Labour targets top earners

Labour Party leader David Cunliffe. Photo / Sarah Ive

Capital gains tax and those making $150,000-plus would fund new spending initiatives

Labour plans to sock wealthy New Zealanders and multinationals for hundreds of millions of dollars in new taxes to fund new spending initiatives while posting slightly larger surpluses than National.

New tax initiatives including a capital gains tax, a new top tax rate for those earning over $150,000 and measures targeting trusts and multinationals will raise almost half a billion dollars within two years, rising to over $2 billion a year by 2021.

The new cash will go on spending plans like Labour's Best Start child welfare package, health and education, and to pay off additional debt taken on to pay for resuming NZ Super Fund contributions from next year and the KiwiBuild home construction programme.

Finance Minister Bill English called it Labour's "failed old recipe of taxing more and spending more".

Revenue Minister Todd McClay said Labour's tax avoidance crackdown "either misses the point or is completely redundant" given Inland Revenue had already been working hard in that area.

But Labour leader David Cunliffe said the tax hikes meant wealthier New Zealanders were being asked to "return a small part of the very large tax cuts they received from the current Government".

Labour estimated its increase in the top tax rate from 33c to 36c would affect 2 per cent of taxpayers who earned on average $260,000 a year.

According to its forecasts a Labour Government would run slightly larger operating surpluses than National with those surpluses increasing as the capital gains tax ramped up.

Labour's net debt track according to its preferred measure, which includes NZ Super, would initially be higher than National's mainly due to the KiwiBuild policy, costing $881 million in its first full year, rising to over $1.5 billion by 2019. As surpluses increase net debt would fall below Budget 2014 forecasts by 2020.

Total borrowing for NZ Super Fund contributions over the six years to 2021 would come to over $7 billion.

Labour's forecasts also include net costs for as yet unannounced policies of $498 million in 2015-16, rising to $1.36 million within three years.

Labour says its plan would leave "adequate fiscal headroom" for "likely" tax cuts. Finance spokesman David Parker said "they wouldn't be weighted towards the wealthy".