Ardern reels in taxes

Herald on Sunday - - EDITORIAL -

Jacinda Ardern would have sur­prised most Labour sup­port­ers this week with her de­ci­sion not to in­crease the top rate of in­come tax.

She had said she would make a de­ci­sion only af­ter see­ing the Trea­sury’s pre-elec­tion fis­cal up­date on Wed­nes­day and it showed the Bud­get sur­plus to be lower af­ter this year than pre­vi­ously fore­cast.

Rea­son enough, pos­si­bly, for Labour to “sock the rich” much as the Green Party has pro­posed to raise the top rate from 33 per cent to 40 per cent on in­comes above $150,000.

But Ardern an­nounced no. Labour would not go to the elec­tion with an in­crease in the top rate, nor would it put that op­tion be­fore the tax panel it pro­poses to set up if elected.

Other wealth taxes, in­clud­ing cap­i­tal gains tax on any as­set apart from the fam­ily home, could be con­sid­ered by the ap­pointed panel. But not the top rate on in­comes.

Why? Pos­si­bly to deny Na­tional an easy tar­get. Labour will be aware its sparkling new leader has been an­nounc­ing a num­ber of taxes in the short time since she took over — a petrol tax, a wa­ter tax. It will have seen a cor­re­spon­dent in the Her­ald dub her “Taxinda”.

But her party prob­a­bly has bet­ter rea­sons to keep the top rate where it has been for 30 years, ex­cept for nine years of He­len Clark’s gov­ern­ment.

That Labour Gov­ern­ment raised the rate to 39 per cent for no good rea­son. It had in­her­ited a healthy Bud­get sur­plus from Na­tional and did not re­ally need the money. The pol­icy looked sim­ply bloody-minded — Clark’s re­venge on Roger­nomics — more than a rev­enue ne­ces­sity.

Its only ef­fect was to help de­prive the Gov­ern­ment of busi­ness con­fi­dence for its first year or two.

Sta­bil­ity is im­por­tant for busi­ness con­fi­dence, es­pe­cially tax­a­tion. A few per cent on the top rate would hardly crip­ple those paid $150,000 and more, it would cause more tax avoid­ance.

Even at 33 per cent, the present Gov­ern­ment’s 2010 tax work­ing group found half of those el­i­gi­ble for the rate were not pay­ing it.

A top rate of 33 per cent is quite enough. Those who never see tax taken from their pay be­cause it is paid by their em­ployer, do not know how it feels to have fully a third of some ad­di­tional earn­ings taken by the state.

Labour has made the right de­ci­sion. It is look­ing very electable.

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