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National’s tax plan will give $10 in tax cuts to the top 5 per cent of income earners and landlords for every dollar of tax it cuts for the bottom half of earners, according to new calculations from the Council of Trade Unions.
If you take a fairly costly interpretationof National's policy, the changes would give people earning the Prime Minister's salary about $54,000 over the three years of the next Parliament, while people on the minimum wage would get a bit less than $350 over the same period.
National's finance spokeswoman Nicola Willis said she completely rejected the figures.
The centrepiece of National's election promise is a tax plan that will bin a raft of Labour's taxes, including the new 39 per cent bracket, the extension of the bright line test and the removal of landlords' ability to deduct interest costs from their tax bills.
At the heart of the plan is a policy to adjust tax brackets to take account of inflation that occurred between the end of 2017 and the end of 2021 - National says it will adjust those brackets further if it can.
The party costed the bracket policy at $1.7 billion earlier this year. CTU economist Craig Renney, a former adviser to Finance Minister Grant Robertson, said it would in fact cost $200m more in its first year ($1.9b) because inflation has pushed more people into higher tax brackets, adding to the initial cost.
"It's hard to understand why in a cost-of-living crisis that disproportionately harms the poorest, you would design a package that is so heavily skewed to those who need it the least. More than half of taxpayers would receive either $2 a week or nothing at all," said Renney.
Council of Trade Unions (CTU) economist Craig Renney made the calculations. Photo / Mark Mitchell
"If Christopher Luxon was prime minister he would gain around $54,000 over three years, or $349 a week, quite apart from the gains from the properties he owns. A minimum wage worker would gain $2.15 a week - not enough for a loaf of Tip Top White," he said.
National Party leader Christopher Luxon said today that the party’s tax policies were a more effective way of addressing the country’s cost-of-living crisis.
It wasn’t about changing taxes all together, but increasing the current thresholds in line with inflation.
”Most people say when you’ve got high inflation it’s unfair that people get caught in what we call ‘bracket creep’,” he told AM.
”We’re not changing the principles of that system, [but let’s] a least take the current system and be fair to everyone.”
Willis said National rejected the CTU’s claims.
“We completely reject these numbers as they are based on a number of false assumptions including about aspects which are not in our tax plan and that the entire plan will be rolled out immediately.”
"We question the motivations of the analyst, given his immediate previous role as a political adviser to the Finance Minister," she said.
If all of the package was implemented in the first year National took office, the CTO reckons it would come to about $3.4b in lost revenue - and more than $11b over the course of the next Parliament. This lost revenue would make it difficult to fund National's spending commitments, which include increasing education and health spending by at least the rate of inflation, without additional borrowing.
National has said that the policy would in fact be staggered, this means the final annual cost of the plan would still be high, but the initial cost would depend on what National chose to cut first.
"This is a question of priorities. If the Government is going to spend $11 billion, it should be focusing that money on public services like health, education and housing or on boosting incomes for families who need it, not a tax package focused on the well-off," Renney said. At the heart of Renney's calculations is updating National's figures for what they will cost in 2024, 2025, and 2026 - the years the party will have to implement the policy if they win the 2023 election. National's tax bracket plan, for example, was costed using the latest IRD data in 2022, however that data used figures dating back to 2020 to work out how much tax people were paying in order to model how much cutting the level of tax would cost. Renney has adjusted that data for the inflation that has occurred to date, and the inflation that is expected to occur by 2024 to come up with a figure that more accurately reflects the cost of the policy when National would implement it.
National has not produced costings of its full tax plan, saying it will do so after the last set of Treasury forecasts, known as PREFU, are released in the weeks leading up to the election.
The CTU has costed the policy as though all of the tax changes will be implemented in National's first year of Government. It is not clear what policies will be rolled out first.
