Barry Soper: Labour should know tax decisions will be out of their hands

Author
Barry Soper,
Publish Date
Thu, 10 Sep 2020, 9:05AM
Jacinda Ardern, James Shaw and Grant Robertson. (Photo / File)
Jacinda Ardern, James Shaw and Grant Robertson. (Photo / File)

Barry Soper: Labour should know tax decisions will be out of their hands

Author
Barry Soper,
Publish Date
Thu, 10 Sep 2020, 9:05AM

Read their lips: there'll be no new taxes, other than for the wealthy, under the second term of a Labour led Government.

That's simple to say but hard to do. As genuine as the sentiment may be, Jacinda Ardern and Grant Robertson know that it's a decision that almost certainly won't be entirely theirs to make.

Tax issues dogged Labour before the last election and after it. Shell shocked by Winston Peters' appointment of them, they shelved the captain's call made by Ardern for a capital gains tax in her first term as Prime Minister.  

They appointed a Taxation Working Group, and despite its advocacy of a tax on capital gains for property speculators, the captain made another call at the insistence of General Peters never to introduce it on her watch.

The team's captain has made another call, a return to the 39 cents in the dollar tax for those earning more than $180,000 a year which will encompass less than two percent of salary earners, and bring in around the same in a year, $550 million, as the current wage subsidy is costing us in a week.

The last time the top tax rate was at 39 percent was during the Helen Clark Government, and that kicked in at $100,000.

But more importantly, the last time the tax brackets were increased, where taxes automatically increase when income thresholds are reached, was almost a decade ago.  

The top rate was then set at $70,000 when just 11 percent of earners made more than that. Five years later, 17 percent were on the top rate, and it's been estimated if wages grow by 2.5 percent a year the average wage earner – yes, the average earner - will be on the current top rate.

By keeping the tax brackets where they are, governments effectively collect tax by stealth as incomes grow.  So Ardern and Robertson may well say there'll be no income tax increases in the next term but they obviously can't say there won't be a growth in wages which will bring them in more money anyway.

But as to their claim there'll be no new taxes, it's an impossible one to make.  

Conceivably they could have just the Greens as their coalition partner without the New Zealand First handbrake. Imagine if the Greens insist their bottom line in negotiations would be their Poverty Action Plan.  

Besides having to find the money for the $325 a week for students and people without work, Labour will have to confront a one percent wealth tax for those with assets worth more than a million dollars and two, not one, top income tax brackets that the Greens say will redistribute wealth.

So put that in your cannabis pipe and smoke it - although that's by no means certain either!