Analysis: The Prime Minister made a politically calculated move this week to leave the door ajar on the issue of a capital gains tax.
Chris Hipkins gave us the first taste of what to expect in the election year Budget this week when he delivered a speech to the business industry in Auckland.
He ruled out a capital gains tax in the Budget, and he’s dampening down expectations behind the scenes.
It came after Inland Revenue released a report into how much tax the super-wealthy paid on their whole income — 9.4% including GST — and Treasury released one on how much tax ordinary New Zealanders paid, which was found to be about 20.2%.
Amid that, importantly, Hipkins isn’t saying a blanket "no" to the politically fraught capital gains policy.
It's fraught because it’s hard to target it precisely, it hurts “mum and dad” investors (which means they probably won’t vote for him) and it adds to the idea of “tax, tax, tax” that Labour is trying to ditch.
In 2019, then-Prime Minister Jacinda Ardern admitted she supported a capital gains tax but said it would never happen under her watch.
Hipkins made a calculated decision not to follow her lead, explaining that he won’t be playing the “rule in, rule out” game. That’s a thought-out political move. It gives him options.
In the meantime though, it also allows rival parties to raise questions about Labour’s tax plan. The parties won’t reveal their policies until closer to the election.
A study gathered information from 311 families worth more than $50m each. (Source: 1News)
Hipkins also said he’s open to adjusting the tax thresholds, but not right now.
We could see these adjusted to give people a little bit more money in their pocket and if it’s an election promise it could kick in around April 2024.
National is also promising adjustments.
There’s been a lot of talk on tax this week and while the door remains ajar, there will continue to be speculation around a proposed capital gains tax.
10.5% - $0 to $14,000
17.50% - $14,001 to $48,000
30.00% - $48,001 to $70,000
33.00% - $70,001 to $180,000
39% - Remaining income over $180,000
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