OPINION
Matthew Hooton writes a scathing review of National’s tax policy.
National’s tax policy was much worse than expected. It reveals a party undeserving of being taken seriously. It has no plan to “fix the economy”, nor any idea of what one might look like. It seems uninterested in achieving power to avert economic disaster, and content merely to hold office.
[…] National faces probably the most incompetent Government in New Zealand’s history. Our trade, fiscal and general economic outlook is the worst since the 1984 and 1990 financial and political crises.
National and its allies should be at least 10 points ahead.
Obviously.
Instead, National and ACT are roughly equal to Labour, the Greens and Te Pati Maori, with New Zealand First set to be kingmaker, whatever anyone says before the election.
[…] Grant Robertson’s profligacy has made public debt material again and his fiscal deficit already appears structural.
[…] Serious people know there are no circumstances in which tax cuts or increased handouts could be justified in the short or medium term.
On top of that, National is now promising another $8b of cuts over the next four years, for a grand total of $16b.
[…] Unlike ACT, National hasn’t identified what it believes can be cut on top of Robertson’s effort. It says it will go through the budgets after the election, and “instruct departmental chief executives to go line-by-line through existing expenditure to identify spending areas that are not critical to core frontline delivery”.
Inevitably, the chief executives will offer only politically unacceptable cuts, known as the Washington Monument strategy by American bureaucrats.
[…] In practice, the only way to guarantee savings is to abolish whole agencies and programmes, as ACT proposes.
National concedes savings alone won’t fund its tax cuts, so also announced four new taxes. None applies to tax-exempt ‘charities’ such as Go Bus, Shotover Jet, Sanitarium and Mission Estate Winery.
The first new tax, which National developed with assistance from Auckland’s Sky City Casino, is on offshore gambling websites. Labour says it already taxes them, collecting nearly $40 million a year in GST.
What’s to stop these gambling websites saying ‘screw you’ and stopping access? It’s also blindingly obvious what Sky City’s motives are. It’s like legalising cannabis but regulating it with the ‘assistance’ of the alcohol industry.
The second new tax is charging foreigners higher visa fees.
These two would raise a few hundred million dollars.
The third is bigger, which is reversing Labour’s Covid-era tax break for commercial property investors, forecast to raise just over $2b over the next four years.
The fourth is the proposed tax on foreign buyers purchasing properties worth over $2m.
The tax won’t apply to Australians, Singaporeans and perhaps citizens of other countries with which New Zealand has tax and trade treaties, but National says it will bring in $3b.
For that to be true, foreigners from countries other than Australia, Singapore and so forth would need to buy around $20b of houses over the next four years.
That’s more than 6000 houses with an average value of $3m. That assumption seems heroic, even if encouraging people to sell houses to foreigners to fund tax cuts is a good idea.
KiwiBuild anyone?
Let’s be charitable, and assume the full $16b-plus in cuts are actually made and the $6b-plus in extra revenue rolls in the door, starting mid-2024.
‘Charitable’ being the understatement of the century. What National is promising is ‘cross-your-fingers’ stuff. There is no way they will get anywhere near $22b.
[…] Any fiscally-responsible Finance Minister would use the full $22b to pay off debt. To instead give tax cuts to the poor and middle-class, with probably the highest marginal propensities to consume of any actors in the New Zealand economy, is grossly irresponsible.
It is certain to fuel higher inflation, higher interest rates and lock in a structural fiscal deficit for a generation. National says the tax cuts will go ahead “no matter how badly Labour has wrecked the joint”.
I call BS on National’s tax cuts going ahead. There’s no doubt that, once in, they will renege and say ‘the books are much, much worse than we ever imagined’.
National and Labour are as bad as each other. The only hope is for a minor party to get in with enough clout and sense to keep them in line.