It works like this: high-income earners are taxed at 38 cents in the dollar on earnings over $70,000 a year. However, by manipulating how thay are paid, and directing their actual earnings into either companies they own or trusts they control and then receiving from the trust or company an income significantly less than $70,000, a good part of their income is taxed at the rate for companies or trusts.
And that is only 33 per cent for a trust and just 30 per cent for a company.
Clearly John Keys' tory government is upset by this. That is by the accusations of tax avoidance, with it's connotations of cheating.
So their solution is change the top personal tax rate! In other words lower how much the high-income earners have to pay in tax by making the top rate the same as that for trusts. This removes the incentive to avoid paying the top rate by sheltering in trusts.
Which means that Key and his cronies can now put their hands on the hearts and say, without lying, that top income earners are NOT cheats because they are now paying the top rate.
Of course, it won't take those high-earners long to realise that the government has also reduced the company tax to 28 cents, which is some way below the top personal rate of 33 cents ....
Bye-bye trusts, hello companies. Lawyers and accountants will love it!