Today, ahead of the Budget, John Key told reporters that cuts to the top rate of personal income tax will be part of a deliberate effort to encourage high-earning, skilled New Zealanders to stay in the country.
"Challenged in his weekly post-Cabinet press conference on the fairness of cutting top personal tax rates, Key said New Zealand could not ignore that it had lost more of its skilled people offshore than any other country in the Organisation for Economic Cooperation and Development – a proxy for the developed world.
Those people included doctors, scientists, engineers, and entrepreneurs, as well as lawyers, accountants, and other skilled professionals.
“We need those people in our economy,” said Key. “Part of what you are going to see on Thursday is a deliberate attempt to get people to stay here and contribute to the economy.”
Skilled people are leaving NZ. We need these people. We are lowering the top tax rate. Therefore skilled people will stay in NZ.
Apparently not one of the well-informed reporters present challenged the completely shonky logic of this statement, so I'll have to do it for them.
Top tax rates in Australia are 40% over $80,000 and 45% over $180,000. In Britain they are 40% over 37,400 pounds and 50% over 150,000 pounds. In France the top rate is 50% and in Germany it's 45%. These rates do not include any mandatory social insurance contributions.
So it's quite clearly not a low top tax rate that is attracting skilled professionals overseas. Nor is it very likely that a low top tax rate will keep them in NZ. It's rather more likely that this latest boost to inequality and the increased social ills that come with it will push them away.