By Vanushi Walters*
COVID has created a once in 100 year economic shock. We’re putting people at the heart of plan to recover and to rebuild our economy.
A key part of our plan is jobs. We’re making record investments in infrastructure to create jobs by building the roads, hospitals and schools New Zealand needs. From 2018 to 2024, our infrastructure plan is investing more than $61 billion to create jobs and future-proof the economy. Our plan starts to make up for the underinvestment by the previous government, and it aids our COVID recovery.
Before COVID, Labour managed the books responsibly and kept a lid on debt. This means even though we borrowed to cushion the blow from COVID on households and businesses through the wage subsidy, small business cashflow loans and business tax refunds, our debt to GDP ratio is still much better than many other OECD countries. But we know we need to be careful about not running up more debt than absolutely necessary.
Our revenue policy helps us keep debt under control while allowing us to continue making the investments needed to create jobs and support the economic recovery. Our policy includes a new top tax rate of 39 cents for the 2% of New Zealanders who earn over $180,000. The new revenue from this policy will help protect services like health and education and help keep a lid on debt.
The new rate will cost $23 a week for an individual earning $200,000, but will make a big difference to the country’s ability to maintain the investments needed for the economy to bounce back with an expected $550 million extra revenue generated every year. This supports the second plank of our economic plan to create jobs and our policy will avoid the cuts to services being suggested by the National Party.
We’re also committed to closing loopholes so that multinational corporations pay their fair share of tax. That’s how we level the playing field for New Zealand companies. In Government we’ve already stopped companies using loopholes to shift profits offshore and avoid paying their fair share of tax. We are committed to finishing this work to level the playing field for local businesses and we’ll keep working with the OECD to find an international solution.
If that solution cannot be found, we’ll work on our own Digital Services Tax. I want to assure our small businesses that trade online that any Digital Services Tax would be very narrowly targeted and would not apply to sales of goods or services. Instead it will apply to digital platforms which depend on a base of users for income from advertising or data.
Our revenue policy will help support other parts of our recovery plan, continuing to invest in our people. On example is our plan to lift the abatement threshold so people working while on a benefit can keep more of what they earn. Not only will this put money into peoples’ pockets who need it most, it will increase the financial incentive to stay in or take up part-time work, which can be a really important step toward finding full-time work.
We know New Zealanders want certainty and stability at the moment. Labour will not implement any new taxes or make any other increases to income tax next term. We have already committed to not raising fuel taxes next term and will only make adjustments to Government levies and duties, such as for ACC, alcohol and tobacco, as per normal government practice - these will be clearly set out in each year’s Budget documents.
Our team of five million are doing an amazing job in the battle against COVID. It’s crucial that peoples’ incomes and services are protected as we recover and rebuild. Our balanced revenue policy will help keep a lid on debt and mean we will continue investing in our people and creating jobs as part of our economic recovery plan.
*Vanushi Walters is Labour’s candidate for Upper Harbour, and is #23 on the Labour Party List. She is a Director at Cogent Law and a Trustee at Foundation North. She has taken leave from her role as a Senior Manager at the Human Rights Commission during the campaigning period. Brooke van Velden, who is the ACT Party's Deputy Leader and Wellington Central candidate, is also writing a regular column for interest.co.nz during this election campaign.
37 Comments
"COVID has created a once in 100 year economic shock." I think it is worse than that. In 1918 the world had a lot less travel than they do now, both internationally and domestically. So from that perspective the flu may be more virulent than COVID, but today our level of travel has enabled COVID, giving it the time to mutate into something much more infectious than it was initially.
But in this Ms Walters is correct that people are more important and must be supported.
But no new taxes? "We have already committed to not raising fuel taxes next term and will only make adjustments to Government levies and duties, such as for ACC, alcohol and tobacco" The Government gives (well, sort of) with one hand while it takes with the other!
2017-18 Household Economic Survey. Of the bottom 50% of adults in New Zealand the average own assets worth just $46,000 and has debts of $33,000, leaving them with a net worth of $12,000. They have negligible wealth in trusts and on average just $4,000 in the bank.
Who is really being helped by your parties latest policy decisions?
The typical (median) person in the top 1% is worth $6.2m.Overall, the wealthiest 10% of New Zealanders have 59% of all the country’s assets, The 40% below that own around 39%. That leaves the poorest half of the country with just 2% of the assets.
When you prop up asset prices. Who wins?
And it's all hidden in trusts and companies so they won't pay the higher PAYE tax rate ... keep recycling it all into assets (of any variety), avoid dividends, book a capital gain and it's tax free ...
Pity the working class paying PAYE (regardless of how much they earn) ... Labour genuine doesn't get it.
Yup, sick of it. Can't get a straight answer out of any pollie even with elections a month away.
Goldsmith keeps talking about unleashing businesses with fewer taxes,quicker writeoffs and regulatory burden to create jobs.
In case he hasn't noticed, hospitality business owners are struggling to get enough customers; getting 5% back of GST paid and instantly writing off new ovens aren't themselves going to help break that dry spell.
Taxation doesn't finance the government though. Taxpayers cannot create NZ Dollars, only the government can do that and counterfeiting money is illegal.
Here is what Beardsley Ruml chairman of the New York Fed had to say in 1945. Since the end of the gold standard, "Taxes for Revenue are Obsolete". The real purposes of taxes were: to "stabilize the purchasing power of the dollar", to "express public policy in the distribution of wealth and of income", "in subsidizing or in penalizing various industries and economic groups" and to "isolate and assess directly the costs of certain national benefits, such as highways and social security". https://en.wikipedia.org/wiki/Beardsley_Ruml
Banks cannot create currency though, only credit with a debt liability attached. Are you suggesting that we pay our taxes with money borrowed from the banks? Try saving up bank debt for your savings as well. Only the government can create net financial assets for our savings. https://www.economicsjunkie.com/sectoral-balances-and-private-saving/
The government spends first thus creating the currency, taxation later returns money to be deleted, taxes don't pay for anything. Did you not read what Beardsley Ruml said? Some study of MMT would also be helpful. The Reserve Bank is part of the government of course and not an independent organisation. Basically though your comment seems to be agreeing with me.
We can only pay our taxes with the money that the government creates though and taxpayers are not the creators and source of this money to finance the government as politicians believe. Banks are licensed to create money but taxpayers are not and so they cannot be a source of money. Counterfeiting money is illegal as I stated. This was the point of my comment.
So riddle me this: if credit is cheap, why would returns just not keep rising to preserve investor margins as they stand? Tax is just as capable of being an inflationary cost as any other. Until you can do housing cheaper and at scale, it will be easier to just keep investing and asking for higher prices. It's been borne out with land, I'm not sure why it would suddenly be any different if the supply side of the equation doesn't change.
But if it's a favoured investment (treatment) then can supply ever be enough, because as long as it's favoured and supported there will be more demand for that easier (in comparison) money. Nor should we assume that more equitable treatment from a tax point of view precludes any other action on increasing supply.
If you make investment in land less favourable, you don't think speculative demand would reduce? Speculative demand vs. demand for accommodation plays a role.
In the absence of any alternatives and barriers to just passing on the costs to preserve margins, I'd have to say I wouldn't expect speculative demand to reduce at all. The issue of supply drives the shortage, the shortage drives the returns, the returns attract the speculation. All I'd suggest you'd be doing is clipping the ticket, with the buyers simply buying more to cover the margins the vendors would otherwise lose to tax. There's no reason for vendors to absorb costs and live with lower returns as long as demand outstrips supply, and there's a generation of aspiring home owners sitting on the sideline. The demand isn't going away, so you have to fix the supply first and foremost.
Seems to rest entirely on a shortage of accommodation driving demand rather than demand for an easy investment being a key component.
If that assumption were correct, sure a 100% CGT might have little effect. But does anyone actually believe only a shortage of accommodation is driving the demand?
Exactly what happened with the introduction of GST. Roger and Dave and their mates lied through their teeth and said every dollar of GST paid would have a corresponding reduction of income tax. What a pack of untruths to finance extra government bribes to stay in power. It did work for a while though.
Henry lives in a world that used to be rainforest and biodiversity, but is now massive shipments of palm-kernel to............. the Henry Tull types.
The folk who lived there have been ejected - like the Enclosuures of old. The biodiversity is mostly dead, much going extinct. No environmental or sical safeguards are in place. Same goes for the place phosphate currently get, um, procured from.
How someone like that holds their head high, I do not understand.
This is a poignant reminder;:
https://www.odt.co.nz/news/decision-2020/important-understand-mmp%E2%80…
The electorate vote doesn't matter. Its the party vote that is the decider
If a party gets 50% party vote but only 10 electorate seats, 51 invisible list members are levered "in" making up 61
If a party gets a 50% party vote, plus 40 electorate seats, 21 invisible listers are levered "in" to make up 61
Voters have no say on who makes up the list of listers or their ranking
It doesn't matter who you give your electorate vote to, unless your party gets over the line with 61 electorate seats
However if your electorate member does get up, they get first dig, and that's one less lister that gets in, and at least you will have someone you can go and grizzle to. Good luck taking your concerns to an invisible lister
Should the winning party get 70% of the party vote you can work out the permutations. They will be entitled to 88 MPs
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