Water debate continues

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Labour left themselves open when they announced their water tax policy when they didn’t say how much would be charged. They said that would be decided at a later date (after the election) by an ‘expert group’.

As a result many claims and assertions and concerns have been made.

Stuff: Grapegrower blasts Labour water policy

Water royalties could put the $1.6 billion industry at risk, says Marlborough grower.

Some claims have been ridiculous.David Parker was interviewed on Q+A yesterday for clarification.

Michelle Boag made some claims on the Q+A panel that seemed to be serious miscalculations

The great water debate with our panelists Michelle Boag and Matt McCarten.

“Each apple would cost $2.80” says Michelle Boag.

That would mean you’d have a million litres to do a cabbage says Matt McCarten.

1 News: ‘They’d have to be the thirstiest cabbages on the planet’ – David Parker hits back at Horticulture NZ over water tax

Mr Parker said on TVNZ’s Q+A this morning that Labour’s new water tax would likely be 1 or 2 cents per thousand litres of water meaning the cost to the consumer “would be less than a quarter of a cent”.

It comes after Horticulture New Zealand claimed Labour “hadn’t done their homework on the issue of water tax” and it would be “like a speed camera on healthy food.”

Mr Parker said the statement was a “level of scaremongering that would make Donald Trump blush” and said Labour’s new water tax would raise “about $100 million across the whole of the country each year.”

When asked why he wouldn’t raise the tax on large foreign corporations like Coca-cola Mr Parker said they already pay “a dollar per thousand litres” and “we’re not going to charge them twice.”

Labour have a history of half baked policy announcements and leave themselves open to exaggerated criticisms.

UPDATE: Stats Chat looks at actual costs in Meters and litres

So a 1c or 2c per cubic metre water charge would come out to less than a cent per litre of milk.

I found an estimate that, it takes 237L of water to produce 1kg of cabbage, ie, less than a quarter of a cubic metre, so less than 1 cent.

Sounds a lot more believable.

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.