2020 Election: National Raids Covid Piggy Bank to Offer Middle Class Tax Cuts

COMMENTARY:

The national response to this week’s bleak economic forecasts is a huge, albeit temporary, tax cut for middle- and upper-income people.

Today, the Opposition published its tax plan showing that middle and high income earners are granted a portion of the tax break for 16 months.

Finance spokesman Paul Goldsmith promises lower debt and a return to deficit, but does so by raiding a fund Finance Minister Grant Robertson put aside the as-yet-unknown needs that Covid-19 will present.

Through a sharp increase in income tax thresholds, anyone making more than $ 14,000 a year would see some savings, but the 16-month increase would benefit those with average to high incomes the most.

Anyone making more than $ 90,000 a year would get around $ 4,000 in savings over 16 months. A double income household would get more, and all individuals would see the savings.

This is a backlash to the Labor tax plan that sees no one but extremely high-income people paying more; National will offer notable savings for the medium.

In a move intended to boost investment, National is also doubling the depreciation rate of investment in plant, equipment and machinery, giving companies a tax cut for spending.

The fiscal plan, reviewed by the New Zealand Institute for Economic Research, also sees National withdrawing from its already vague promise to cut net government debt as a percentage of economic output to 30 percent by 2030 to a promise of cuts. savages to public services.

Now, National’s target is 35 percent by 2034, compared to the Treasury’s projection in the Pre-Election Fiscal Update (PREFU) that debt as a percentage of gross domestic product would only drop to 48 percent.

Where the Treasury does not project any surpluses at any time until at least 2035, National’s plan sees promising deficits in 2028, midway through what would be his third term in office.

This week, Finance Minister Grant Robertson described National’s fiscal plan as something like the “Bermuda triangle,” with promises of more spending and less debt despite seeking less tax revenue.

The attack is likely to continue; National’s plans see it running a smaller deficit than Labor even in years when it offers $ 4 billion worth of income tax cuts.

To do this, National is raiding the $ 14 billion Covid relief fund, part of which will be used to pay off debt.

It will also run slightly lower operating allocations, about $ 1.8 billion a year, than what the Treasury of $ 2.4 billion has assumed in its forecasts.

As such, National is using a similar trick that Labor did in its 2017 tax plan; he’s leaving less in the tank to cover unexpected elements that inevitably crop up during rule.

Where Robertson’s plan leaves him with around $ 14 billion to respond to the impact of Covid-19 as they emerge, National will need to come up with new, hitherto unallocated spending should the pandemic demand it.