Editorial: Parting ways on tax reform

Green co-leaders James Shaw and Marama Davidson announce the party's tax policy. Photo / Alex Burton

EDITORIAL

Tax reform remains a big underlying issue for this election.

It’s the one that ties together several others, such as the costs of climate change, infrastructure rebuilding, rising inequality, poverty and superannuation.

Behind the concerns about inflation and crime lie a couple of big ones: how does this society pay for the changes needed going forward, and what type of society do we want to be?

There are a mix of methods that can be used to create more growth and revenue. Tax reform should be part of the conversation. Now, thanks to the two very different secondary political parties, it is.

This is more difficult territory for the major parties, as both fear stumbling in the election race with something that might be contentious - or even slightly new or daring.

National, the party with the biggest donations, hopes its planned familiar tax cuts will be a drawcard and is promising to explain how it will pay for them, while criticising the Green Party’s plan for a wealth tax.

Labour did raise the topic by releasing a report on how little tax New Zealand’s wealthy pay on income, but has yet to say what it might do.

Act and the Greens have laid out what they’d like to happen, and considering each has major influence in opposite winning combos, it’s worth considering these plans.

A month ago, Act reaffirmed its policy of a two-rate income tax system. Those earning less than $70,000 would pay 17.5 per cent from the next financial year. Those who earned more would have a lower tax rate from the present 33 per cent or 39 per cent to 28 per cent by the beginning of the 2025/26 year.

There would be a tax credit for low and middle-income households. “Kiwis need lower, flatter taxes, paid for by reducing wasteful spending,” Act Party leader David Seymour said.

The Green Party at the weekend said it wants a wealth tax of 2.5 per cent on assets over $2 million owned by individuals, or $4m on assets owned by couples. There would also be a new top rate of income tax of 45 per cent on income over $180,000 and a 1.5 per cent tax on trust assets.

It would fund an “income guarantee” that will ensure no one gets less than $385 a week after tax, compared to the current basic job seeker benefit of $258.50 after tax. Anyone earning under $125,000 would pay less tax, with a tax-free threshold of $10,000.

“This is a promise that, no matter what, you will always have enough to afford the weekly shop, pay the rent or cover unexpected costs,” Green Party co-leader James Shaw said.

Whether any of these ideas should happen, or has a realistic chance of happening, it’s still worthwhile raising. A society that doesn’t consider evolving the way it does things stagnates.

The weather disasters this year highlighted the shortcomings of New Zealand’s infrastructure and how the country has stagnated with inadequate planning and investment.

There are different problems, priorities and prescriptions from the left and right on what to do about them.