60K and $70k they get lesser amounts. Compare that with a cut to the top rate of 39c where the more you earn the more you benefit.

If you want to cut the rates, then the only ways to limit that effect is to cut a rate further down the progressive scale – either the 33c rate that starts at $38,000 or the 21c (effective) rate below that threshold.

Or – and here’s a bit of speculation to send a chill through the blood of the very well paid. Remember that comment about redistribution and the imposition of the 39c rate in 1999?

What if he introduced a new top rate, to apply after the election of course, say 40c or 42c on income above a new threshold? A threshold of $150,000 might do it, and would annoy precious few voters. That would cap the benefit and even start to claw some tax revenue back. National could fulminate, but might look like protecting “its rich mates” – a trap Cullen is constantly baiting for John Key and Bill English.

There are those who would argue the top personal and company rates should be aligned, but with business tax at 30c and two personal rates higher than that now, the roof hasn’t fallen in. So “why not be hung for a sheep as a lamb?” as my mother would say.

This certainly can not be ruled out. Cullen hates rich pricks, and the thought of taxing them even more is not impossible. He did the same in 1999.

Cullen knows he will probably never get their votes, so you do some wedge politics and take more off the “rich pricks” so you can reduce tax for people who might still vote for you.