Free Press, 3 December 2018 – Taxing Times
No New Taxes
National has promised no new taxes in its first term and to repeal the Auckland regional fuel tax and any capital gains tax. While this should be welcomed, we’ve been here before. New Zealanders were promised no new taxes by Steven Joyce during the 2014 election campaign, and then got the bright line test/capital gains tax, a border tax, a Netflix tax, and higher cigarette taxes. It also begs the question…
What Happened to Cutting Taxes?
Such a policy will simply return New Zealand to the status quo that existed on election night 2017. It’s not ambitious enough – we should be seeking to reduce the tax burden on hardworking Kiwis. It also ignores taxes that might be legislated for prior to 2020 and other stealthy taxes that are creeping up on Kiwis.
Tax Working Group
What could Michael Cullen’s Tax Working Group throw up prior to 2020? Cullen reckons our tax system relies on too narrow a range of taxes and isn’t progressive enough. This will be news to the top 10 per cent of households who pay about 37 per cent of all income tax. It will also come as a shock to those who pay income tax, company tax, GST, petrol tax, alcohol tax and tobacco tax. Cullen has publicly spoken about eight new taxes or types of tax. Taxpayers could be in for a capital gains tax, a sugar tax, a financial transaction tax, a wealth tax… ACT will be fighting the Government, and defending taxpayers, every step of the way.
The coalition’s increases to petrol excise will take a billion dollars out of the pockets of Kiwis over the next four years. Fuel tax hits the poorest hardest – they live further from city centres and so drive more, and they are less likely to have fuel efficient vehicles. Petrol taxes make up 28 per cent of the cost of a litre fuel. ACT would scrap fuel taxes and introduce road pricing – a fairer and more efficient system. Other businesses adjust pricing in times of shortage to shift demand toward times of surplus. With GPS technology, we can adjust pricing of specific routes in real time using prices and ensure consistent availability of road space. Road pricing has reduced traffic flows by up to 20 per cent in London, Singapore and Stockholm. It will make public transport faster and more attractive.
Bracket creep is an invisible tax that has been ignored by our Finance Ministers. Households that see their incomes rise at the level of inflation are dragged into higher tax brackets, meaning they pay more tax but their purchasing power falls. As a result of inflation and the inaction of governments, the average income earner will eventually pay the top tax rate in 2022. The previous government took an extra $2.1 billion from the taxpayer between 2011 and 2017, costing the average household $2500. ACT would index tax brackets to inflation. Earlier this year, David Seymour tabled an amendment that would have achieved just that, but Finance Minister Grant Robertson refused to adopt it.
Tax increases of 10 per cent plus CPI are set to hit smokers on 1 January 2019 and 2020. The amount of tobacco excise collected by the government will rise to $2.2 billion by 2021. We’re told it is the best way to deter people from smoking, but it isn’t working. Smoking rates have flatlined over the past few years. The Government could halt further tax increases and encourage people to take up vaping. Instead, it will continue to take millions out of the pockets of the poorest New Zealanders. It has also decided to regulate vaping – a relatively safe alternative – just as heavily as smoking, meaning fewer Kiwis will switch over. ACT would scrap any further increases to tobacco excise.
A Tax Cut for Every Worker
ACT’s plan is to deliver a tax cut for every working New Zealander. That means a top rate of 10 per cent for those earning up to $14,000. Workers on between $14,000 and $48,000 will pay no more than 15 per cent, down from 17.5 per cent. A person on the full-time minimum wage will keep an additional $500. New Zealanders earning more than $48,000 will pay no more than 25 per cent. A worker on the average wage will hold on to about $1,500 more each year. These tax cuts are fully costed and will be funded through the Government’s $5.5 billion surplus.
Firing Up the Engine Room
Small and medium-sized businesses are the engine room of our economy. ACT would cut company tax from 28 to 25 per cent so businesses can grow and create new jobs. We would make $1.1 billion in cuts to corporate welfare to fund these tax cuts. Rather than Labour, NZ First and National’s corporate welfare handouts to politically-connected businesses, the simplest thing the Government can do to support business growth is to cut company taxes. Reducing the tax burden on all companies will enable them to grow, take on new staff, and pay higher wages.