Revenue Minister Stuart Nash (left) and Finance Minister Grant Robertson announcing Labour's tax policy yesterday. Photo / Mark Mitchell
Revenue Minister Stuart Nash (left) and Finance Minister Grant Robertson announcing Labour's tax policy yesterday. Photo / Mark Mitchell
COMMENT:
Louis XIV's Finance Minister, Jean-Baptiste Colbert, famously declared that "the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing."
With the October 19 election pending, it's more likely that Finance Minister Grant Robertson— who fronted Labour's taxation policy announcement yesterday — is driven more by the George Bernard Shaw maxim: "A Government which robs Peter to pay Paul can always count on Paul's support".
Robertson finally unveiled the party's long-awaited tax policy announcing the predictable return of the 39 per cent higher personal income tax rate.
From all the bleating from the National Party you would have thought Labour has pledged for the new rate to kick in at incomes over $100,000 which would have been swingeing.
Inevitably, the new rate — which kicks in on incomes over $180,000 — invites comparisons with Australia which has legislated to reduce personal income taxes.
The National Party's boosters claim the reintroduction of the 39 per cent top rate will incentivise better heeled Kiwis to move to Australia and set up businesses or consultancies there — or so the drum goes.
But the 98 per cent of personal income taxpayers who will not be stung with a tax increase are not going to bleat about "unfairness". Nor, will they be particularly upset if others jump ship.
The reaction from Kiwis to the returning expats who had moaned on that they might have to pay quarantine fees is a case in point.
There is not much sympathy these days for open displays of entitlement. As for any of the 2 per cent who head to Australia on such ridiculous grounds — sayonara.
Australians who can't even leave their own country right now unless they have a special Covid-19 exemption are hardly going to roll out a welcome mat for entitled Kiwis.
The new tax rate kicks in on incomes over $180,000. Photo / 123RF
As a point of comparison when former Finance Minister Michael Cullen introduced the 39 per cent rate it kicked in at incomes over $60,000. This did affect the middle class. The new bracket affects only 2 per cent of personal income tax-payers.
Some of the "2 per cent" may well be National Party or Act Party voters. But not all.
Even well-heeled New Zealanders like the Warehouse Founder Sir Stephen Tindall have said higher taxes on high-net-worthers are justifiable. Tindall is not the only HNWthr in this camp.
That said there is a possibility that opening a large gap between the top personal tax rate of 39 per cent and the 28 per cent company rate may incentivise some to try to rearrange their affairs. But again, in this Covid-19 era will there really be much tolerance from Inland Revenue if the tax industry swings into overdrive? Nor, I would suggest from the "98 per cent".
The naysayers have also argued that the reintroduction of the 39 per cent rate will only raise a mere $550 million a year in additional revenue. This $550m is not the mere drop in the bucket they suggest.
It may be a fraction of what the Labour Government is borrowing to fund the fiscal stimulus it is applying to support the economy through the worst of the Covid-19 crisis.
But that $550m will also help to offset a predicted fall in company taxation off the back of lower profits.
The 39 per cent tax rate is not going to bust the bank accounts of the "2 per cent". But a capital gains or wealth tax might.
They should count themselves lucky that option is not on the table. If Labour had the courage of its convictions, it would be.
