Labour’s underwhelming tax policy

Grant Robertson announced Labour’s tax policy yesterday, not Jacinda Ardern. There’s not much to it, and it was criticised from the left and the right.

So what are the changes? Is Labour putting up taxes?

Our balanced plan protects vital services like education and health and keeps a lid on debt. 

Our three tax policies are:

– A new top income tax rate of 39% – only affecting income over $180,000 

– A freeze on fuel tax increases and no new taxes for the entire term

 – Closing tax loopholes to make multinational corporations pay their fair share 

Just the 2% highest earners will pay more tax – this means MPs (excluding party leaders and ministers) will avoid the higher tax.

The pledge not to increase any other tax in their next term actually means that with bracket creep middle income earners will continue to be taxed at a slightly higher overall tax rate with every increase in their income. This has been happening since the last lower bracket adjustment about ten years ago.

Governments have been promising to ‘close loopholes’ used by multinational corporations for many years, with little changing.

The projected increase in tax take will be only about half a billion dollars a year, which won’t come close to paying back the many billions of dollars borrowed to address the Covid Pandemic.

There appears to be nothing new to try to address property assets – Labour’s announcement mentioned only what they have already done, which seems to have done nothing to reduce property inflation.

They continue to promote ‘fairness’ – “We’re improving the fairness of our tax system to make sure everyone is paying their fair share”. Fairness is in the eye of the payer – most people think it’s fair for others to pay more tax, not them.

National and ACT and others tending right criticised the higher tax bracket.

Goldsmith, Seymour slam higher tax rates

Labour’s opponents say more tax is not the answer to the economic challenges facing New Zealand.

“No country’s ever taxed its way out of recession,” National’s Paul Goldsmith says.

“And this is classic Labour Party policy, spend more, tax more.”

“And there’s a very big question as to how much actual revenue will be gained because this will be great for tax planners and accountants to work their way around.”

Goldsmith also warned this is “just the beginning”.

ACT leader David Seymour said the new rate announced by Labour would raise little revenue and describes it as “divisive populism”.

“Jacinda Ardern likes to say we’re all in this together, but Labour is picking on a small group of New Zealanders to fund the Covid-19 recovery.

“Labour is telling young New Zealanders ‘if you study hard, get good grades, get a good job, save money, and invest wisely, we’ll tax you harder’ – that’s the wrong message,” Seymour says.

One valid criticism was that the Trust tax rate was not being increased so would be 11% lower than the highest bracket. This is likely to increase the use of trusts to try to avoid tax.

The top bracket will also increase to significantly more than the business tax rate, which will also encourage ‘management’ of income and assets to try to reduce tax.

Greens were amongst the strongest critics – see Green reaction to Labour’s tax policy.

But on current polling Greens and NZ First look like struggling to make the threshold and may not be in the next Government.

The latest UMR poll (25 Aug – 2 Sep 2020):

  • Labour 53%
  • National 29%
  • ACT 6.2%
  • NZ First 3.9%
  • Greens 3.2%

It’s looking like Labour may be able to govern alone, or at least with a majority. And they are acting like they believe that will happen.

Robertson is promising no other increases or new taxes, but was asked whether that would stand if Labour needed to negotiate post election for support, with a party like the Greens, that has a more aggressive tax policy.

“This is the policy that Labour is campaigning on and we will only implement the changes that are in this policy,” he said.

That could be seen as confidence or arrogance.

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25 Comments

  1. John J Harrison

     /  10th September 2020

    Pete, the $500 million in extra tax touted by Robinson is total BS.
    As you correctly note there will now be an 11% disparity between the top personal tax rate compared to trusts and companies.
    With the exception of highly paid civil servants the entrepreneurial will simply dodge the tax by incorporating or funneling their well deserved income through a trust.
    A first year accounting student would be able to drive a fully laden Mack truck through this pathetic attempt by Labour to appease their base.
    The tax will fail to generate an extra $50 million, let alone $500 million.
    Australia is showing the way by reducing taxes to encourage businesses to expand and employ additional staff thus growing the economy.
    Ardern and her green eyed followers wish only to tax those who risk their homes and businesses in growing the tax base from which we all benefit.
    Particularly the tsunami of the rapidly increasing number of beneficiaries.

    Reply
    • Duker

       /  10th September 2020

      Australia tax changes wont come in till 2025 tax year….so far out its ridiculous and were promises made in more well off times.
      My pet is they will be postponed when the public twigs to the tax reduction for the well off, especially if ALP labour party wins next year election

      Reply
  2. Blazer

     /  10th September 2020

    ‘ the entrepreneurial parasite will simply dodge the tax by incorporating or funneling their
    ill deserved income through a trust.

    or there are always offshore tax havens which are created to……!!!!

    Reply
    • Plenty of ways to dodge this sort of tax Baze, that’s why top accountants have holiday houses and expensive cars.

      Reply
      • Blazer

         /  10th September 2020

        No cause for concern then Ray.

        Would you agree that the wealthy have got dodging paying their fair share down to an…art?

        Reply
        • Emotive language and a false premise there, also a totally obviously loaded question.

          You still don’t seem to have grasped the difference between legal tax avoidance (the kind that the IRD obligingly help with) and illegal tax evasion.

          Reply
          • Fight4nz

             /  10th September 2020

            Also glaringly obvious Ayou don’t grasp that to dodge tax through funnelling income whether legal or not, simply puts more burden on us that can less afford it. If the wealthy didn’t employ these self centred tactics there may be no need for this increase.
            Also have no idea why you think these people’s lack of conscience is a reason not to impose the tax.

            Reply
  3. David

     /  10th September 2020

    Firstly trusts can no longer be used to avoid tax the IRD look straight through them.
    Its a virtue signalling tax from a PM who signals much but does little and therefore is immensely popular and if she continues this way will see a 3rd term.
    The tax raises little, effects very few, can be avoided by many but why bother when its such a piddling amount and most of all it produces great headlines with little substance behind it, the art of governing longevity.

    Reply
  4. David

     /  10th September 2020

    As far as UMR polling I dont buy it, they poll me all the time and I have been left off this one and they know obviously me as they auto fill the details for me to save time. I think they took the opportunity to poll when the Greens were reeling from the green school debacle to put another nail in Shaws coffin and hoover up that vote.

    Reply
    • duperez

       /  10th September 2020

      “As far as UMR polling I dont buy it, they poll me all the time and I have been left off this one and they know obviously me as they auto fill the details for me to save time.”

      I think all the polling companies do stuff like this. Rather than waste time contacting people they simply have people in offices making stuff up. As references they use the results from other polls as well as their own previous results as a guide and construct something to sort of fit in with those. That’s why there’ve been a significant number of rogue polls. It’s the same stuff slightly remodelled.

      There you go, I reckon I win the prize for ridiculousness over you.

      Reply
    • Duker

       /  10th September 2020

      UMR ?
      LATEST UMR INTERNAL POLL: Lab: 53% Nat: 29% ACT: 6.2% NZF: 3.9% GRN: 3.2%

      The media columnists who know Collins over many years say shes been “neutered’…as the folksy old biddy ‘style’ polls better in focus groups.

      But the desperate attempt to buy up likes for Collins facebook page reeks of …well desperation.

      Its in the vanity as a political strategy that Donald Trumps campaign had by spending bucks for TV ads in the hopelessly democratic Washington DC area,

      Reply
  5. Reply
    • Alan Wilkinson

       /  10th September 2020

      Illustrating the accuracy of Seymour’s “divisive populism” assessment.

      Reply
      • Duker

         /  10th September 2020

        And pandering to gun owners wasnt populism….and then there is his banging on about freedumbs all the while supporting the lockdowns to the hilt….tucked away in press releases so no one can find them ( keeps the media pack happy) but the activists are fed a different angle

        Reply
        • Alan Wilkinson

           /  10th September 2020

          Your Queen of pointless populism doesn’t like competition.

          Newsflash for Lefties: freedom isn’t pointless.

          Reply
          • Duker

             /  10th September 2020

            It is when its forked tongue populism….ACT has always been the party of the elite, but this new found populism can only end in tears ..just like 2008 when Roger Douglas came rushing back to parliament to shove his ideology down countrys throat…and found that Key preferred to be labour Lite

            Reply
            • Alan Wilkinson

               /  10th September 2020

              The country prefers to be Labour lite. Saves thinking.

            • Duker

               /  10th September 2020

              At least Douglas and Prebble , Richardson and even Brash were balloons that crashed and burned when their ideas were exposed as hot air…Hide and Seymour are more like vacous careerists…..will someone call him by the nickname machine gun seymour

  6. Fight4nz

     /  10th September 2020

    Need more revenue but as a Labour govt that anything announced in this direction will encounter the usual mindless frothing from the right.
    Looks like they’ve decided to just shut the whole issue down.

    Reply
    • Duker

       /  10th September 2020

      Yes . Its better to get the ‘net’ in place and then make it a very fine mesh.

      Reply
      • Alan Wilkinson

         /  10th September 2020

        Best to wreck the economy slowly?

        Reply
        • They must hope that people won’t notice, like the boiling frogs who don’t realise that they are being boiled to death.

          Reply
          • Duker

             /  10th September 2020

            The 2%….yes I think the majority won’t notice them stewing

            It can’t be both minimal real effects and wreck the economy stuff at the same time.
            Judith must be stewing though, she must be dying to go ballistic but her spin doctors would tell her being negative didn’t get Bridges anywhere even before Covid and he was young and male , an older woman risks sounding …..I’ll get into trouble if I spell it out, you can fill the gaps Mon cherie

            Reply
  1. Green reaction to Labour’s tax policy | Your NZ
  2. Shaw sort of talks tough on tax and other coalition demands | Your NZ

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