National defends targeting middle-income earners with 16-month tax relief

Source: 1News

National is defending targeting middle-income earners with their proposed policy to provide 16 months of tax relief, despite economists saying tax cuts to lower-income earners leads to more spending and economic stimulus.

National’s finance spokesperson Paul Goldsmith told TVNZ1’s Q+A today it was natural that those who earned more would get the most benefit from tax relief.

National announced on Friday it would slash income tax for 16 months to boost spending, if elected.

It could mean the average worker, earning $64,000 per year, would get to keep an extra $3226 over a 16-month period, or about $50 a week.

Meanwhile, minimum wage earners would only get to keep an extra $8.10 a week.

Goldsmith said the policy focused on middle-income workers who “work hard to provide for themselves and their families”.

“It’s their own money that we’re going to be returning to them,” he said.

When host Jack Tame asked him to explain why minimum-income workers would only get about $8 a week, despite economists saying that those on minimum incomes would more likely put money from tax cuts back in to the economy than any other group, Goldsmith said: “Yeah, they’ll get some extra money, and we want to put some extra money into the hands of people who are working hard.”

“We want to get some money back into the hands of the average income earner.”

He said if some money from the tax cuts end up being spent on local businesses, then “that’s good”.

Goldsmith said Kiwis could better decide where their money would go, rather than in a Labour-led Government who wanted to introduce more programmes.

“We really want to get the economy back on track. We’re confident about New Zealand’s ability to re-build and re-gain our prosperity. It’s just a question of how quickly we do that.”

He said a National-led Government would get the country’s debt down faster than labour.

Goldsmith said the $4.7 billion estimated cost of the tax cuts would come out of the Covid-19 Response Fund.

When asked by Tame on Q+A today if that was responsible in case there were to be further outbreaks of Covid-19, Goldsmith said there would still be $9 billion left in the fund after the tax relief it proposed.

If another outbreak of Covid-19 were to occur, Goldsmith said they would, “of course”, borrow more.

“It will take longer to get our debt under control.”

A secure border plan was also essential to help avoid that situation, Goldsmith said.

As for future Government spending, he said National wouldn’t cut core spending.

He said the tax cuts balanced short-term stimulus with long-term investment. For example, health expenditure would continue to increase as the population aged, Goldsmith said.

Goldsmith said that although National was planning to spend about $50 billion less than Labour by 2023/24, it didn’t mean they were slashing investment.

“We’ll be much more careful with our spending.”

Labour disparages National's tax plan as 'reckless'

Labour spokesperson Grant Robertson said National’s tax plan was “desperate” and “reckless” at a time when New Zealand needed to invest in health and education.

“They’re raiding the fund that we put aside in the event of the resurgence of Covid,” he told Q+A today.

When asked by Tame about National’s intention to provide stimulus through tax cuts, Robertson said of Labour's plan: “We’ve got to get the balance right here."

“What they’re [National] doing will completely undermine the funding that is needed just for our health system, for an example.”

He added: “This is the wrong policy for the wrong time.”

Robertson defended his party’s announcements this week to increase the minimum wage to $20 an hour and double sick leave entitlements, which added extra costs to businesses which were already struggling in the pandemic.

He said under a Labour Government, people working full-time on minimum wage would be $44 better off.

People on low income would likely spend that money supporting small businesses, Robertson said.

“We know when we lift minimum wage, that money is spent in the economy.”