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Labor Finance spokesman Grant Robertson has revealed the party’s long-awaited fiscal policy, announcing the return of the 39 percent tax bracket.
But Robertson sugarcoated what would otherwise be a bitter pill by saying that the top rate would only apply to income earned above $ 180,000, meaning that only 2 percent of taxpayers would actually pay it. Everyone else’s tax rates remain the same.
He justified the additional support by saying that the country needed to keep debt under control, while continuing to spend on health and education. He said the new rate would generate about $ 550 million a year in revenue.
“This policy is about keeping investment in important services that are as crucial to New Zealanders as healthcare and education, while keeping tax rates exactly the same as they are today for 98 percent of people,” said Robertson.
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“I have focused during this term in office on managing our books carefully and reducing debt. That approach will continue. Generating additional income now will help keep debt under control.
“The new rate will cost $ 23 a week for a person earning $ 200,000, but it will make a big difference in the country’s ability to sustain the investments necessary for the economy to recover,” Robertson said.
He also ruled out new taxes or new income tax increases next period, including increases in fuel taxes.
Robertson challenged National to show how it would pay for the cost of Covid-19.
“Our plan strikes a balance as we recover from Covid-19. It will avoid the cuts to services suggested by the National Party, and it will also help to control debt while we support the economic recovery from a shock of 1 in 100 years, “said Robertson.
Ross Giblin
Grant Robertson wants a new top tax rate of 39 percent.
Revenue spokesman Stuart Nash said the tax rate compares well to rates in Australia.
“Australians who earn more than A $ 180,000 pay a much higher rate of 47 per cent (including the 2 per cent Medicare tax),” said Nash.
However, Australia has legislated tax cuts that will make people earning less than $ 200,000 pay no more than 30 cents for every dollar they earn.
The last time New Zealand implemented a tax bracket greater than 39 percent was under the leadership of Helen Clark. John Key inherited that group, but ultimately lowered the top rate to 33%.
But that tax rate only applies to income earned above $ 70,000 (or roughly $ 82,000 in today’s money). In 2005, National also campaigned with a top rate of 39 percent, but it only applied to earned income above $ 100,000 (the equivalent of $ 135,000 in today’s terms).
Nash touted the economic success of the Clark government as reason to be optimistic about new support.
“We know from the experience of other countries, such as Australia, Canada and the United Kingdom, that their economies grow strongly when the highest income earners pay tax rates above 39 percent. When New Zealand previously had a top rate of 39%, it certainly did not prevent GDP from growing at annual rates of 3% and 4%, ”said Nash.
Labor also plans to work with the OECD on the issue of multinational corporations that don’t pay their share of taxes. The OECD nations have wanted to move forward on these taxes together, but Robertson said that if an international solution could not be found, Labor would do it alone.
“Unions will continue to work towards an international agreement that will see a comprehensive regime for multinational corporations to pay their fair share.
“But we must also be prepared to implement our own rules to ensure fairness, if that agreement is not possible,” Robertson said.
“We will be prepared to implement a digital services tax (DST). Current IRD projections estimate that a DST will generate between $ 30 million and $ 80 million in revenue per year.
“A DST would be a very narrow target and would not apply to sales of goods or services, but rather to digital platforms that rely on a user base for advertising or data revenue,” he said.
Robertson tried to neutralize criticism that the new tax rate would make the income tax out of line with the flat tax charged on fiat income. That could incentivize people to funnel money into trusts to avoid the new tax rate.
Robertson said he would not change the confidence rate, but that the government would crack down on people who exploited the system.
