Claire Trevett is the New Zealand Herald’s deputy political editor.

Labour's election gambit is tax hikes, not cuts, to raise revenue

Labour Finance spokesman addressed the issue of tax in a pre-Budget speech on today. Photo / Jason Oxenham
Labour Finance spokesman addressed the issue of tax in a pre-Budget speech on today. Photo / Jason Oxenham

Tax is set to be a major battle line in the 2017 election after Labour's Grant Robertson signalled his party would increase some taxes to pay for its policies - a stark contrast from National's expected tax cut platform.

Mr Robertson addressed the issue of tax in a pre-Budget speech on today, saying before the election he would set out a tax policy including measures to ensure Labour could raise the revenue needed to pay for its promises in health, education and housing - a clear signal some taxes would be raised.

It comes days after Prime Minister John Key said National could campaign on a platform of significant tax cuts rather than a more moderate package to address bracket creep. Mr Key said about $3 billion would be needed for substantial tax cuts that returned more than single figures to voters' pocket. The last changes to income tax thresholds were in 2010 and that was paid for by increasing GST to 15 per cent.

Mr Robertson would not give details on exactly what taxes Labour was looking at to increase its revenue or whether that included income tax hikes. Last election Labour proposed a new tax rate of 36 cents in the dollar for those earning more than $150,000 a year. The top tax rate now is 33 cents for income of more than $70,000. Mr Robertson acknowledged bracket creep was an issue. However, he said re-starting contributions to the Super Fund was a priority "way ahead of any tax cuts" as were health, education and housing.

"We will take a look at the way bracket creep has worked but I do not believe there is enough money for the kinds of tax cuts John Key is dangling about. I've got to make clear that the priority we have is investment in health, education, housing and infrastructure."

He said if it was elected Labour would set up another Tax Working Group to look at the mix of taxes, especially the tax incentives for property investment over investment in the productive sector. While Labour would not campaign on a capital gains tax in 2017, it would be in the mix for the Tax Working Group to look at as would a land tax.

Mr Robertson said a massive surplus would be needed to offer tax cuts. This year at least $600 million was needed for health just to ensure it stayed on level pegging, let alone make up for underinvesting in the past. Mr Robertson also indicated Labour was looking at boosting its "KiwiBuild" policy under which the state would build 100,000 affordable homes. Mr Robertson said demand had only increased since that policy was conceived and more was now needed.

- NZ Herald

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