Tax is likely to be a key election issue

There have been major distractions in politics over the last two weeks, with the fall of Andrew Little followed by the euphoric rise of Jacinda Ardern, plus the self destruction of the Greens which included the end of two MPs and the effective end of Metiria Turei’s political career.

Amongst that earlier this week there were two polls that showed a shrink in support for the greens and NZ First, and the likely return of a head to head battle between National and Labour.

And in a debate on The Nation yesterday between Steven Joyce and Grant Robertson the battle lines were drawn.

Robertson: So, under Labour’s package, every family earning $62,000 or less will be better off than under National’s package. What I don’t want is for Steven and me to get a $1000 tax cut when we’ve got families living in cars and garages, when we’ve got a health system that’s not coping. What we’re saying is we’ll get the money to the families in need, but we’ll get the money that Steven wants to give to us as tax cuts – to wealthy people like us – we’ll get that money, and we’ll make sure it’s invested in public services that have been run down.

Joyce: Well, it’s not actually about me – or about Grant, actually. It’s about those people who are on the median wage who are currently facing a 30-cent-in-the-dollar tax rate, and we have to change that. And the only way we change that is shifting the thresholds. Now, Grant’s allergic to actually reducing taxes and allergic to adjusting thresholds. He’s about increasing taxes.

Labour have pushed the anti-tax cut for rich people since National’s tax cut package was announced in the budget in May.

But it doesn’t just reduce tax or ‘rich people’, it reduces tax for all workers who pay PAYE:

Increases the $14,000 income tax threshold to $22,000, and the $48,000 threshold to $52,000. This provides a tax reduction of $11 a week to people earning $22,000 or more rising to $20 per week for anyone earning $52,000 or more.

https://www.budget.govt.nz/budget/2017/family-incomes-package/index.htm

That’s $1,000 less tax per year for everyone earning over $52,000 (affecting ‘rich people’ of course but also the majority in wage earners).

Of all the polices announced this one directly affects me the most. Labour would scrap it, and that has to be a significant factor in deciding who to vote for.

More on possible tax changes;

Lisa Owen: Capital gains tax — are you ruling it out in the first term absolutely, if you’re in in the first term?

Robertson: We’ve got a tax working group. I can’t pre-empt what they’re going to come back and decide.

Lisa Owen: So you can’t rule it out? Could come in the first term?

Robertson: I can’t pre-empt what that group says, but here’s the important point — right now today we have something called the bright-line test that the National Party brought in. It says that if you sell a house that’s not your family home within two years, you’ll pay tax on it. Steven has a form of capital gains tax.

Lisa Owen: I’ll give you the chance to talk about your policy, Mr Robertson. So a capital gains tax is still on the table? You’re not taking it off?

Robertson: What we’re going to the election with is a commitment that if you sell a property that is not your family home within five years, you’ll be taxed for that.

Robertson clearly avoiding stating a position on a Capital Gains tax, something he has favoured in the past but Little took off the table. It appears to be under consideration again.

Joyce: I think there’s a problem there for the Labour Party, because they’re dodgy on tax. They’re refusing to say about the capital gains, they’ve mentioned a water tax last week, but they won’t tell us how much it is, and then, of course, they’ve got a regional fuel tax they won’t talk about where it goes beyond Auckland.

Expect National to hammer the uncertainty over what additional taxes a Labour government could implement.

Labour are trying to avoid details by deferring to a future tax working group (on CGT) and an ‘expert panel’ (on water taxes).

Lisa Owen: So top tax rate — can you rule out lining yourselves up with the Greens and having 40 cents over 150 grand? Are you going to go for that?

Robertson: No, I don’t think we will be going for that, but what we will do…

Lisa Owen: …but you are not ruling out raising that tax rate.

Robertson: I’m not ruling it in; I’m not ruling it out.

On a water tax:

Lisa Owen: What about your water levy? What’s that going to be?

Robertson: The water levy? Look, what we’ve said there is for every thousand litres of water that’s used in irrigation, perhaps one or two cents.

Lisa Owen: One or two cents. There you go, Mr Joyce. That’s not going to make a huge difference, is it?

Joyce: This is the problem is that he’s not telling.

Robertson: One or two cents, Steven. How big a difference?

Joyce: Well, hang on. Don’t ask me; ask the farmers, because I’ve seen some figures that even at those levels, you’re talking about 50,000 a year per farm. So I think it’s beholden on the Labour Party to actually come a bit more clean on their tax stuff, because they’re being very dodgy.

Robertson: We’ve been completely upfront.

Joyce: You haven’t, actually. So you’ve got a water tax that you won’t tell anybody—

On the Panel discussion on The Nation:

Patrick Gower: I actually think that Grant Robertson probably got in a few more jabs in…however in terms of actual overall damage I think some of the talk about tax there that Steven Joyce, in terms of long term damage beyond the debate, in terms of that capital gains tax is back on the table.

The capital games tax is back baby. Labour were going to go to the next election with that, but that could come in next term.

Lisa Owen: Jane, are they doing themselves a disservice by not putting numbers on stuff now.

Jane Clifton: Absolutely. They’re their own worst enemy. This week alone with the water tax issue, because finally we’ve got a figure for irrigators and wineries and so on of one to two cents, although David Parker said three.

…but yeah, just get your ducks in a row, announce them all, don’t leave room for speculation about $18 cabbages and $70 on a bottle of wine…

The Newshub video cut Gower off at the end, but he pointed out a significant power shift in Labour. When Andrew little took over the leadership in 2014 he put a number of Labour policies on ice, including the CGT.

But with Little dropping to the ranks and Ardern taking over the leadership Gower said that this meant also a significant rise in influence of Robertson – he and Ardern have been close allies for a long time. We are already seeing glimpses of what that may change in Labours tax policies.

Gower followed up on Twitter:

So expect tax to be a prominent issue in the election.

It may have a significant effect on the outcome of the election. Labour will need to be much better prepared for the inevitable attacks from National.

Ardern will need to be well prepared for the leaders’ debates with Bill English. She will likely have a ready response to a ‘show me the money’ type line (Key used that to devastating effect against Phil Goff in 2011), but she is likely to get challenged over and over if she remains vague of what taxes a Labour government may impose or increase.

And tax could also have a significant impact on the outcome of coalition negotiations. Both Labour and National will have to try and find enough partners to support their tax (and spending) plans.

Personally a water tax or a CGT or a fuel tax in Auckland won’t affect me.

But I will be seriously taking into account whether National’s income tax cuts might be reversed or not when I decide who I will vote for.

13 Comments

  1. PG
    The water tax will definitely affect you if it is anywhere near the levels that Labour (like Stuart Nash) has talked about. Look how much irrigation goes on for horticulture. Think of frost protection in Central Otago. With milk needing 700l per litre, that will go up. But don’t worry. Coca Cola won’t be affected – unless they bring in the sugar tax they are keen on.

    • Brown

       /  August 13, 2017

      Tax is where National can absolutely stick it to Labour and frighten the punters. I hope they do.

    • Most frost protection is now by air movement (usually helicopter).

      Irrigation is an issue in Central Otago but that has cost significant money forever – I briefly part owned shares in a water scheme that supplied irrigation (except for in very dry summers) via a 12km water race originally put in for gold mining.

      I don’t think water taxes will affect me much.

      • Brown

         /  August 13, 2017

        You are made up largely of water. It will affect you.

      • Warren

         /  August 13, 2017

        May be not but once they get rid of oil what will the helicopter run on…perhaps it will be back to water for frost control

        • When I lived and worked on orchards we used diesel oil in frost pots for frost control. Very dirty.

  2. Missy

     /  August 13, 2017

    Water tax? Tourist tax? Seriously is he wanting to ruin the country?

    With those two taxes they are targeting NZ’s two biggest export markets, once the value of our exports go up the demand will decrease, that will mean a lot of low paid workers out of a job when small businesses in those industries go bust.

    So much for being the party of the worker.

    • Blazer

       /  August 13, 2017

      what simplistic nonsense….a higher exchange rate has a much bigger effect on exports and…tourism.You knew nothing about Thiel or this topic.Get a blue rosette.

    • Kevin

       /  August 13, 2017

      Don’t forget Labour’s petrol tax to pay for a train to the airport. Because you know the average worker is always in hurry to catch a plane to their next holiday destination …

      • Blazer

         /  August 13, 2017

        As Robertson pointed out….people who live in Auckland are happy to contribute to easing congestion in the city.10c a litre is neither here nor..there.

        • Another 10 cents a liter of fuel IS a big deal. And exactly how ruining the average factory worker is going to ease congestion?
          How about scrapping those bus lanes and the bike lanes.
          That should free up a fair bit

      • phantom snowflake

         /  August 13, 2017

        You are clearly mistaken if you believe that the plan for Light Rail was ever about servicing only the airport. This claim is addressed well on the Greater Auckland blog:

        “One of the major issues with discussing rail to the airport is that many people seem to assume it’s all about the airport and only there to whisk travellers to and from the city centre. Building transit for a single market, especially in a city like Auckland, is a surefire way for it to be a failure, as Toronto found out. Jarrett Walker has a great post on exactly this issue and he notes that some of the key elements to making airport lines work is to ensure they serve not just travellers but workers too and that the need to provide lots of connections to the wider transit network.

        In Auckland, the goal is not just serving travel between the airport and city centre but also all the places along the way, something Jacinda Ardern pointed out well at her launch.”

        More details at: https://www.greaterauckland.org.nz/2017/08/10/airport-rail-resposnses/

  3. Gezza

     /  August 13, 2017

    I’m gving full marks to The Nation for yesterday’s effort. Good to see them getting both Robertson & Joyce on together – so we got a chance to hear them critique each other’s tax policies in the areas Labour wants to focus on. And for a change Lisa Owen shut up & let them both complete their answers when requsted a few times. She moderated that debate quite well, I thought.