National’s plan to cut income taxes will cost $14.6 billion over the next four years which will be funded through $8.4 billion in spending savings and $6.2 billion in new taxes.
The party has opted to proceed with this tax plan regardless of New Zealand’s fiscal position, meaning the $14 billion in revenue and savings will not be available to balance the budget.
Its flagship policy is an 11.5% adjustment to income tax brackets to partially offset the effects of inflation. Prices have risen 22% since National left office and 17% since 2020.
This would cost roughly $2.2 billion each year, adding up to just under $9 billion across four years.
National also committed to reviewing the brackets every three years and adjusted them again, if fiscal conditions allowed. This would first occur in 2026.
The next biggest tax cut would be reinstating interest deductibility for landlords, ramping up to an annual cost of $650 million or $2.1 billion across the first four years.
A $25 per week increase to Working for Families will deliver another $1.4 billion to some households in the first four years, with the annual cost rising to $455 million by 2026.
Another set of tax credits to reimburse childcare expenses, called Family Boost, would cost just under $1 billion or $250 million per year.
Spending cuts
To pay for these transfers, National would ask a selection of Government agencies to cut their collective budget by $594 million each year. That would add up to $2.3 billion.
The party would scrap a set of Labour initiatives, free childcare for two-year olds and discounted public transport, to save another $530 million each year.
And it would also order agencies to cut contractor spending by $400 million. That’s another $3.7 billion from those two cuts.
Finally, the plan would redeploy existing Government revenue by returning the proceeds of the Emissions Trading Scheme (ETS) into the central fund to help cover the tax cuts.
The ETS currently acts as a sort of carbon tax and the revenue it earns is set aside to be spent on helping businesses and households transition to low-emission technologies.
National said it would fund future climate initiatives out of annual operating allowances, and use the ETS money on tax cuts.
That’s estimated to bring in another $2.1 billion, although the carbon price is set by the market and can rise or fall due to demand.
The party leaders implied they would follow the Climate Change Commission’s advice and allow the carbon price to climb.
This could lift prices of things like petrol and food but would help New Zealand achieve its climate targets by incentivising businesses to cut or offset carbon emissions.
While this is a spending reprioritization, it involves using a higher carbon tax to fund lower income taxes. It’s hard to predict exactly how that would net out for individual households.
New taxes
The four new taxes are not imposed on households or income earners, and would bring in an estimated $6.2 billion over the next four years.
The largest is a tax on foreign home buyers. Non-residents would be permitted to purchase property valued at over $2 million thus overturning an existing ban, but would be hit with a 15% tax for the privilege.
It has been estimated to raise almost $3 billion over the next four years.
Second, National would scrap commercial building depreciation rules for a total of $525 million each year, or $2.1 billion. Labour plans to do the same to fund its GST-free policy.
Another $1.2 billion, over the forecast period, would be raised by taxing online gambling and charging a levy on immigration applications.
Castalia Advisors, a strategic consultancy firm, was hired to review the tax proposal and check the numbers all added up. It said the savings identified were “possible and plausible”.
Besides the main $14 billion tax switch, the party also pledged to scrap the Auckland Regional Fuel tax which funds transport projects in the region.
That money goes into Auckland Council’s coffers and doesn’t affect central Government revenue. But transport projects will still have to be funded, one way or another.
Heavy pocket of loose change
ACT Leader David Seymour said the tax policy was just “loose change” and not “real change."
“Keeping Labour’s $56 billion in extra spending and Labour’s tax system with minor adjustments for inflation is not the real change we need,” he said in a press release.
The extra spending Seymour references is a nominal figure, which is boosted by inflation and GDP growth.
National leader Christopher Luxon said this was the best tax plan that would be on offer to voters this election.
“I’m not interested in what any other party has to say about our tax plan,” he told reporters.
“This is the tax plan we will take to the election and, importantly, we’re going to implement it on the other side”.
National’s finance spokesperson, Nicola Willis quipped: “I’d say to David Seymour, $50 a fortnight is a very heavy pocket of loose change”.
The plan aims to save an individual median wage worker $51 each fortnight, and the average household (with two-children) $102.
New Zealanders on higher incomes also get a tax break, but the cuts are largest for average workers and households. Low income households and workers get very little tax relief.
Fortnightly savings start at $4 and end at $40 per week for individuals across the pay scale, but it peaks at $51 for workers grouped around the median wage.
Two income households’ savings range from $9 to $80 with a peak of $102 around the average income. This will increase for households with children in 2026, when low income households will start with $134 savings.
No surplus in sight
Luxon said the party had chosen to “decouple” its tax cuts from its fiscal plan, so that the package could be delivered regardless of deficits or debt levels.
This is not entirely accurate, as the $14 billion in revenue and savings identified in the plan now cannot be used to balance the budget or pay down debt levels.
Willis said tax relief for middle income earners was more important than paying down debt, or ensuring the Crown accounts were in surplus.
“Actually, we have a cost-of-living crisis in people’s back pockets … that is the number one issue facing New Zealand workers,” she said.
132 Comments
This house is on TradeMe for $1.5M. It's a very average home, in a very average Auckland suburb.
In 7 years time, if it appreciates at 5% a year, it'll be worth more than $2M.
- In 2024 - $1,500,000
- In 2025 - $1,157,000
- In 2026 - $1,653,750
- In 2027 - $1,736,438
- In 2028 - $1,823,259
- In 2029 - $1,914,422
- In 2030 - $2,010,143
This is what this 'tax' policy is about. The reintroduction of foreign buys to the market by stealth. Sure, it'll take 7 years for these average houses to get there, but that just gives us all time to build up our portfolios a little more. You can be sure that as soon as a house falls into that '>$2M' category, the auction rooms will be humming again. Place your bets wisely gentlemen, the game is on again.
It is regrettable that in NZ, since Kirk’s Labour government, no legislation has ever defined the distinction between a house as the property of occupying home owner or otherwise. There is a world of difference between folk who just want to own the roof over their household and those for whom owning property is a business. it must be bewildering for some of the former who now find having had no more ambition than basic home security, they now have a property that has rocketed in value just by living an ordinary in it and now is being targeted by some political parties for taxation.
Grant Robertson found $4b in spending cuts last week. Is it so hard to believe there's more fat to be trimmed?
Or are we going to stick our head in the sand and pretend we're getting immutable value from every single dollar the government spends?
If so, how did Grant Robertson find $4b of spending cuts? Isn't that 'slash and burn' stuff?
We're voting for the next term, not the last one. We can bag Labour all we want, and I'm well aboard that bandwagon, but a "head in the sand" is one that assumes National will "just do some magic cuts and it'll be just fine 👍"
In Luxons own words, this is the "best tax plan that would be on offer", which includes $14.6b in tax cuts but cancels itself out so effectively they've put it in a new decoupled budget. So, as I said; where. the. duck. are. the. cuts.
Probably finally realised closing that $10b hole will throw the country into recession in the absence of a rockstar housing market and that's not such a good start to your first political term.
I imagine that if GR can find 4 billion, then that 4 billion is in addition to these savings by National. So potentailly National could save a lot more. So GR is doing Nationals job for them. But if GR could find that sort of savings just like that, what has he been doing for the last 6 years to keep spending lean?
Those savings would likely more than offset any tax savings for low earners. Cutting public services means they have to be provided by the private sector who take a margin. Add cost increases to everything due to carbon tax increases (petrol/transport). This disproportionally affects low to middle income earners. This will increase the cost of living crisis for your average Joe and we're no better off as a country. Apart from we've again sold a whole bunch of houses to foreigners.
Worse National leader in living memory.
Agencies with standout expenditure growth from FY2018-FY2023 are:
477% Ministry for Pacific Peoples
265% Ministry for Environment
193% Ministry for Women to $15,119,000
113% Ministry of Transport to $75,867,000
73% MSD to $1,629,894,000
67% MBIE to $1,248,940,000
Then theres the hidden unexplained massive increases happening...eg RBNZ up approx a third $88M over 2 years
https://croakingcassandra.com/2023/08/24/spending-lots-more-with-no-par…
Very interesting thanks. I am not concerned as much by raw spending figures as in value for money - like it costs money to do things so if we see Health up 200% but waiting lists slashed or more frontline doctors and nurses and hospital beds I’m ok with that.
On the other hand, looking at the above ministries, how much of this is captured by PWC, Deloitte and other consultants writing reports the ministries own public servants should be doing?
And MSD is probably just more boomers claiming their free money. I know it’s 17bn a year already with 800k people on boomer benefit and due to go to 1.2mm by 2030. If we want to cut spending that’s the first place to start, followed by landlord subsidies
Depends on what you do for a job. For me, a kitchen benchtop is not the ideal place to laydown A3 plans particularly when they're often strung together at the join lines. And being hunched over a 15inch laptop screen is not ideal for pulling up those A3 plans to figure out what's needed to be printed.
Nope - that's not what this is about.
It means existing taxpayers have been subsidising visa application and processing costs for incoming migrants all this while.
For example, we charge student and work visa applicants nearly half of the fees charged by Australia. Are we processing these at half the speed and half the overheads - certainly not.
These policies are certainly aimed at National's base, and their base have received them well.
As for immigration, who's coming? As for infrastructure - it's a slow grind.. New Zealand has intellectual and fiscal capacity constraints.
These policies alone will NOT drastically improve the housing, infrastructure or immigration situations facing the country.
Personally I'd just be happy if National, ACT or NZFirst promised to cut ALL funding to legacy media. Not having a fit-for-purpose 4th Estate is probably the BIGGEST issue.
That is chump change though. Honestly it is just the same old National with no long term planning for the future. Can one of them even say what NZs population is planned to be in 2030, 2040 and 2050, and have they planned the infrastructure to support that increased population?
Lol. Luxon has a target to be elected for 4 years. Thats his only focus. During that 4 years he is focussed not to lose his base, reward the donors and his mates and keep the swing voters happy... and toward the end to try to be elected for another 4. Typically they will be replaced after 2 terms, 3 at the most.
So why would give a stuff whats happening beyond 10 years... we dont target him on that. The west all works that way... trouble is that we dont really have a better plan .. so we swing back and forth from left to right and the only people that win are the donors that fund both sides (sweet strategy).
Roll on the future of a global AI master that takes over and sorts us out and saves planet earth from the brief human-led-environmental-disaster-era. Future AI kids will study it in disbelief.
you know why NZ's quality of life drops? that is because one party tries bring NZ forward by 2 steps when in office, and the other one sets its back by 3 three steps when it wins office over.
NZ is not pushing forward by any parties, but pulling forwards and backwards by this insane political setup.
Does it? Compare our economic performance over the past 30 years with Dubai, China, Saudi, Russia. Centrally planned economies making long term planning decisions have achieved a lot more than our 3 yearly changing of colours and tinkering at the edges, avoiding any real hard work
There are diehards on here who, it might seem, sincerely believe NZ should not have had any other government, since Michael Savage, other than that of the New Zealand Labour Party. They therefore would align with Comrade X here that a one party system is absolute tops but at the same time is not a dictatorship. During Covid though, the lockdowns and especially the last, isolating just Auckland, you could easily have suspected that this Labour Government was getting to enjoy having people entirely under their control and there was a fair degree of reluctance about relaxing their grip. Perhaps that does both identify and qualify some of the broad speculation that at heart, PM Ardern was truly a hardline socialist category controller underneath it all?
That 15% tax on overseas buyers of NZ home buyers isn't going to work they way they think it will.
For starters, it'll be as easy as the current ban to sidestep.
But lets assume some overseas buyers do front up and pay the 15% (most won't - they'll rent, lease or BnB instead meaning more for rich kiwis), what happens when they go to sell? Think they'll sell to kiwis and take a 15% haircut? Not. A. Chance. It'll remain in the hands of foreigners for a very long time.
Why doesn't the National Party just sell Stewart Island to someone? Same effect.
I think they're dreaming if they think they'll raise as much revenue as they're pretending.
so if they remove the brightline to 2 years and a kiwi buys for over 2 ML but then sells later after 2 years for below 2 ML then no tax paid. will IRD be checking bank accounts to see if any other payments are received and what they are for?
i can see another couple of ways around this already
You seem to be assuming that anyone in national, and anyone who votes for them, cares whether or not the revenue generating plans actually end up being accurate. Tax cuts are the main event, everything else is just paperwork shenanigans that no one ever cares about whether they actually work out as projected or not. This is a very american style way of selling policies, where they have to provide projections to support the budget outlay. (They never end up being accurate).
No doubt easily circumvented by a VPN, which likely will result as those offshore gambling sites start blocking NZ users without VPNs (to avoid the new tax). I am guessing NZ also receives a tiny percentage of crypto trading profit tax as well (which presumably relies on self reporting)
Last year the Govt received an extra $22m tax revenue as a result of loss of interest deductibility. Its raising a negligible amount of tax at present due to 50% of 6% interest costs being exactly equal to 100% of 3% interest costs. But the lack of investors in the housing market has meant a tenfold increase in the cost of emergency housing, and Kainga Ora having to spend billions to house all the people who used to be in private rentals but have been forced out by reduced supply of cheap housing, and higher rents.
KW, well said, we have so many people in emergency housing because there aren't enough rental or KO houses.
Private landlords are a necessity, if the government built enough social housing which they probably never will then then there may be less private rentals.
Presumably you mean 'extra compared to the previous year', rather than 'extra compared to if the rules hadn't changed'? Higher interest costs would have otherwise lead to a big fall in tax take. Labour are claiming the change proposed by the Nats will cost about $2 billion over 4.5 years.
So what is happening to those houses to allow that to occur? A rental when sold should then be lived in by an owner occupier. Unless they are intentionally being left empty, or they are being turned into airBNBS. But if either of those are occurring, they can fix it by doing what they do overseas, such as vacant home taxes, or commercial rating airBNBs, and limiting the number of days they can be rented out.
Yep, immigration (and its effect on our economy and infrastructure) is the elephant in the room in all of this. NZ’ers have gotten poorer (relatively) because we’re having to compete with the rest of the world to buy/rent our own houses.
On the bright side, for anyone already living in NZ, it’s a sign that we’re all already richer and luckier than we think we are… Because why else would so many people from other countries want to live here?!
Claim your ground while you still can, gonna get bumpy once the Nats make it even easier for the foreign buyers…
The article lists it as being up to $650m/year, presumably as it isn't fully phased in year
The next biggest tax cut would be reinstating interest deductibility for landlords, ramping up to an annual cost of $650 million or $2.1 billion across the first four years.
Pretty much just shuffling deck chairs.
I want real change. Neither of the two main parties are offering anything but "more of the same".
Funny how National always manages to ensure the upper income earners and the mega-wealthy still get tax cuts & lollies while National sings the song about being focused on "middle NZ". What a crock.
Did you even read the plan? This is actually very targeted to middle income NZ, the tax rate threshold adjustments proposed only impact income up to $78k, so those earning income over that amount receive no extra tax cuts. The other big part of the announcement goes to family tax credits, and that also has income thresholds so wont benefit the rich an additional amount either.
The only bone to the rich is the reversal on property interest deductions, and even that takes years to fully reverse (2026), and in fact commercial property owners are actually harmed significantly by nationals policy with building depreciation being removed.
Bit of a con that $2m rule… I won’t be surprised if many homes that would otherwise sell for less, suddenly get random overseas offers for $2m…
Maybe just another way to pump up our property market, that is, by expanding the market base by introducing a “buy-in” for high rollers… clever one Luxy.
And of course, higher demand/prices at the top of the market inevitably filters down to the rest, because there’s a finite supply of houses…gulp.
Did you understand the plan? Clearly not.
To put it simply ... Someone on $250,000 a years gets exactly the same PAYE tax cut as a person on $78,000.
Does the person on $250,000 need the extra cash as much as the person on $78,000?
A plan that was serious about helping the middle would have adjusted the upper bands so that those people on $250,000 got only a little more.
Can I conclude you've been conned? You'll be in plenty of company.
Not really is it though? Why do we not allow for income tax sharing for couples? For example if the husband works in a higher income role and the wife stays home with kids or works part time, his income is considered his and his alone for income tax purposes. But his wife won’t be able to get any benefits because of her husband income - at this point. that income is considered joint income. Very inconsistent.
When talking about relief for the squeezed middle, recognising this and allowing the income to be spread over two persons would be a far better way to help the middle eg husband makes 120k, wife makes 20, they should be taxed as if it we’re 70k each
Yes, and I'd go even further and pay the stay-at-home partner a UBI. Then drop all the ECE subsidies. And think of the savings companies would make with so fewer parents needing to take sick child leave. One income families was what made society so much more socially cohesive in the past.
"One income families was what made society so much more socially cohesive in the past. " Only part of the story. In those days prior to the DPB there wasn't much financial opportunity for women to leave bad marriages (you also needed your husband's permission to open a bank cheque account or sign up a loan). Socially cohesive doesn't always = healthy.
You're going way back to the baby boomers grandparents generation to come up with that excuse - women are now liberated. No looking back on their capability or entry into professions these days. And note, I always talk about one partner staying at home - in today's more equal world that partner would be of either sex (50/50 likely).
Their policy document is littered with big errors. They say that the Auckland Regional Fuel Tax was implemented to pay for the light rail project, and that they would cancel this tax as well as light rail and all will be good with the world. That is totally wrong. The Auckland Regional Fuel Tax provides funding for a huge range of projects across the Auckland roading network. This will leave a hole in Auckland's transport budget that would need to be filled, or else projects cut back.
What on earth are National thinking?
Auckland has already had to cut back massively on public transport. If it genuinely mattered, the current government could have funded these projects centrally. Lumping Auckland with the bill for years of Wellington-foisted population growth at the same time the government actively hampers any chance of proper rapid transit is crocodile tears after six years of abject failure. Why does it suddenly matter now?
I think I know why.
The funding source being there hasn't stopped projects being slashed or cut back, or endlessly deferred anyway. That's already happening under the current regime.
If there's a legitimate need for Auckland to have a regional fuel tax then everyone should have one. Only Auckland ever got singled out for one, and there's no moral justification for them to have both the tax and delays and deferrals.
In summary-
- If you live in Auckland you can expect worse roads and more foreign buyers competing for houses;
- If you live elsewhere you can expect more rapidly disintegrating public services;
- There will be more public borrowing; and
- We will fix the environment next time.
But the ‘natural party of government’ is back in power, as is right and proper, and we can all buy Ford Rangers without feeling picked on. Huzzah!
Not quite sure what Labour are going do, we have a prediction that if LIEBOUR keeps spending we will be liquidated by credit ratings Finch
They way I see it if you want to pay more tax vote Liebour or get a few lose coins Vote National or if you want to be tied to a tree vote Greens or if you want to vote Maori Party you can break any rules and get a wee smack on the hand .
As for Winston he got us all in this mess in the first place and David I thought he was making sense but not he thinks he is Prime minister
Is the 2 million house inflation adjusted as 2 million sounds low? In 10 years most houses in Auckland could average 2 million. 15% also seems low. Or may 15% is just a start.
It does seem that NZs wealth divide between the rich and middle income earners is growing even bigger with this change in policy, as it is one rule for the rich and another for average buyers.
Nothing to see here! Tax reductions offered by $8.4B re-distribution of money and $6.2 B of new taxes. Nothing how about a future pathway to earn those taxcuts by increasing the total revenue pie. For those $8.4B it is a zero sum game so wherever they take the money from, I hope they have done a decent impact analysis above the statement that $400M is wasted on consultants. Yes, MBIE is in the fire line but I also hope that this particular department, which is accountable for innovation and trade, should allowed to work on a pathway to get this economy turned around to new products and markets. Keep on laying our trust in milk powder is a dead end street in my opinion. Therefore I have a little sympathy for the comments of David Seymour that this is not a real change. It is more of the same, Labour, policies but this time not aimed at the lower income families but at the "squeezed middle".
Plenty, although I feel more will head to Winnie. Im seriously considering it as if the Nats are going to get in and cant form a government with Act then he will be a massive handbrake to the Nats constant flogging off our country to the highest bidder. Red and Blue is like voting for a shit sandwich or a shit sandwich with extra shit
What's the point voting for a handbrake so basically nothing gets done ? We have had one massive handbrake for the last 6 years and cannot even get a few potholes filled in. What we need is some positive direction with no brakes and pedal to the metal. If it takes some radical stuff by ACT then so be it, seriously how much worse can it it get ? We are already in the toilet.
They may have picked a few up from Labour as Labour are not going to be able to say Luxon is saving more that middle income tax payers with the way they have moved tax brackets. Labour votes are what is needed rather than votes moving back and forth between National and Act. Labour would have loved to say taxpayers are getting $2000 per year tax cut and Luxon $20,000
ABSURD
“One of National's fund-raising mechanisms is to divert money from the ETS away from new projects for decarbonising industry to help pay for the proposed tax policies.”
The ETS shouldn’t be some slush fund for politicians.
Also changing the bright line test is nothin more than self serving for property owning National MPs.
National has no strategic vision as all and is so backward. I’m ashamed to be a New Zealander given the incompetence of our politicians.
I'm no National fan but adjusting the income tax bands for inflation had to happen. The government fought a very long delaying action but, if they're honest, I think even they'd admit they should always have been adjusted annually for inflation instead of allowing fiscal drag to penalise workers.
Yeah, well, much as I like a good public transportation system only a single digit percentage of people actually used it daily.
Carbon taxes are more interesting but generally people don't seem that engaged with the policy which is actually a real shame because it is so important.
wayne brown not a fan, what do you expect from a wellington based finance spokesperson and a transport spokesperson that is still wet behind the ears not to mention if anything is between them
Auckland Council relies on the RFT to deliver sensible transport improvements for Auckland, beyond road maintenance and operating public transport.
“We are using the funding for the Eastern Busway, as well as planned upgrades like Lake Road, Lincoln Road and Glendvar Road.”
Brown said these projects were at risk if the RFT was dropped without a replacement, warning it could leave close to a $2b gap in the council’s budget.
“It will mean more delays to sensible projects to optimise our road network and more potholes.”
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