Labour’s economic policy to be announced next Thursday will show the government’s tax take in the short-term would be similar to what it currently is, while over the medium-term it could possibly rise as the effects of changes to the tax-mix take effect.
Next Thursday’s announcement will be focused on reducing the Crown’s net debt to zero over the medium term, with a budget surplus track similar to National’s goal of reaching surplus in either 2013/14 or 2014/15.
A new tax package will outline a reorientation of who pays what, with lower and middle income earners set to pay less, and higher income earners more – a move that has already been foreshadowed by leader Phil Goff. It is expected the new top tax rate will kick in at about NZ$120,000. The tax package will include measures introduced to push more capital to the productive sector, Phil Goff said yesterday.
The introduction of some new sort of capital gains tax has been tipped in the media. Interest.co.nz understands Labour’s tax policy will include more new policy measures than just that – ones that have not yet appeared in media speculation.
A capital gains tax of 15% on investment properties is the lead policy doing the rounds, attracting strong criticism from Prime Minister John Key.
The tax package will focus primarily on the goal of reducing government debt. The fact the net tax take will remain close to what it is now in the short-term indicates new tax measures are not being introduced just to pay for new spending plans.
Labour has already announced its intention to introduce a tax-free threshold for the first NZ$5,000 of income – a move that would cost about NZ$1.3 billion a year. However, it is possible the threshold could be introduced in stages, or over successive terms in government, Labour finance spokesman David Cunliffe said in March as Labour looked at economic policies following the devastating Christchurch earthquake.
Raising the top tax rate from 33% to 39% for incomes over NZ$120,000 should bring in a bit less than NZ$1 billion a year.
Labour has also said it will push farmers into the emissions trading scheme from 2013 in a move it says will raise NZ$800 million a year to cover for the reintroduction of research and development tax credits. However National says the R&D plan is likely to cost more than that, giving a figure of NZ$1.55 billion as what the true cost of the policy would be.
Labour says its plan to take GST off fresh fruit and vegetables would cost NZ$250 million a year, although National says it could be as high as NZ$400 million.
Labour also has to find NZ$5-7 billion in a budget to cover National's move to book the expected proceeds from the partial privatisations of Meridian Energy, Genesis Energy, Mighty River Power and Solid Energy over a three to five year period. Labour is opposed to the policy.