December 10, 2023

National’s tax plan has $1.5 billion fiscal hole

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[s] National Party leader Christopher Luxon said it was “obvious” the plan would cost more given the rise in inflation and the Council of Trade Unions’ analysis was ‘about right’.

The Council of Trade Unions has thrown down the gauntlet to National, saying an analysis showed the party had underestimated the cost of its tax plan by at least $1.5 billion.

When National promised to adjust tax brackets in March last year, it costed the policy at $1.66b annually, $6.64b over four years.

CTU economist Craig Renney said new wage growth forecasts from last week’s Budget show the cost will actually blow out to $8.2b.

He said National needed to publish its calculations to show how it intended to make up that more than $1.5b difference.

“The scale of these tax cuts is around the same cost as cutting the entire annual police budget. We’re not talking about spare change that can be made up by cutting a few consultants.”

National party leader Christopher Luxon told Morning Report the $8.2b figure was “about right” over a four year period.

“That just highlights again how much further inflation has got out of control.

“It’s been obvious for some time it’ll cost slightly more – whether it’s another $300 million a year – is basically what it will be.”

“It’s been obvious for some time it’ll cost slightly more” – Christopher Luxon (7 min 5 sec)

Inflation had got worse in the 18 months since the policy was announced, he said, as government spending ballooned.

“The really tragic thing, it’s because of inflation that tax take is up to $48 billion. That’s a huge amount of money that’s coming out of working New Zealanders and they’re getting caught in bracket creep because of inflation.

“All around the world people adjust tax thresholds because they don’t want working people getting caught in higher tax brackets.”

Nationa’s policy would give the average couple an extra $1600 a year in tax cuts a year, he said.

Renney earlier said if National disagreed with his analysis, the party should publish its own numbers.

“If the National Party disagrees with our analysis, that’s great. They just need to put out some tax numbers and say what it’s going to cost and how they’re going to pay for it,” he told RNZ.

National has said it will release a fully costed fiscal plan, but not until after Treasury’s Pre-election Economic and Fiscal Update (PREFU), which could be just four weeks before election day.

Renney said National had no good reason to delay as the Budget contained all the information it needed.

“ACT recently released its fiscal plan. Labour, in opposition in 2017, released a fiscal plan and then updated it when the PREFU numbers came out. John Key released a fiscal plan and then updated it when the numbers came out.

“Let’s give the public that information.”

Renney said the CTU’s analysis had been independently verified by tax consultant Terry Baucher, director of Baucher Consulting.

National Party finance spokesperson Nicola Willis said the CTU analysis showed Labour’s economic mismanagement meant “continued sky-high inflation is pushing even more Kiwis into higher tax brackets, even though the spending power of their wages has gone backwards for three years straight”.

“National has committed to providing income tax relief that will mean someone on the average wage will be $800 a year better off. To pay for this, National will restore discipline to government spending.”

Willis said last week’s Budget should have provided more tax relief for New Zealanders.

“The government is spending an extra $1 billion of taxpayers’ money every single week compared to 2017. Labour is spending over half a billion dollars in corporate welfare for climate initiatives, $1.8 billion a year on consultants, $400 million on a new polytech bureaucracy and $100 million a year on advertising.”


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