Election 2020: Labour's tax policy will cost those earning $200,000 less than the cost of a cup of coffee a day

COMMENT:

Even Labour supporters who are already jaded at the idea that the party represented the transformational change might get a sinking feeling from its new tax policy.

Unless you are one of the approximately 2 per cent of Kiwis with incomes of more than $180,000, you will see neither a tax increase, nor a tax cut.

Fulfilling Ardern's promise to never introduce a capital gains tax while she is Prime Minister, there is no tax reform of any kind on capital, leaving a blindspot which successive Governments have refused to address.

Labour's entire revenue policy is a new tax bracket for very high earners, of 39 cents in the dollar income over $180,000.

For good measure, the party has even promised there will be no other new taxes or further income tax increases in the next term of Parliament.

The changes mean those earning $200,000 a year will pay an extra $23 a week in income tax, or in the terms used by charities asking you to donate, less than the cost of a cup of coffee a day.

Even backbench MPs could theoretically be unaffected by the tax.

A Government minister who sits outside Cabinet, earning around $250,000, would pay around another $80 a week.

In releasing the policy, Labour's finance spokesman Grant Robertson said the policy "strikes a balance" in the Covid-19 recovery, adding that the move will "help keep a lid on debt" as New Zealand recovers from a one in 100-year shock.

But in the scheme of the tens of billions of dollars of spending Robertson has approved since March, the increased revenue from the tax for those on super high incomes is a drop in the ocean.

Labour estimates the move will help raise $550 million a year. That is about the same cost as two weeks' wage subsidy payments.

The figure could also be optimistic.

Labour must also know that many people who operate at that level can likely adjust their tax affairs and spending in such a way to avoid the higher tax anyway.

To be fair to Labour, Robertson and revenue spokesman Stuart Nash had the dignity to not present the new tax as something it was not.

The policy was announced in a nondescript room in a four-star hotel in Wellington, as far away from the Prime Minister, who is visiting the Eastern Bay of Plenty, as Robertson and Nash could sensibly manage.

When it was suggested to Robertson that the change represented structural change in the tax system, Robertson had the dignity to dispute that it was.

Again and again, Robertson said the tax was about offering certainty to Kiwis and it was the right policy for a time of economic crisis. But he never really explained why.

Already the Greens have said the changes are tinkering, while National has immediately responded that the first instinct of Labour is to raise taxes.

This response will no doubt be taken by Labour as more evidence that its policy is about the right balance.

But transformational this is not. It still leaves a major gap in the tax system and taxes only a tiny sliver of New Zealand households at a time when the country is running deeper into debt than it has in a generation.

Attention will now focus on whether the Green Party can win enough support to force the issue of a wealth tax on to the agenda of future coalition negotiations.

The Labour Party though is consigned to being the party which in three years has transitioned from promising major structural change to one where its tax policy is about creating as little fuss as possible.