Greens policies will raise revenue higher than expenses according to a review by Infometrics

by Eric Frykberg

The policies of the Green Party will see more money going in to Crown accounts than is coming out, according to a review by the economics consultancy, Infometrics.

As a result the cost of Green Party spending promises will be $5 billion less than the increased revenue from its tax policies.

The findings rebut claims that the party's policies will cost far too much.

Green proposals such as free dental care and a guaranteed basic income for everyone are frequently assailed as unrealistic.

But the Greens have released the Infometrics review to counter those arguments.

The review covers the years until 2026-27.

Over that time frame, Infometrics says the Green Party policies will increase both revenue and expenses.

But the revenue growth will be higher.

The consultancy says revenue in the forecast period is expected to be +$43.3 bln higher than in PREFU 2023.

But expenses are expected to be +$38.4 bln higher than in PREFU 2023.

Infometrics adds that although the net impact of these changes on the government’s operating balance is positive, the debt track for the Green Party is slightly higher than in PREFU 2023, largely due to borrowing for capital expenditure. 

It adds current operating allowances as published in PREFU are unchanged under the Green Party track.

And environmental policies are affordable, they say. Infometrics says the Green Party’s Clean Power Payment policy can be fully funded by the Climate Emergency Response Fund (CERF).

As of PREFU 2023, Treasury indicated that $1 bln is left available to allocate from the CERF in the future.

But the Green Party track expands the available funding to be $1.5 bln by returning the $0.5 bln loan to the National Land Transport Fund (NLTF) back to the CERF.

As a result, it says the $1.36 bln in operating expenditure towards the Clean Power Payment as announced by the Green Party can be fully met.

The Clean Power Payment involves assistance on programmes like insulation and solar power.

One controversial plan by the Green Party would expand ACC from covering just accidents to covering illness as well.

This would be funded by changing ACC to pay-as-you-go, instead of building up reserves to such a level that it has become a gigantic institutional investor.

Infometrics writes that the cost would be met from these funds in the first year of the programme, the 2026 fiscal year.

This would be $3.29 billion. Further costs will be met by an increase in ACC Levy revenue income. Infometrics says the first year of the programme will reduce the size of state assets, but Crown net worth is still expected to be higher overall under Green Party policies compared with the PREFU at the end of the forecast period.

Infometrics adds the party's proposed Wealth Tax would be complicated and could be reduced by 25% due to tax avoidance and evasion. But it says the Green Party proposal takes account of this measure.

The firm adds a word of caution.

"We do note that the government’s administration costs associated with a wealth tax could be larger than expected, with increased compliance costs to determine the value of assets," it says.

"Higher administration costs could reduce the net revenue from a wealth tax."

On the other hand, these higher costs will not be great compared with the amount of revenue to be brought in.

Meanwhile, Infometrics has a warning for the Green Party over its proposed tax thresholds. These include tax-free status for money earned under $10,000 a year..

It says history shows people's tax behaviour changes with changes to tax levels.

"In other words, there is a behavioural response by taxpayers to minimise their tax burden," Infrometrics says.

Infometrics says the Green Party has moved to limit tax avoidance, via methods such as a proposed 1.5% blanket tax on trusts.

"Nevertheless, if taxpayers consider the effects of the tax changes large enough, they will look to shift their taxable earnings into other vehicles, including companies, to avoid personal income tax – an economically rational and perfectly legal option," Infometrics says.

"It is important to recognise a potential decline in the tax base as a result of any changes in tax policy. In our view, the revenue collected from the Green Party’s proposed income tax changes should therefore be viewed as a high-end estimate."