The fine print in all the tax promises
By Richard Harman (author)
We haven’t seen anything like it for years – political parties debating how to spend billion dollar plus surpluses.
It was a big day for tax strategy yesterday with the Greens offering more detail on their tax strategy agreement with Labour while the Prime Minister was careful not to commit to tax cuts or a boost to Working for Families in the coming Budget.
Possibly sensitive to Labour’s charge that the Budget surplus should be spent on health, education and other social needs, English went down the same path.
“We’ve got surpluses,” he said.
“But we need to make sure that we have weighed up the need for investment in infrastructure, the pressure of growth of population on our public services,” he told his weekly press conference yesterday.
Later, responding to more questions about whether the Budget would contain tax cuts or a boost for Working for Families he said the Government was not ready to make decisions yet.
“We’re not at that stage yet,” he said.
"It's only the beginning of March, the forecasts haven't been done yet, and there's a whole lot of options."
In a Radio New Zealand interview he gave yesterday, he said any tax cuts would come in on April 1, 2018.
This sounds like the Government is preparing to spend most of this coming financial year’s anticipated $3.3 billion surpluses on public services, infrastructure and repaying debt and taking any tax cuts out of the 2018/19 surplus which is projected to be $5.4 billion.
Budget surpluses will then rise to $6.8 billion in 2020.
It is those (comparatively) huge surpluses which enable Labour to say it will not raise taxes at the same time as it spends more on health, education, law and order and infrastructure.
But there is some fine print in Labour’s pledge.
Finance spokesperson Grant Robertson says Labour will not sign off any final decisions on where it might spend any surpluses till the party has seen this year’s Budget.
But he lists as priorities, addressing what he calls the “social deficit”; investing in infrastructure; repaying debt and restarting contributions to the Cullen fund.
If Labour wins power, then it will set up a Tax Working Group.
“The Working Group was never about tax rates,” he said.
“It is about the structure of the tax system.
“The mandate I want to give this working group is the balance of the tax system.
“At the moment we don’t tax assets and wealth the way other countries do.”
He said Labour’s Commission on the Future of Work which looks forward to a much more casualised “gig” economy meant there was a need for a “root and branch” look at the income tax system.
Robertson says any major recommendations would have to go back to voters at the 2020 election.
Labour’s Leader scrapped the party’s support for a capital gains tax on becoming Leader, so how will the group look at taxing assets and wealth?
"Capital gains will have to be one of the things that will be looked at, but there are other options as well; a land tax; the Greens will no doubt want us to look at a carbon tax.
“We have to have that suite of options in front of that group and then decide what we are going to do.”
The Greens are already booked next week for a joint announcement with Robertson of what the two parties are calling a Budget Responsibility Rules strategy.
The Strategy will leave the Gr4eens free to propose new taxes and spending increases, but they will need to be constrained within the strategy which will be restricted to principles.
The joint Labour-Green Budget Responsibility Rules are intended by Labour's strategists to reassure voters who have up to now been reluctant to support the party because of their lack of faith in its ability to manage the economy.
At the same time, Labour also believes the strategy will reassure voters who may be worried that the Greens could force radical ideas on to a Labour-Green Government.
Greens Co-Leader James Shaw says the rules are a set of principles. They do not contain numbers; he told POLITIK.
“And so the idea is that whatever we say, and whatever they say, during the campaign might be different but it has to meet those principles.
“We actually do have different views on revenue and expenditure, but the point is that we are going to play within certain parameters.
“So what we are doing next week is outlining the parameters.”