At the most extreme, hardly any respondents see any merit in the Labour Party’s plan to remove GST on fresh fruit and vegetables, with 86 per cent seeing no merit in it at all. Marginally less (81 per cent) see no merit in Te Pati Māori’s proposal to remove GST on all food items, with a similar number (79 per cent) seeing no merit in NZ First’s analogous GST initiative of removing GST on all basic foods. Driving the lack of support is the untargeted nature of these initiatives, resulting in what many see as an unwarranted net cost to Government coffers.
The existing 39 per cent top personal tax rate, now sought to be extended to the taxation of trustees, remains unpopular, with only around 11 per cent of respondents supporting these initiatives.
The lack of support for the trustee rate flows in part from the measure also being untargeted, and simply a political sop to the recent High Net Wealth project. While it sounds credible, it’s not. Only a fraction of the hundreds of thousands of trusts have beneficiaries that are largely taxed at the 39 per cent personal rate. It’s not good tax policy, and scores accordingly.
Taxation of property
The taxation of residential property also remains unpopular, accepting that this is a polarising topic across the entire political spectrum.
The Labour Government’s initiatives continue to attract minimal support, with between 4 to 7 per cent fully supporting the various initiatives, and with most thereafter (circa 40 per cent) not supportive at all.
Looking at this issue, from the perspective of National’s proposals to reduce the bright-line test and restore interest deductibility, respondents were more positive, but still only around 40 per cent were fully supportive of restoring interest deductibility and 26 per cent for the bright-line reduction, with a statistically significant number not supporting their removal at all (12 per cent regarding restoring interest deductibility and 20 per cent on the proposal to reduce the bright-line test). Again, a polarising topic.
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Pivoting to the latest political football - the removal of depreciation on commercial property - National has found no real friends here, with only 6 per cent of respondents fully supportive and 35 per cent not supportive at all. Again, not surprising as it’s not good tax policy. Commercial property does depreciate, with commercial landlords just the latest political casualty, in this case to help fund the popular indexation of tax thresholds that respondents overwhelmingly support, with nearly 84 per cent net positive and around 52 per cent fully supportive.
Individual tax rates
Unsurprisingly, increasing the highest marginal tax rate to 45 per cent as proposed by the Greens has virtually no support, with 86 per cent not supportive at all, and over 90 per cent also unsupportive of Te Pati Māori’s proposal to move the rate to 48 per cent, but at a higher threshold. Act’s proposal to reduce tax rates also failed to find universal favour, with less than half of respondents reasonably or totally attracted to the same, and with the majority either not or only somewhat supportive, influenced no doubt by their affordability given our economic reality.
Wealth and capital gains taxes
In terms of the nexus between tax and wealth inequality, respondents were also not attracted to a wealth tax, with nearly 90 per cent not supportive of the Green’s initiative in this area, and with that lifting to around 93 per cent when referencing the Te Pati Māori wealth tax initiative. Contextualising this, virtually all respondents acknowledge wealth inequality (materially driven by housing ownership) as a real concern, with over half saying it’s a heightened concern relative to the past. Around half also see the Governments’ role in dealing with wealth inequality as ensuring suitable levels of welfare and income, with around a quarter supportive of taxing realised capital gains to help address the same.
While the taxation of capital gains remains a polarising topic, sentiment has possibly softened with the evolving context, which includes the taxation of capital gains being seen as more palatable than a wealth tax, while also reducing the risk that a wealth tax is successfully advanced.
Fiscal Outlook
The current economic outlook, including the Government’s fiscal position, may also be influencing sentiment, as without question, the storm clouds are front and centre in many minds, as are the omnipresent fiscal deficits and levels of net core Crown debt that need to be addressed. Of course, softened doesn’t mean supportive.
Consistent with this overlay, respondents overwhelmingly (80 per cent up from 33 per cent in 2021) feel that the Government’s priority and actions to return to surplus, stabilise and reduce net core Crown debt, are not high enough.
A similar level (85 per cent up from 62 per cent in 2021) have a heightened concern around the efficacy of Government spending (a damming result really, with one respondent stating, “it’s out of control”, that no doubt influences the overall sentiment of respondents, including about being taxed more), with a majority (60 per cent) also having a heightened level of concern around our ability to attract mobile capital and labour.
As with wider poll results, the survey sentiments project a heightened level of concern that isn’t just attributable to externalities, but also to the actions of the Government in addressing the same and delivering outcomes.
Not the scorecard any Government would look for, and materially different from the sentiment around the last election.
Quoting Warren Buffett and using a market analogy, “in the short run the market is a voting machine, but in the long run it is a weighing machine”, with the current survey results weighing up the present-day realities over the previously evaluated rhetoric, with sobering consequences for the Government.
· Thomas Pippos is chairman of Deloitte.
