Labour leader Chris Hipkins spoke about a Capital Income Tax. Photo / Mark Mitchell
Labour leader Chris Hipkins spoke about a Capital Income Tax. Photo / Mark Mitchell
Labour leader Chris Hipkins said the party’s tax policy is still a live discussion after the Labour Party social media account shared an account of a party meeting where former Revenue Minister David Parker allegedly discussed something called a Capital Income Tax.
Hipkins confirmed members were discussing arange of taxes.
“There’s a lot of conversation within the Labour Party at the moment around different forms of taxation: capital gains tax, wealth tax, combinations of the two, land taxes,” Hipkins said.
“If you look at capital gains tax and wealth tax, they sit on the same spectrum. It’s about taxing capital and they are variants of a similar theme.”
On August 19, Labour’s Whangaparāoa account shared a post titled, “Meeting David Parker – It’s a Capital Income Tax”.
The post described a meeting with Parker, who was Revenue Minister when the Labour Government developed the wealth tax proposal that was later killed by Hipkins. Parker told a party meeting about something called a “Capital Income Tax” or CIT. The author says this is “different from a capital gains tax – and not really a wealth tax – but a capital income tax”.
The proposal suggested Labour might run on a combination of a Capital Gains Tax and a wealth tax.
“[T]here is a debate going on within Labour... about a Capital Gains Tax [CGT] with a Capital Income Tax for deep pools of capital attached to it. (By deep pools I think we mean over $20 million – and it excludes the family home etc),” the author said.
Much like 2023′s wealth tax proposal, it appears the revenue raised from this tax might help fund income tax cuts for workers in the form of a $10,000 tax-free threshold, meaning the first $10,000 people earned would not be taxed.
When asked about the Capital Income Tax idea on Tuesday, Parker told the Herald that a capital income tax was essentially a wealth tax.
“The Labour Party is having a debate as to whether in the tax space we should have a capital gains tax or a wealth tax and a wealth tax can alternatively be described as a tax on capital income – a Capital Income Tax,” Parker said.
When asked whether he favoured using the revenue raised from any change in tax policy to fund additional services, or whether it should be used to redistribute income to workers, Parker pointed to the wealth tax proposal he put up last year as Revenue Minister.
“I won’t talk about the future but last time we proposed it, it was a tax switch,” he said.
Details on that policy was released after research published by the Inland Revenue Department showed the wealthiest New Zealanders paid tax at a rate half that of ordinary “middle-wealth” New Zealanders, mainly thanks to the fact that income earned through working is taxed heavily compared to economic income earned by holding capital. The study found the average tax rate paid by a sample of 311 high-net-worth New Zealanders was just 9.4%. That compares with a tax rate of 20.2% paid by “middle-wealth” New Zealanders.
The very very wealthy would be stung more by a wealth tax. Graph / Treasury
“I understand that Labour loves talking about more taxes. What’s harder to work out is why would David Parker be stepping in to comment on Dr Russell and Hon Edmonds’ portfolios: he hasn’t held the revenue portfolio for more than a year” Willis said.
Hipkins confirmed one option under discussion was a combination of a CGT and a wealth tax, listing several things the party was discussing: “capital gains tax, wealth tax, combinations of the two, land taxes”.
“We’ve had an internal conversation in which all sorts of combinations are on the table. We will set out our tax policy in due course,” he said, adding Labour had not got far enough through the process to discuss anything.
The idea mentioned in the post of mixing a CGT with taxing wealth over $20m could be one Labour opts to pursue.
The 2023 wealth tax triggered at net wealth of over $5m which would have been taxed at 1.5%. This would have taxed the wealthiest 0.5% of New Zealanders. Treasury documents released on that tax proposal said more than 55% of the $3.4 billion rising to $3.7b the tax would have raised would be paid by people whose wealth was $20m or more – New Zealand’s wealthiest 0.05%.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
