The Green Party is refusing to support the Government's new top tax rate legislation

Green Party co-leaders James Shaw and Marama Davidson. Photo / Mark Mitchell

The Green Party is refusing to vote with the Government to pass a law which creates a new 39 per cent tax bracket for New Zealand's highest earners.

But instead of outright voting against the legislation – scheduled to be debated in the House for the first time this afternoon – its MPs will instead abstain.

This means they will neither cast a yes, nor a no vote – a relatively unusual move in Parliament.

But, as the bill is tax legislation, the Greens are not allowed to vote against it according to their cooperation agreement with Labour.

That agreement does, however, state that Greens MPs are allowed to abstain from matters of confidence and supply, such as this.

In a statement, the Greens said the reasons the party is not giving the Government its support is because the legislation does not implement a wealth or capital gains tax.

Because of this, Greens co-leader James Shaw said the new law is likely to further increase inequality as high-income earners are incentivised to shuffle even more money into property.

"The last time the top tax rate was increased to 39 cents without also taxing wealth or capital gains, we saw house prices increase 17 per cent because people channelled income into trusts instead, and those trusts invested in property," he said.

"This bill will just increase the distortion between income that is earned through work, and income that is earned through property investment and wealth accumulation.

The Greens have been pushing for a capital gains and a wealth tax for years now.

On the latter issue, Prime Minister Jacinda Ardern was forced to rule such a tax out numerous times before the election.

And she categorically ruled out implementing a capital gains tax as well, after the tax working group report recommended it in 2019.

Despite the Greens abstention, and the likely "against" votes from Act and National, the bill will still pass.

This is because Labour has 65 MPs in the House – a party needs support of at least 61 MPs in the House to pass a law.

Meanwhile, the Act Party has claimed that despite the fact the first reading of the bill being in just a couple of hours, its MPs have not received a copy of the bill as of yet.

"How are MPs supposed to do their jobs? Parliament can't hold the Government accountable if it doesn't have a chance to read and scrutinise legislation," Act leader David Seymour said.

He said that Labour campaigned on this bill and have had weeks to put the legislation together – to not have given it to Opposition MPs yet raises questions about the Government's competence, he said.

A spokesman for Revenue Minister David Parker, who is shepherding the bill through the House, said the bill would be with MPs before it goes to the House this afternoon.