Labour leader Phil Goff is promising to make the first $5,000 income tax free if Labour wins power.
At least that’s the line with which he’s attempting to tempt voters.
But it pays to read the fine print:
It would introduce an across the board ‘tax free zone’ so earners paid no tax on up to their first $5000 earnings, at an estimated cost of $1.3 billion.
Although likely to be initially introduced at a lower level, Labour would look to increase that zone to reach $5000 during its first term in government.
The operative words are on up to their first $5,000 and likely to be initially introduced a a lower level, Labour would look to increase that zone to reach $5,000 . . .
On up to. . . likely . . . would look to . . . means this isn’t a set-in-concrete-we-will-definitely pledge it’s an we’d-like-to-with-ifs-and-buts-and-maybes-goal-we’re-aiming-at apology for policy.
It’s also very, very expensive. Proposals to increase in the top tax rate and put more effort into countering tax evasion will go nowhere near covering the cost:
Labour’s so-called state of the nation speech today is an irresponsible and very expensive recipe for a huge amount of extra borrowing, Finance Minister Bill English says.
“Labour has clearly learned nothing from the failed policies of its previous term, when New Zealand’s net liabilities to the rest of the world soared to more than $170 billion and we ran the highest balance of payments deficit in the developed world,” Mr English says.
“When the incoming National Government took office, we faced an economy deep in recession before the rest of the world and Treasury forecasts of never-ending deficits and ever-increasing Government debt.
“Phil Goff has today confirmed he wants to jump back on the conveyer belt of more debt and higher taxes. His recipe will do nothing to help lift New Zealand’s national savings – it will do precisely the opposite. In fact, it will discourage savings and encourage property speculation.”
By Labour’s own calculations, making the first $5000 of income tax-free for all taxpayers plus taking GST of fresh fruit and vegetables would cost more than $1.5 billion a year – with much of the benefit going to high income earners.
On the hand, increasing the top personal tax rate on incomes above, say, $120,000 and ring-fencing property losses would raise only $440 million.
“And that’s the shortfall from just two of Labour’s promises. They also want to restore research and development tax credits (annual cost $330 million); introduce paid parental leave to 18 weeks ($50 million); increase Working for Families for under twos (unknown cost) and not take dividends from State-owned power companies $700 million).
“It’s telling that Phil Goff would not spell out precisely where all this money will come from. It’s now abundantly clear that he will have to borrow it and increase taxes – and New Zealand can’t afford it.
“I’m sure New Zealanders will be interested to know that despite all the rhetoric, Labour still stands for more debt and higher taxes. By contrast, this Government stands for responsible management of the economy.”
Goff’s prescription is for more of the same medicine which made the economy sick.
It didn’t work when the rest of the world was economically healthy, it will do even more harm now it’s ailing.