Tax cuts - $3 billion available

• Puts the money in the hands of individuals to spend as they see fit.

• Does nothing to fix other big issues: - The social crisis we face : Super, Welfare, Health and Education.

• Age for retirement would need to rise to at least 70 over time.

• Retirement benefit levels would need to be reduced as a percentage of average wages over time.

How much room does $3 billion give you?

Not much

Virtually nothing for 77% of taxpayers.

• $4,000 real a year saved for 47 years = approximately $1m real capital savings in retirement. (See appendix 1)

• Married couple = approximately $2m real capital savings in retirement.

• Alters the incentives faced by those on benefits - 200,000+ back into workforce over 3 to 4 years.

• Allows you to package changes to Education and Health to reduce government spending over time to no more than the annual increase in the cost of living not the 3½ and 6½ a year real (last 10 years) increase in these respective costs.

• Enables you to get to a 15c flat company and personal tax rate within 10 years.

• Changes the way people think about themselves.

• Major economic benefits flow from superannuation saving of $7-8 billion a year:

Dealing with the issue of retirement also provides us with the opportunity to largely solve the social problems facing New Zealand.

How? By changing the incentives people face.

• Sticks & carrots work

• The most powerful motivator in society is self-interest

• Behaviour can change quite quickly.

The yearly superannuation contributions are the key to changing the current welfare state incentive system.

How? By making people worse off i.e. they lose money when they are on welfare or accident compensation, rather than receive an income from the government or a government body.

People are rewarded when they are providing for themselves and their families by way of lower taxes and a $4,000 contribution to the individual's superannuation account. A non-working partner whose husband or wife is in work would also receive a $4,000 contribution to their superannuation account.

However people not in work between the ages 18-65 (on accident compensation, sickness or unemployment benefit, at university or a technical institute) would have to draw down on the superannuation contributions they would otherwise have received that year before any other help is provided by the government or in the case of a couple, both their contributions.

They are in effect spending what would otherwise have been their own money.

• Existing retirees' position is fully protected.

• People retiring over the next 5 years to receive existing rights plus superannuation savings.

• From year 6, retirees receive their superannuation savings plus a slightly smaller government pension (phase out of government pension to take 40 years). Super + pension for those who worked for the majority of the time they were between the ages of 18-65 would be considerably higher than today. Today's 18 year olds would be much richer when they retire.

• A safety net pension for those who were on benefits for most of their working life would be provided.

• Every New Zealander of working age will need to take out catastrophic insurance (beyond 6 months). Such cover would be for:

• Accident

• Sickness

• Unemployment

• Other (invalid)

• Minimum cover to equal existing benefit levels. Cover beyond minimum level required by law would be up to the individual.

• Those New Zealanders unable to get immediate cover (e.g. existing long-term unemployed) would be given cover by the government until they are able to get private sector cover.

• New Zealanders will be responsible for the payment of the insurance costs involved in having cover beyond 6 months. This will be made possible by:

• Employer contributions. (50%) (of minimum cover cost.)

• Existing ACC contributions via PAYE.

• Additional income from tax reductions.

• Government tax credits for low income earners (e.g. families with children).

• Lower premiums as a result of individuals covering the first 6 months of being off work.

• New Zealanders would be responsible for meeting the costs of their first 6 months of work via:

  • Existing rights or responsibilities

• Draw down on government superannuation contributions for year (up to equivalent benefit level in any week).

• Government benefit - to extent A & B does not cover 6 months stand down period.

Over time, as these elements of welfare are privatised, the cost to government of meeting accident, sickness and unemployment benefits would reduce to around 10% of what it is today.

• Existing DPB would draw down on their own superannuation rights for the year.

• Depending on circumstances of each case, the father's superannuation rights might be drawn upon before any government contribution made.

• Given the fact that most schools - pre-school, primary and secondary, now open for business around 7.30 am and remain open until at least 5.30 pm solo parents would be expected to look for part-time or full-time work. Given that 60% of mothers in two parent families work either part or full-time, it seems reasonable to expect solo parents to do the same.

• The educational tax credit available to solo parents who work either part or full-time could be adjusted to take into account the extra costs involved.