Just when it looked like Labour were comfortably PR managing their way to a comfortable election victory, playing ultra-safe with a minimal policy approach, and National looked to be going through the motions heading for a big defeat, the campaign has been shaken up a bit with a promise of tax cuts for everyone.
National were obviously waiting for the PREFU release (Pre-election Economic and Fiscal Update – economy “better than predicted”) on Thursday, announcing their Economic & Fiscal Plan yesterday, with most attention given to short term tax cuts aimed at stimulating the economy.
This seemed to rattle Labour, with both Jacinda Ardern and Grant Robertson reacting.
Ardern said tax cuts were “irresponsible”:
“What they have announced today is unaffordable and is raiding from a fund that has to be available to make sure that we as a nation can keep responding to the challenges of Covid, not deliver unaffordable tax cuts.
This is a bit rich. Labour have already spent something like $50 billion propping up the economy, and have a $14b fund set aside to dish out as they see fit.
“Now is just not the time for tax cuts and I genuinely believe New Zealanders will look at the environment right now and agree with that.
“What we need now is really careful economic management, we need certainty and we need a plan and that’s what we’ll deliver.”
There’s nothing certain about our short and medium term economic future.
Minister of Finance Grant Robertson:
“It beggars belief that in the middle of a pandemic the National Party is planning to gut the money set aside to protect New Zealanders in case of another major outbreak of Covid-19,” he said in a statement after the announcement.
“We carefully put aside $14 billion to look after New Zealanders’ health and wellbeing and now National wants to put that at risk. This policy reeks of desperation as National races to borrow money to pay for a $4000 temporary tax cut for Judith Collins.”
The responses from Ardern and Robertson reek of rattledness.
National’s announcement.
National will cut taxes for middle New Zealand
National’s massive tax stimulus package will put more than $3000 extra into the pockets of hard-working Kiwis on middle incomes, National Party Leader Judith Collins says.
You can read a copy of National’s Economic & Fiscal Plan here.
Ms Collins has announced the next National Government will let Kiwis keep more of what they earn by lifting the bottom tax threshold from $14,000 to $20,000, the middle threshold from $48,000 to $64,000 and the top threshold from $70,000 to $90,000.
These changes will be in place from December 1, 2020 until March 31, 2022. The total cost of this over the 16-month period is estimated to be $4.7 billion.
“Today we are facing the biggest economic downturn the world has seen since in living memory. But with the right leadership and economic plan we can grow our economy and keep Kiwis in jobs,” Ms Collins says.
“To keep our economy ticking, New Zealanders need money to spend. National will deliver temporary tax relief that puts more than $3000 – or nearly $50 a week – into the back pockets of average earners over the next 16 months.
“This will give Kiwis the confidence to go out and spend, which will be crucial for our retail, tourism and hospitality businesses to survive this economic crisis.
“New Zealand is facing a much longer and more painful economic shock than earlier forecast. We need a serious plan for economic growth to get us back on track.”
National’s Finance spokesperson Paul Goldsmith pointed to higher taxes as Labour’s only plan to get New Zealand out of this economic hole.
“No country has ever taxed its way out of a recession – and this is a big one we’re in now.”
As well as tax relief for households, National will double the depreciation rate for businesses that invest in new Plant, Equipment and Machinery over the next twelve months. This will bring forward the amount a business can claim in depreciation for new investments, which will stimulate investment by increasing the return on capital.
Doubling the depreciation rate is expected to cost $430 million a year for five years, while increasing tax revenues in out years.
“Our stimulus package has been fully-funded and costed, and is included in our independently reviewed Economic and Fiscal Plan released today,” Mr Goldsmith says.
“National’s plan carefully balances the need to drive economic stimulus, increase investment in core public services and restore government debt back to prudent levels.
“Labour, on the other hand, has announced it will increase taxes during a recession. The contrasting approaches to the economy at this election could not be clearer.
“Judith Collins and her strong National team will bring the leadership, experience and vision needed to get our country back on track.”
You can read a copy of National’s Economic & Fiscal Plan here.
You can view a copy of National’s Personal Tax Relief Policy here.
You can view a copy of National’s Double Depreciation Rate Policy here.
See RNZ: National promises $4.7bn in tax cuts in economic and tax policy
Obviously this policy would benefit me, by a few thousand dollars. I’m not sure it’s the best approach over the next year or two, but at least it’s reasonably even, it means all tax payers would pay less tax for 16 months (that makes for a messy part taxyear), and every one of us could decide what to do with the extra take home pay.
It does seems a better approach to Labour ‘picking winners’ and ‘corporate welfare’ of dishing out millions of dollars to selected businesses, which puts competing businesses at a disadvantage. I guess they plan to continue to do that with their $14 fund they don’t want given to workers.
Funny to see Labour favouring some corporates while National taking less from workers, that shows how muddled politics is these days.
This announcement is unlikely to swing the election (I’m still very undecided), but going by Labour’s responses it has them a bit worried. At least it livens up a lacklustre campaign.