By Bernard Hickey
With less 11 days to go until the September 20 election, here's my daily round-up of political news on Tuesday September 9, including a debate over National's long-awaited fiscal plan and a Green transport plan for Wellington.
There's also a stoush between Labour and Federated Farmers, via their advisers BERL and NZIER respectively, over Labour's Capital Gains Tax plan.
National finally announced its fiscal policy yesterday, including a pledge to (possibly) spend up to NZ$1.5 billion on a modest tax cut for low to middle income earners in April 2017.
However, there was little detail in the plan and it was conditional on fiscal conditions.
Bill English, who has appeared consistently more circumspect about such tax cuts than John Key, also included in the plan the condition that any revenue surprises would be used to repay debt faster to return to a net debt to GDP ratio of 20% sooner than 2020.
English said there was room for around NZ$500 million per year over the next three years for tax cuts and debt repayment. He said they could be 'moved' within the three year period to accumulate into a NZ$1.5 billion 'pot' by 2017. But he was clear that 'pot' could also be used for debt repayment and that once the 20% target was met the Government would resume payments to the New Zealand Superannuation Fund.
"This portion of the allowance will be moved between Budgets and accumulated as necessary. Therefore, by the third year there will be around NZ$1.5 billion available for tax cuts and debt repayment," English said.
"We will consider the details of a possible tax package closer to the time," he said.
This leaves open the possibility the Government could choose debt repayment and an early restart to NZ Super Fund contributions over tax cuts.
English's statement was explicit in saying that returning to surplus, repaying debt and reducing ACC levies were the Government's first three priorities.
Tax cuts were listed as the fourth priority.
Here's the statement and the bolding is mine: "Begin to reduce income taxes from 1 April 2017, providing economic and fiscal conditions allow, and if the first three priorities have been achieved . Any tax reductions will be modest, given the fiscal headroom available, and they will focus on low and middle income earners."
Key suggested in the news conference in Wellington that one method for any tax cuts would be an increase in the current NZ$70,000/year threshold for the top tax rate of 33% in an attempt to combat 'bracket creep' or 'fiscal creep.' But he also acknowledged this method would deliver the bulk of the tax cuts to those at the upper end of the spectrum.
National also signalled a further NZ$700 million to NZ$900 million in ACC levy reductions from April 1, 2016 in its ACC policy .
English reiterated that he and John Key had never promised to set out a specific tax package.
The statement included tables specifying the NZ$636 million of new spending over four years that was announced by National during the campaign, with a further NZ$6.5 billion for extra spending on health and education. This meant a total of NZ$7.136 billion out of a possible NZ$10 billion had been allocated, leaving NZ$2.864 billion unallocated.
'A hypocritical fizzer'
Labour Leader David Cunliffe described National's fiscal plan as a "fizzer" and calculated any tax cut would be NZ$5 a week in three years -- "maybe". He compared it to the "block of cheese" tax cut that Key himself famously accused Michael Cullen of delivering before 2008.
"National is so desperate to have something to say in this campaign John Key has resorted to a laughable promise of an undefined tax cut for an unclear number of people in three years," he said.
Russel Norman targeted the lack of detail in the plan.
"National are hypocritical. They attacked the clearly set out and detailed fiscal plans of opposition parties, but can’t even set out the basics of a tax cut, like how much it will be and who will get it," Norman said.
Vernon Small wrote in Stuff that National had "failed the hypocrisy test."
Winston's SuperGold Card warning
Winston Peters attacked Colin Craig over his weakening of his binding referenda pledge on Sunday to exclude those with fiscal implications.
"He’s worked out that National, who he is trying to snuggle up to, is not for the wholesale use of referenda so he’s backing off a policy which he advertised at length all over the country," Peters said.
Peters also returned to accuse National and Michael Woodhouse of of preparing to downgrade the free public transport benefits in the SuperGold card.
"Right now, Mr Woodhouse needs to explain to SuperGold Cardholders what is being discussed behind closed doors between the government and local body transport authorities. This looks suspiciously like a deliberate attempt to disguise the reality of cutbacks," Peters said.
Russel Norman, Julie Anne Genter and Gareth Hughes launched the Green Party transport policy for Wellington, including a plan to spend NZ$500 million over five years.
It included a light rail line from the Railway Station through Newtown to Kilbirnie (NZ$450 million), with extensions to Miramar, the Airport and Island Bay by 2025, a phased replacement of diesel buses for electric buses (NZ$220 million), keeping Wellington's trolley buses and spending NZ$94 million on protected cycleways.
CGT stoush
Federated Farmers released an NZIER research paper prepared for Federated Farmers on Labour's Capital Gains Tax plan. NZIER forecast CGT revenues would be half those forecast by Labour.
"The CGT would do little to improve the efficiency and effectiveness of New Zealand’s tax system. The main reason for this is that it would be riddled with exceptions and unresolvable design problems and for all this it would raise very little revenue," NZIER said.
Labour Deputy Leader David Parker said Federated Farmers were "just plain wrong" with its attack on Labour's Capital Gains Tax.
"The report asserts that based on the Australian CGT (which has a different headline rate) the CGT revenue estimates for New Zealand are too high. This is incorrect because, in Australia individuals and small businesses are taxed on just half the capital gain. In New Zealand the whole gain (from the date of introduction) is taxed at the lower 15% rate," Parker said.
He said the report mistakenly underestimated capital gains because it did not properly calculate all realised gains after the date of introduction and had wrongly focused on the gain in the year of sale.
“Our capital gains tax policy was costed by BERL and the numbers have stood on their merit for four years. BERL's assumptions were themselves more conservative than in Treasury estimates prepared for the Tax Working Group," Parker said.
Coming up...
John Key is campaigning in Palmerston North.
David Cunliffe is campaigning in Auckland and is expected to launch Labour's policy on loan sharks. Labour tried to amend recently passed consumer finance law reform to include an interest rate cap.
See all my previous election diaries here.
See the index for Interest.co.nz's special election policy comparison pages here.
10 Comments
David Cunliffe is to launch Labour's policy on loan sharks !!!!
... bloody hell ... the oceans full of them .... they're there for free .... why the feck would anyone wanna pay money to have a loan of a shark ...
Labour are a buncha seriously confused dudes & dudettes !
... dunno what Cunny means ... these airy-fairy-arty-farty academics ....
If he had a policy on loan concrete mixers , or loan Stihl chainsaws , I'd perk up and take notice of what the bugger was saying ...
... what flavour do whales come in ? .... I like hokey pokey ....
The reality of Labour's CGT could be worse than even the NZIER project:
- When times are bad, CGT won't bring in any tax as people will make capital losses. Whereas Labour's projections show a steady upward revenue projection
- If Labour wins, the CGT will be introduced at the peak of a property boom. Prices unlikely to keep climbing so quickly and could fall (capital losses)
- Even $1bn CGT revenue is small in the context of a $65bn total tax revenue
English's statement was explicit in saying that returning to surplus, repaying debt and reducing ACC levies were the Government's first three priorities.
Tax cuts were listed as the fourth priority.
I wonder if any NZ journalist has read and understood PREFU.
The forecast OBEGAL surpluses are predicated on:
1. Increasing the tax take by 5.6% each year of the forecast (concomitantly increasing tax as a percentage of GDP).
2. Maintaining high export commodity prices and terms of trade.
3. House price inflation plus very significant increases in housing construction
Even with forecast surpluses Government never had any intention to pay down debt. Despite forecast increased tax takes there will be no surplus. On top of that the economy has already failed on point 2, and will almost certainly come in under projections on points 1 and 3.
Even if PREFU came in with surpluses as forecast:
1. Table 2.1 shows net core crown debt growing every year to the end of the forecast period (2018) and core crown residual cash negative throughout.
2. Table 2.2 shows negative net retained surpluses of SOEs, CEs and NZS Fund each year (these are excluded from OBEGAL).
I loved the Nats fishing policy for AKL.
All those quotas that we gave to the fisherman for nothing we now get to buy back now the fishery is buggered. Frigging genius, now just tell me who bought up all the quotas in the meantime would you?
We could always just reduce the quota in the area to zero, cost to taxpayer nothing, same result.
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