National’s tax plan

National has released a 29 page tax plan. The key details are:

Incomes

• A family with children earning the average household income of $120,000 will be $250 a fortnight better off
• An average income child-free household up to $100 a fortnight better off
• Full-time minimum-wage workers get a $20 boost to their fortnightly incomes, and paying lower rates of tax on extra hours worked.
• Anyone earning over $78,100 gets the same tax cut of $40 a fortnight
• A superannuitant couple will get up to $26 a fortnight more

Tax Cuts/Credits

• 17.5% threshold moves from $14,000 to $15,600
• 30% rate moves from $48,000 to $53,500
• 33% rate moves from $70,000 to $78,100
• Extend eligibility for Independent Earner Tax Credit from $48,000 maximum income to $70,000
• Previously announced childcare tax credit of up to $150 a fortnight for 25% of costs of early childhood education for low and middle income families
• Increase WFF in-work tax credit by $25 a week

Canceled taxes

• Fully restore interest deductibility for rental properties
• Bring the brightline test back to two years
• Cancel Labour’s planned fuel tax hikes which would add 12 cents per litre of petrol, or $8 for a full tank
• Remove the Auckland Regional Fuel Tax which adds 11.5 cents per litre of petrol
• Cancel Labour’s new App Tax

Spending reprioritisations

• $594 million on average per year reduction in spending on back-office functions in government departments, excluding non-core and frontline agencies
• $400 million on average per year reduction in government spending on consultants
• $590 million on average per year Climate Dividend, returning taxes raised on climate polluters to Kiwi families rather than giving subsidies to large corporates

New revenue

• $740 million on average per year from introducing a 15% foreign buyer tax on the purchase of houses worth over $2 million
• $525 million on average per year from ending the commercial building depreciation tax break
• $179 million on average per year from closing a tax loophole and ensuring offshore operators delivering online gambling to New Zealanders, pay tax
• $123 million on average per year from moving to user-pays immigration levies, excluding tourist visas

This is a great policy package both economically and politically.

Over the next four years there would be $14.6 billion of tax relief, funded by $8.5 billion of spending reprioritisations and $6.3 billion of new revenue or tax measures.

It is large enough that it will make a meaningful difference to struggling families – far more than $1.50 off the cost of fruit and vegetables.

Politically it is quite cunning with the extra revenue measures being ones few New Zealanders would object to – foreign house buyers, overseas gambling sites, commercial building owners and migrants.

I am disappointed that they have not committed to automatic future indexation of tax thresholds. They will review them every three years, but my preference would be automatic annual indexation – just as we do with benefits.

Nicola Willis and National should be very happy with the policy. Shows a lot of hard work has gone into it, and not is well calibrated.

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