If it's a rabbit you want out of a hat, look no further than the parties' tax policies this election campaign, says John Campbell.
I was so bad at accountancy at secondary school that my teacher, Mr Kerr, agreed to mark me present if I didn’t attend class. It was better for everyone. This week, I began to wonder if some of the people writing tax policies for our major political parties may have enjoyed similar arrangements.
Tax, as we know, is both as inevitable as death and highly subjective.
The former means we all have to pay our share (unless we’re Google, Apple, Uber, etc, or own multiple homes appreciating in value) and the latter means we have to endure politicians talking endless bollocks about it.
It was turbo-bollocks, this week. A kind of pin-the-tail on the donkey, in which the tail was tax policy and the donkey was the voter.
Let’s call our voter “Beth”. (A name I chose solely so we could use that headline.)
Beth pays her share of tax. It’s never occurred to her not to. And because she’s somewhere in the lower reaches of that vast and uncertain country we call “middle income”, she couldn’t avoid it if she tried.
She rents. Or has just, somehow, bought her first home. (Her partner must work, too.) She is thirty-something. Life isn’t as easy as she dreamed it would be. But she retains hope that things will get better. And she swims towards that distant, shimmering horizon, every day.
On Sunday, Labour targeted Beth (and you) with the announcement of the removal of GST from fruit and vegetables.
Not that it’s a dreadful policy, despite a number of economists spontaneously combusting, it’s just small pretending to be big. (Clark Kent rather than Superman.) And in that respect, it’s exactly what we should expect from Labour.
Still, polling company Talbot Mills, who Labour values in the same way a driver with topographical agnosia values GPS, tells us people like it.
But with a weekly value of somewhere between $2 and $5 per household (for most of us), it’s not transformative. And it’s not the kind of policy that declares the first majority Government under MMP sees the world in all its inequality and is determined to use its unprecedented mandate to address it.
GST off fruit and veges was the headline announcement. But Labour also announced a $25 a week “boost” to Working for Families, through the In-Work Tax Credit (IWTC) – the “largest ever increase to IWTC will benefit approximately 160,000 families”.
This is more meaningful. For some. But, and this is the kind of “but” that makes Labour sometimes feel like National lite, to get the “In-Work Tax Credit” you have to be in work. (Doh!) As with Working For Families itself, the clue is in the name.
Bewildering
Here, Labour are bewildering. A point made, with her usual accuracy, by the Child Poverty Action Group’s Susan St John, writing in The Daily Blog.
“When a payment to a caregiver is designed to be enough to address child poverty,” St John writes, “but it is withheld from the worst-off families who are on benefits to create a work incentive, the result is deeper child poverty not more parents off-benefit.”
Speaking on RNZ’s Morning Report, St John went quotably further: “What they’ve done, is they’ve taken the discriminatory part of the Working For Families tax credits, and put that on steroids.”
This wilful exclusion, which is at the heart of Working For Families, has repeatedly been questioned by those who see child poverty first hand. Most importantly, perhaps, by the Welfare Expert Advisory Group (WEAG), the Child Poverty Action Group (CPAG) and the Salvation Army.
Remember, as I’ve written about at length here, the WEAG wasn't inherited from a previous government, reluctantly. It was convened and configured by the Labour-led Government itself, following a confidence and supply agreement with the Green Party in 2017 that committed to "overhaul the welfare system… so that everyone has a standard of living and income that enables them to live in dignity and participate in their communities, and lifts children and their families out of poverty".
In my 30 years of reading these orphans (Government commissioned reports that the parents then abandon), the WEAG Report is amongst the most outstanding.
It gave Labour a blueprint for poverty reduction that could have altered the lives of our most disadvantaged in a way that genuinely enriched us all. That blueprint included scrapping the In-Work Tax Credit and increasing the first child Family Tax Credit, which reaches all lower-income children, not just children whose parents’ work.
Yes, as MSD tells us about the Family Tax Credit, with a language so bland it almost disguises its significance: “Families getting a main benefit and low to middle-income working families can both get it.”
So, the WEAG said, increase it, and get rid of the IWTC. Simple. Transformative. Kapow!
And yet, as the Child Poverty Action Group pointed out at the end of 2021: “None of the 42 key recommendations of the Welfare Expert Advisory Group (WEAG) have been fully implemented almost three years after the report release.”
It’s like going to the doctor for lung issues, being told you’ll be fine if you give up smoking, and celebrating the good news with a fag.
But, but, but… GST off fruit and vegetables!
Grant Robertson, speaking on Morning Report, defended this with the robust vigour of a man who holds the unlikely portfolio combination of Finance and Sport. Addressing the estimated savings from the GST announcement, he pointed out that $4 to $5 a week was “more than someone on the minimum wage gets from National’s tax cuts policy, which would be about two dollars a week”.
"Better off"
Enter National, of course. Keen to not have their $2 per week overlooked and waving that little brown coin like it was the key to a Tesla. “The vast majority of Kiwis will be better off on our tax plan,” Christopher Luxon declared. And sure enough, the better off the Kiwi, the better off they’ll be: $112 a year on the minimum wage, almost ten times that if you’re on $85,000 and above.
Tantalisingly, there may be more. Or not. Under the headline: “Delivering tax relief”, National writes (twice in the same release): “We will take into account the economic and fiscal conditions at the election and if we can go even further in providing Kiwis with tax relief, we will.”
Yes, dear voters, “even further” than two bucks! Here’s where a sane person would take Mr Kerr’s accountancy class option and get the hell out.
The challenge, in a balance sheet sense, with cutting taxes is that taxes are revenue and Governments spend money.
National tweeted, or X’d (sigh) how they plan to address this: “National will restore discipline to Government spending.”
Discipline. Like a Victorian school master, the Nats love it. From boot camps for young criminals, to cellphone bans at school, to fiscal piety, there’s very little that discipline won’t fix.
(As an aside, when the left do this, the right call it “Nanny State”, particularly when the Prime Minister is a woman. But when the right do it, it’s “getting tough on…”, or “discipline”, or any number of those paternalisms the right see as a virtue.)
However you describe it, at this stage of the campaign it still feels like a vibe thing, rather than a costed actuality.
Let’s turn to Nicola Willis here, National’s Finance spokesperson.
“National will fix the economy by stopping wasteful spending and providing tax relief,” she said, in May, in response to the Budget.
“New Zealanders need tax relief now more than ever. Tax relief is the right thing to do,” she said in July.
If we do, and if it is, it seems logical to observe that those on the lowest incomes will need this relief more than those on the highest.
But the relief offered in National’s tax bracket adjustment is, as we’ve seen, paltry for those on lower incomes.
On $45,000 it’s $112 a year (yes, you read the correctly).
On the average wage and above, it’s just over $1000 a year, or $20 a week. Not nothing. But not very much.
For Beth, by the way, it’s about $16 per week.
Add in Family Boost and it may (depending on whether you have a family, you use childcare and your children are of “early childhood” age) increase by a “childcare tax rebate of up to $75 per week”.
So far, that’s it. Although a call to the National Party on Wednesday received a hearty assurance there’s more to come.
Here’s where it’s not unreasonable to ask how they’ll pay for it? And here’s where their answer starts to sound like me in Mr Kerr’s accountancy class, woefully fudging the fact I don’t have any figures.
“Family Boost will be fully funded by reprioritising existing wasteful spending which is not delivering value for New Zealand taxpayers,” National tells us in the information release accompanying the policy announcement.
Oh.
And the inflation adjustments to income tax brackets, how much will that cost? Well, the estimated cost is somewhere in the region of $1.66 billion annually, although there’s a sense that’s a hopeful figure.
Still, let’s accept $1.66 billion a year. Where’s that coming from?
It’s hard to actually say. There’s the restoring “discipline to Government spending” tweet we saw, earlier.
And Nicola Willis is quoted by RNZ as saying: “To pay for this, National will restore discipline to government spending." But that beloved discipline hasn’t yet extended to meaningful costings.
They’re on the way, I’m told.
Inflation
The problem is, the understandable desire to offer people things during an election campaign is offset by National’s persuasive and successful attack on inflation. Stimulus is inflationary. It’s also offset by National’s insistence they’ll spend Government money more responsibly.
If you can juggle those plates, baby, you should be a waiter at Buckingham Palace.
Somewhere, a roomful of Nats and advisers, their shirtsleeves rolled up like an am-dram rendition of The West Wing, are saying things like, “what say we reduce tax on Riedel glasses but increase it on Tupperware?”
Oh, to be in that cauldron of ideas.
On Friday morning, National’s prevarication around how they’d pay for things got the better of David Parker, whose exasperation with almost everything in politics is now reaching Statler and Waldorf levels (and is equally entertaining).
Defending Labour’s announcement that the work (mostly roads) in their latest “transport policy statement” would, in part, be paid for by an increase in petrol tax, and responding to Nicola Willis’s assertion that National can turn the entire North Island into a single road without taxing anyone an extra cent, the Transport (and, harrumph, former Revenue) Minister responded to a question from Corin Dann on RNZ by barking, “Well, how are they gonna pay for it? Is it magic money?”
“Magic money”, thought Nicola Willis, with immense relief. “We’ll use that.”
This, by the way, isn’t a problem the Greens and Act are struggling to deal with. Quite the reverse.
The Greens have been so disciplined in disclosing how they’ll use tax to pay for their policy programme, that Mr Kerr would regard them as model students and seat them at the front of class.
A 2.5% Wealth Tax on net assets worth more than $2 million (minus mortgages and other debt), to be applied on an individual basis (meaning couples = $4 million, net). A Trust Tax of 1.5% so people can’t move their money into a trust to avoid the Wealth Tax. A new top rate of income tax of 45% on income over $180,000.
Like it or not, that is what a costed spending programme looks like.
And here, too, Act are resolutely matter of fact about how they’ll pay for their policy programmes. Brutally so.
“ACT’s fully costed alternative budget”, the Party thunders, “reduces spending by $38 billion over four years, without touching frontline services.”
(If frontline services believes that, by the way, I’ve got some moon rock to sell them.)
ACT will:
• Reduce the size of the public service to 2017 levels
• Scrap wasteful and ineffective schemes like the Clean Car Discount and Climate Emergency Response Fund spending
• Abolish demographic ministries
• End corporate welfare policies
There are two responses to this.
Firstly, that it’s admirable to see a party saying, explicitly, what they’ll cut.
Secondly, that there’s a striking absence of empathy in the unacknowledged number of job losses this must entail.
David Seymour is one of those politicians whose skin gets thicker the more the joke is on people who aren’t like him.
On Thursday afternoon, he told Newstalk ZB: "We'd send a guy called Guy Fawkes in there (the Ministry for Pacific Peoples) and it would be all over."
This is the “abolish demographic ministries” part of their spending reductions.
He later said it was a joke.
It was funny in the same way a Christmas Cracker joke might be, if the Christmas Cracker was made by the KKK.
But given that, in the world’s largest Pasifika city (Auckland), the Epsom electorate’s population is only 2.8% “Pacific Peoples”, it’s possible David Seymour has never actually met any.
And so here we find ourselves, with Act and the Greens, however much you may disagree with one or both of them, and however much David Seymour sometimes behaves like one of those little boys who likes to say “poos and wees” at a family Christmas lunch, treating their constituencies like they might actually want them to stand for things and to explain how they’ll pay for them.
While Labour and National pull something small and white out of a hat and shout – LOOK, BETH, A RABBIT!
(Act, of course, would kill the rabbit and serve it in mustard sauce. Lapin à la Moutarde. They’d vote for that in Epsom.)
There’s time, of course. Parliament’s still sitting. The campaign proper hasn’t even started.
Costings, meaningful policy, transformative leadership, calculated and admirable risk, a determination to not punch down. It’s all yet to come. Isn’t it?
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