Just how taxing is Labour’s income tax announcement?


(Sung to the Telethon tune) “Thank you very much for your kind taxation. Thank you very very very much”

The above was a National Party advert criticizing the proposed tax policy of then Prime Minister Helen Clark’s government in 2005. Dr Don Brash was leading the National Party, which had finally found its voice to the delight of National’s conservative base.  As the 2020 election campaign begins to ramp up, the political parties are starting to release their major policies after a considerable concern that the 2020 contest was not going to be about ideas.

Interestingly enough, Dr Brash’s proposed tax policy in 2005, despite being leader of the National Party was actually steeper than the announcement yesterday by Treasurer Grant Robertson. Dr Brash had proposed the following brackets (but not as steep as those of Dr Michael Cullen (bold)):

  • Up to $12,500 = 15% ; Up to $9,500 = 15%
  • $12,501-50,000 = 19% ; $9,501-38,000 = 21%
  • $50,001-100,000 = 33% ; $38,001-60,000 = 33%
  • $100,000+ = 39% ; $60,001+ = 39%

In contrast, social activist John Minto once upon a time proposed a 100% income tax on income over $250,000. In other words if you earned that much money, you did not get to see a cent of it. For obvious reasons, aside from Mr Minto not standing for Parliament, his proposals never went ahead. But it was that kind of extremism that prevents me ever supporting a bid by him to stand for public office.

I mentioned my own thoughts about income tax rates in June.

Many on the right will grumble about wealth being taken away from successful, hard working New Zealanders. Wealth and income are quite different classifications. Income is the hard money that your bank account sees, whilst wealth is ones cumulative assets – house/s, car/s, luxury items like boats, expensive jewellery and so forth. One might not have a huge day to day income, many have a share portfolio, investments in gold and so forth.

National and A.C.T. will invariably grumble, as will the Taxpayers Union. What these parties and the T.U. will never admit is that even some prominent former New Zealand politicians, such as former Prime Minister Jim Bolger believe high income New Zealanders should be paying more tax. Which is why it will be all the more interesting to see what their tax policies are and how they will fund expenditure.

Some on the left will grumble too. For entirely different reasons, namely they do not think the changes go nearly far enough. This will include the left-wing of Labour, the Green Party and social activists. They will argue that the Government is not serious about using income taxation to reduce poverty.

Others like me, however, will argue there are other ways in which poverty can be reduced. Tax is certainly useful as a lever to encourage, discourage certain behaviours and to fund programmes, but anyone who has studied poverty in depth will know there is a lot more to it than just this.