Prime Minister Chris Hipkins has described National’s tax policy as “smoke and mirrors” ahead of the party’s announcement this morning.
The party will release the full election policy at 10.30am from Parliament, but a slide seen by the Herald shows how the policy aims to “boost” the incomes of five typical households.
Under National’s plan, a household earning $120,000 a year with no children will receive up to $100 a fortnight, the document shows, while an “average” household with children will get up to $250 a fortnight.
Hipkins told Newstalk ZB Wellington Mornings’ Nick Mills that he will be keeping an open mind on National’s tax policy.
“There appears to be quite a lot of smoke and mirrors in what they’re talking about,” he said.
He said National appeared to be bunching their figures together across households and fortnights to “try and make the numbers look bigger”, and that they might be “a bit overcooking it”.
“I’ll keep an open mind, I’ll see what they’ve got to say.”
Under National’s plan, a fulltime worker on $60,000 will get up to $50 a fortnight, and someone who works fulltime on the minimum wage will get up to $20.
A superannuitant couple will get up to $26 a fortnight.
All of the savings were expressed as fortnightly figures, rather than weekly figures, making them look larger.
National hopes the changes appeal to the “squeezed middle”, offering as much to middle-income New Zealanders as they do to high earners.
The party’s finance spokeswoman and deputy leader Nicola Willis has said the package will be fully funded through a mix of spending cuts and “specific” and “targeted” revenue tools - code for tax increases elsewhere.
The policy will not dip into future operating allowances - money set aside for future Budgets.
“We’ve put it together in a way so that it is self-funding, so that even if Labour, as predicted, leave the books in a total mess, we can guarantee that working New Zealanders will get a tax break,” Willis said yesterday.
“There will be four additional revenue measures in our tax plan. They will be specific, they will be targeted,” she said.
National “could definitely” look at taxing churches and charities “down the road” but has not considered that strategy at this stage as it has been focused on other things, Luxon told Newstalk ZB’s Mike Hosking.
He said the costings for National’s tax relief plan were rock solid and had been externally reviewed to ensure the numbers are correct.
Revenue would be raised to support the tax plan through targeted revenue measures, he said. He had been reassuring people that National would keep increasing spending on health and education.
Most of the tax plan would benefit what Luxon called the “squeezed middle” which he defined as people who “have woken up at seven, they’re going to work, they pay their taxes, they get their kids to school, they do everything right.
“But man, they are being hammered,” Luxon told Hosking.
Any revenue raised would not come from them, he said.
Luxon confirmed to Hosking the tax plan would include movement in the tax brackets under National’s tax plan. But he also conceded that the up-to-$250 going to a family with an average household income would include policies already announced, such as childcare support.
National has teased four main tax cuts, and the tax package will likely be a combination of some of these.
The first, and most significant, is to adjust the income tax thresholds to take some inflation into account. Adjusting the brackets would mean a tax cut to income earners.
National last year promised an 11.5 per cent adjustment, in 2022, and said it would like to adjust the brackets further if possible.
The figures released to the Herald suggest the party has lifted the brackets further, or changed approach.
But with that plan costing about $2 billion a year, it is not clear how much further they will be able to take those bracket changes.
The party is also rolling back Labour’s extension of the bright line test to 10 years, and the removal of landlords’ ability to deduct interest costs from their tax bill.
The fourth big change is a policy to subsidise childcare costs through tax credits of up to $75 a week.
The party also promises to repeal a handful of smaller taxes such as the Auckland Regional Fuel Tax and to change the way GST is levied on Ubers.
National has come under pressure to demonstrate how it would afford the plan. Indexation changes are estimated to cost $2b a year - more if National decides to lift the amount of indexation.
The bright line test changes are estimated to cost about $50m a year and reversing the interest deductibility changes is estimated to cost about $650m.
Prime Minister and Labour leader Chris Hipkins has put pressure on National to front up with how the changes will be paid for, saying National’s admission the tax cuts will be paid for with some tax rises is an “admission” the cuts are unaffordable.
“I welcome [Christopher Luxon’s] admission that they are unaffordable, judged by the fact that they’re proposing now to introduce four new taxes in order to pay for them,” Hipkins said in the House yesterday.
National is particularly vulnerable to Labour’s attack that it is offering a package of tax cuts for “millionaires”, based on the claim that repealing the 39 per cent top tax rate would deliver a tax cut of $50,000 to someone on a million-dollar salary. National has said it will not offer that tax cut this term, but it has not ruled out repealing it in the future.
Thomas Coughlan is deputy political editor of the New Zealand Herald, which he joined in 2021. He previously worked for Stuff and Newsroom in their Press Gallery offices in Wellington. He started in the Press Gallery in 2018.