by Eric Frykberg
The policies of the Green Party will see more money going in to Crown accounts than is coming out, according to a review by the economics consultancy, Infometrics.
As a result the cost of Green Party spending promises will be $5 billion less than the increased revenue from its tax policies.
The findings rebut claims that the party's policies will cost far too much.
Green proposals such as free dental care and a guaranteed basic income for everyone are frequently assailed as unrealistic.
But the Greens have released the Infometrics review to counter those arguments.
The review covers the years until 2026-27.
Over that time frame, Infometrics says the Green Party policies will increase both revenue and expenses.
But the revenue growth will be higher.
The consultancy says revenue in the forecast period is expected to be +$43.3 bln higher than in PREFU 2023.
But expenses are expected to be +$38.4 bln higher than in PREFU 2023.
Infometrics adds that although the net impact of these changes on the government’s operating balance is positive, the debt track for the Green Party is slightly higher than in PREFU 2023, largely due to borrowing for capital expenditure.
It adds current operating allowances as published in PREFU are unchanged under the Green Party track.
And environmental policies are affordable, they say. Infometrics says the Green Party’s Clean Power Payment policy can be fully funded by the Climate Emergency Response Fund (CERF).
As of PREFU 2023, Treasury indicated that $1 bln is left available to allocate from the CERF in the future.
But the Green Party track expands the available funding to be $1.5 bln by returning the $0.5 bln loan to the National Land Transport Fund (NLTF) back to the CERF.
As a result, it says the $1.36 bln in operating expenditure towards the Clean Power Payment as announced by the Green Party can be fully met.
The Clean Power Payment involves assistance on programmes like insulation and solar power.
One controversial plan by the Green Party would expand ACC from covering just accidents to covering illness as well.
This would be funded by changing ACC to pay-as-you-go, instead of building up reserves to such a level that it has become a gigantic institutional investor.
Infometrics writes that the cost would be met from these funds in the first year of the programme, the 2026 fiscal year.
This would be $3.29 billion. Further costs will be met by an increase in ACC Levy revenue income. Infometrics says the first year of the programme will reduce the size of state assets, but Crown net worth is still expected to be higher overall under Green Party policies compared with the PREFU at the end of the forecast period.
Infometrics adds the party's proposed Wealth Tax would be complicated and could be reduced by 25% due to tax avoidance and evasion. But it says the Green Party proposal takes account of this measure.
The firm adds a word of caution.
"We do note that the government’s administration costs associated with a wealth tax could be larger than expected, with increased compliance costs to determine the value of assets," it says.
"Higher administration costs could reduce the net revenue from a wealth tax."
On the other hand, these higher costs will not be great compared with the amount of revenue to be brought in.
Meanwhile, Infometrics has a warning for the Green Party over its proposed tax thresholds. These include tax-free status for money earned under $10,000 a year..
It says history shows people's tax behaviour changes with changes to tax levels.
"In other words, there is a behavioural response by taxpayers to minimise their tax burden," Infrometrics says.
Infometrics says the Green Party has moved to limit tax avoidance, via methods such as a proposed 1.5% blanket tax on trusts.
"Nevertheless, if taxpayers consider the effects of the tax changes large enough, they will look to shift their taxable earnings into other vehicles, including companies, to avoid personal income tax – an economically rational and perfectly legal option," Infometrics says.
"It is important to recognise a potential decline in the tax base as a result of any changes in tax policy. In our view, the revenue collected from the Green Party’s proposed income tax changes should therefore be viewed as a high-end estimate."
50 Comments
According toShaw, on Q&A this morning, the wealth tax avoidance was calculated as 15% , but they increased ti to 25% to provide a buffer.
He also indicated eh would pick up the phone , Should National be in a position to form a govt , and it avoids the need for ACT and NZ First . but the decision is ultimately party delegates , not his.
kknz - strawman argument. Self-justification via
Common - too common.
Try addressing the real issues?
They aren't any where near where we have to go - the 1975 Values Party manifesto is closer - but they're hell-and-gone further down the track that those promoting 'growth' at this late stage.
Yep, boldly going where no one has gone before on tax. Full credit.
A very libertarian friend of mine once said that a country needs wealth in order to afford to be clean and green. Time to balance the scales and capitalise on our unproductive wealth.
Shaw was good on Q+A this morning - as he pointed out, they need more Cabinet Ministers at the table. A 50/50 Greens/Lab majority on election night might just set this country on the right path. We might see more willingness by Labour to admit - that more revenue is key.
There's a willing number of wealthy NZers already realising that and knowing that all boats need to be lifted for any country to get anywhere.
Before you start taking more money demonstrate fiscal responsibility in how you spend it. Completely absent with these muppets (and previous Governments). But it’s lovely taxing the rich as they are such an envious target. Resonates with Robin Hood and stories of old.
Tell us Kate, how much will you pay with their proposed wealth tax?
They would.
The net wealth tax would cover most forms of wealth and assets, like property, shares, and bonds. These assets have known values because they are traded often. High value property such as artworks will also be included and can be valued on the basis of what they are insured for. Everyday household goods like furniture, appliances, electronics, and vehicles with values less than $50,000 will be excluded for simpler application of the Wealth Tax.
This was intentionally misleading* from Shaw tbh. The wealth tax avoidance for Labour's much lower proposed wealth tax % per annum, and much higher threshold was 15%.
Putting it at 25% for what the Greens are proposing isn't at all conservative, but it is reasonable as a midpoint estimate, given that they would be incentivising people much more heavily than Labour to avoid the tax lol.
*Shaw should know better so it's intentionally misleading, I'd consider it just simple incompetence if it was Marama saying this.
I find the proposed policy quite visionary, impressive and rounded. Can't be said about all parties' policies.
Considering the proposed lowered income taxes have the potential to reduce NZers of working age leaving the country, whilst sourcing funds to pay for the much needed investments in services, infrastructure and transition, this has real potential.
As long as the wealth tax is competitive compared with other countries taxes, it should work well for NZ. A capital gains would be better than a wealth tax - not least because it taxes realised gains whilst making it easier to compete/compare with other countries tax rates on gains and assets.
"Australia does not have a net wealth tax."
https://taxsummaries.pwc.com/australia/individual/other-taxes#:~:text=A….
To clarify:
CGT has a long list of exemptions including the family home.
https://www.ato.gov.au/Individuals/Capital-gains-tax/List-of-CGT-assets…
"There are no inheritance or estate taxes in Australia. However, you may have tax obligations for the assets you inherit: capital gains tax may apply if you dispose of an asset inherited from a deceased estate."
https://www.ato.gov.au/Individuals/Deceased-estates/If-you-are-a-benefi…
"A competitive wealth tax"?
Presently, only 5 OECD countries have a wealth tax. Tax experts will confirm that a WT is technically difficult to implement. It will make NZ a very unwelcome place for those who have been successful as risk-taking entrepreneurs and in their profession (yes, including medical practitioners that we desparately want to attract). No surprise Chris Hipkins has ruled it out.
Sadly, so many NZers seem to be preoccupied by redistribution of wealth and income rather than how to create fair opportunities for people who want to take control of their own destiny by contributing to our future prosperity as a country.
If you really like "visionary ideas" this may be something to consider?
How about you learn what it is we're headed or?
https://res.cloudinary.com/rampi/image/upload/v1695301863/merz-et-al-20…
Now define what you mean by prosperity?
I'm guessing (from your posit) you won't go near it - such folk have fierce need to avoid, I've found... But if you're deeper than them, and can be bothered to read it - I'd be seriously interested. Do you still define 'prosperity' as you did before you read it?
Wealth tax was visionary back in 1850, with the Communist Manifesto written by Marx. Back then, the wealthy were owners of hundreds of thousands of hectares of farmland or large amounts of land in cities, where they owned factories and exploited workers in Europe. The situation here and now is quite different, with much land being owned by Landcorp NZ and by Maori, would be probably "exempt" from paying. Many ordinary kiwis would be adversely affected by a wealth tax, due to increases in property values over the past 30 years.
If it is really more tax that is needed (which would be surprising, given the extra $63 billion in tax revenue over the past 6 years) then why not just add an extra tax bracket to those earning over $500,000pa (let's say, 50%)?
We do note that the government’s administration costs associated with a wealth tax could be larger than expected, with increased compliance costs to determine the value of assets
there is a behavioural response by taxpayers to minimise their tax burden
Hence why it makes more sense to go with a Land Tax instead of a Wealth Tax.
Cheaper to administer and still payable no matter where in the world you live because you cannot take the land with you (unlike a business or invention that would be captured by a wealth tax). I actually want the owner to try and minimise the impact of the tax with one of the options available to them building / renting out / or selling (more supply, lower prices).
I agree. LVT is far simpler but the Greens look to have a better chance of being influential in the next government. I'm not all that fussy as long as taxes on wages, salaries and profits make up a far smaller percentage of our total tax take - with tax on capital finally being implemented in some form and that more tax revenue is generated.
Frankly, I'm a bit disappointed that no party is talking about means-testing super - and nether are any of them trying to regulate the rental market in a way that reduces the taxpayer burden that the accommodation subsidy has become. $2.4 billion+ per annum - ridiculous.
Communists like this guy?
Winston Churchill said it all better then we can | History | Blog | Comment (landvaluetax.org)
Pleased to hear Land Value taxes are tried and tested - I wouldn't want to propose anything new and radical.
Really? Where do you get that from?
There is no division of land owners into different groups based on holding size or location, for example:
All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be.
Yes, I'm just lazy so tend towards simplicity and hate unnecessary 'work', or what I perceive as wasted time and effort...
Your rental method would work from what I've understood. We need housing to be affordable on wages the NZ economy is capable to delivering. I wish TOP had gone hard on housing and rental affordability which includes putting a brake on population growth. Rents were falling in Auckland before we fired up immigration again. Billions in accommodation supplement to the LL's to bid up house prices only to send billions offshore to banks. It's so stupid, on so many levels.
A land tax hits those of us doing public good for no money (what an alien concept). In my case, a non-ETS forest to sequester carbon, stabilise land and increase biodiversity.
The tax has to be on the activity (land and labour are 200-year-old concepts) done atop it - and all those are linked to fossil energy. So tax it, and ration it. End of story.
Oh, but, but, but, child poverty but, but, rights, but, but...
But nothing; fossil energy has and is being our undoing - so lets stop using it.
“But nothing; fossil energy has and is being our undoing - so let’s stop using it. ”
So you don’t use a plane to travel? You don’t purchase or consume imported goods (boat or plane)?
You don’t hold stocks directly or indirectly in airlines, shipping companies, petrochemical etc? Check your KiwiSaver and the various EFTs that they may hold.
Honestly, I don’t give a F about my carbon footprint. When China and India start making a change I’ll follow suit otherwise I’ll enjoy SQ285/6 next week in the pointy end.
Strawman argument - yes, I'm part of society. But I gave and give change a good heave. I sail, I bike, I drive a small car. I buy stuff which will last, or which can be maintained (by me, preferably). I planted (by hand) a forest to assuage my carbon-share.
I stayed out of kiwisaver - it's just shares, which are forward bets on future energy (and shares are collectively overshot; the reconciliation may well collapse the whole system). Instead, I sorted out my future energy requirements...
I guess we all have to live with our consciences; I contemplate my grandkids to check mine.
Go well
It would if I had my way Murray, no good deed goes unpunished! BTW, current TOP policy in this area wouldn't hit you unless your forest is on residential land.
In either case, there would be a give too - via income tax free threshold/UBI so you might not come out worse off. If it is marginal/remote land to start with, then it's value should be low and your land tax also low. I'm happy to tax fossil energy too.
Do I need to include an exception in my simple LVT to accommodate people like you? Maybe you can donate it to the DOC or local body with some rules about future use (or lack thereof) - even put your name on it!
Many councils make land covenanted to the QE2 trust rates free or reduced. That could be extended to a LVT , i guess.
Which brings me to my question about LVT. why not just increase rates , and have councils pay for a greater range / share of local expenses the govt currently contributes too. Such could include social housing etc .
That could be extended to a LVT , i guess.
Sounds promising. I have no doubt PDK is doing great things for the environment.
why not just increase rates
Councils may rate on Land Value, but they may also (many do) rate on the combined value of land and buildings. There are charges for specific services such as rubbish collection or a white elephant project such as a stadium that is being paid off over time and separated out. The point is rates are specific to local councils, land taxes as you see me advocating for are for central government.
That said, one likely method of collecting an LVT would be via council rate invoices since they already have the land values. The LVT could appear as another line on the rates bill eg 'LVT for central government (LVT% * land value)'. Then the councils pass this onto central government.
have councils pay for a greater range / share of local expenses the govt currently contributes too
You could, but it is a separate discussion/decision. Similar to when people say governments don't spend taxes well enough so don't create an LVT as 'another tax' - I agree they don't spend wisely enough, but that is again a separate discussion/decision to how to raise the tax that is raised.
One final point, the reason I advocate for an LVT is because I want land prices to be driven down and more productive use of the land (such as building on vacant land, renting vacant houses). If land prices are lower then less money will be 'borrowed' in the future, so less profits to the banks shipped offshore, more affordable houses should also mean more affordable rents. I consider shelter a key need for a healthy society and that investors buying existing houses has caused a lot of problems/stress in society. I would also pause immigration until we have housing those already here sorted,
I'm sympathetic to an LVT but again the devil lies in the detail. QV and what ever other organisations do valuations have built up a value mess over the last 30? or more years. The differences in land values between very similar sections in the same area are ridiculous. My preliminary investigation pointsto the the Property Act and the way valuations are done in accordance with the law. Typical of politicians and many others who favour LVT they do not know what is going on.
Before I'd become in favour of an LVT the Property Act would need to be changed to include other factors in the derivation of land values. This would cost around $100m and at around 3-5 years to complete (back of the matchbox calc) although there is probably a statistical technique that could lead to a quicker solution in time and cost.
In addition some council rules would need changing on the size of section that can be subdivided. Dropped to 300m2. Daylight recession angles need to be changed as well.
Nothing is perfect and the land values will be given a lot more focus - I would expect an uptick in challenges to councils about valuations. Perhaps an option should be available to owners to sell to council when they insist a given block is worth more than the owner does. Even if you went off for 3-5 years there is no guarantee that would make everyone happy with the new valuations. Ultimately no one has to pay LVT, they may sell. That sale price would filter through to the valuations in due course.
I agree there are issues with some valuations, just not enough to delay implementation of an LVT. Anyone not happy with 'their' land valuation may object and get if sorted before the LVT for the following year is due.
The council planning rules you refer to are a different matter entirely - the land price will change as the rules about what it can be used for change. Those changes you mention may be a good idea but are not a prerequisite to implementing an LVT.
I'm beholden to the New Plymouth Council here.
The average rates for the whole district was flagged as going to be +12.4%
Suburb I live in, averaged +23%. Plenty of other suburbs are well over what was indicated. There are properties paying less this year than last. That's a pretty inequitable starting point that will be leveraged now as we keep getting the bad news about how much money is needed to catch up on infrastructure, and how much over budget current projects are running, or projects now deferred with cost estimates still ballooning.
No extra services or amenities where we live. Just one of the last 'affordable' locations which has attracted a lot of families the last few years wanting to buy a home.
So yes, the valuations has delivered a complete mess.
Not disagreeing although any overall increase in rates will be due to council budget choices and unrelated to changes in land/capital values. Any land/capital value changes may alter how the total rates being collected are divvied up between individual properties though.
I will point out, sorry if you're aware but others often aren't, there is a difference between rates (used for council local services/maintenance) and a land tax (used for central government funded services - currently paid for via PAYE, GST, company tax). Political parties such as TOP policy would add an LVT and reduce PAYE via a 15k tax-free threshold.
Hi Murray. I'm for a land value tax in lieu of reducing the tax burden on worker effort. I think we badly need to level the tax landscape and move away from incentivizing speculation on land value with the current tax benefit this behavior receives.
My own example though just goes to my lack of trust on how there would be an equitable spreading of the valuations on land to determine the amount of tax to pay. At this point in time.
Where I live there are ~500 households. Like I said, with a low number of property transactions and families eager to buy a home, our property 'values' have been bid up disproportionately more than in the city. There are other suburbs within the NPDC catchment with lower numbers of properties who have suffered a lot more than us too. So, have we been underpaying all along our fair share of general rates? Or are we just victims at the end of the property bubble? And about to suffer the compounding effects of the likely rates increases over the next several years. It'll be (painfully) interesting to see what unfolds.
Unless I missed it, this article is missing the KEY piece of information here, which is that infometrics did not investigate the second-order effects of Green party policies.
So they've basically just seen that 3+5-2=6 and that the Greens did their numbers right. They didn't test whether the assumptions were correct, or consider the impact of things like capital flight. This is vital information, as currently as it stands a casual observer could think that Infometrics is giving the Greens a stamp of approval here!
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