7 Mar 2022

Business leader backs Christopher Luxon's proposal to scrap all Labour-introduced taxes

8:58 am on 7 March 2022

The National Party's promise to scrap all the new taxes introduced by Labour since coming into power has been met with both praise and scepticism.

Christopher Luxon

National Part leader Christopher Luxon. Photo: RNZ / Angus Dreaver

Party leader Christopher Luxon zeroed in on the cost of living in his State of the Nation speech at the weekend, promising to raise income tax thresholds.

Business New Zealand Kirk Hope chief executive gave the policy the thumbs up.

"Hearing that attitude coming back into politics that politicians do trust businesses is a really important message for a lot of people who have been doing it pretty hard," Hope said.

"In terms of practical application of the bracket changes I think those are really, really important for working New Zealanders."

The lowest tax bracket of 10.5 percent would rise just over $15,600 the 17.5 percent threshold would go up $53,500 and the 30 percent to $78,100.

This would mean those earning $45,000 would have an annual tax saving of $112, those on $ 55,000 would save $800 and those on $85,000 would save more than a grand.

Minister of Finance Grant Robertson said the tax cuts would just lead to important services being cut and drive inflation.

However, Infometrics Principal Economist Brad Olsen said any suggestion the policies would lead to a slashing of services was not strictly true.

"It is always challenging to balance the Budget, but the government has also given itself a rather large pot of money going forward that is essentially being repurposed under this policy," he said.

He argued it also would not increase inflation because the money will still be spent - by individuals rather than by the government.

However, he noted lower income earners will get the least benefit .

"They might well need additional targeted support be that tax credits, benefit increases or similar. We know everyone is feeling stressed at the moment and there are more steps that need to be taken," he said.

Asked if there should be tax credits for low income earners, Luxon pointed to rises in benefits and the minimum wage under the Labour government, and reiterated that anyone earning above $14,000 should not get caught in a tax bracket just because it was not adjusted for inflation.

"When a minimum wage worker only has to work 44 hours a week - an extra four hours - and they all of a sudden end up in a 30 percent tax bracket, something's wrong with that," Luxon told Morning Report.

"Inflation-adjusted tax thresholds, a concept that's been around for a very long time, done in very many other countries in the world, a commonsense sort of thing.

All we're saying to Grant Robertson is 'look, you're planning to spend six billion dollars of incremental new money this year, take 1.7 billion, give it back to the New Zealand people'."

He said there would not be cuts to education and healthcare under National's tax plan.

Among the taxes on the chopping block was the Auckland Regional Fuel Tax.

Auckland mayor Phil Goff said money to fund the region's transport system needed to come from somewhere.

Much of the revenue gathered funded the eastern busway, which Luxon's electorate directly benefited from, Goff said.

"If we lose the hundreds of millions of dollars from the regional fuel tax going there we will either need to stop the project going ahead, or we will need to put a 20 percent rate increase in," he said.

What National was proposing would hit poorer Aucklanders - who relied on public transport - hardest, he said.

'Ute tax'

Luxon signalled the National Party planned to reverse Labour's so-called ute tax if it was elected to government.

National and Federated Farmers have said the government's rebate scheme for imported electric and plug-in hybrid vehicles penalises users of utes and other heavier vehicles.

"We've said we don't support it," Luxon told Morning Report.

"We don't think it makes sense to put a tax on a ute when there's no viable EV to actually be able to substitute it with."

Luxon said he was supportive of EVs, and as former Air New Zealand chief executive had moved the airline's fleet to electric vehicles.

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