Tax pledge risks painting Nats in a corner

In terms of its superficial appeal, Simon Bridges’ pledge of no new taxes is great retail politics. For all of the nuanced debate among those who follow politics closely, few things appeal to voters generally in the way that hippocket issues do.

During the weekend, thousands of people were rioting in Paris, ostensibly over fuel prices, but the anger seemed to be focused more generally on rents and other unavoidable living costs. These are all issues which have surfaced in New Zealand this year, so far with none of the violence.

Yesterday, Bridges promised no new taxes in National’s possible first term of government – and ruled out a capital gains tax for good measure.

But while his promise may seem a way to try to capitalise on the cost-of-living debate, promising no new taxes is either meaningless, unworkable or downright irresponsible. For anyone hoping that politicians might lead the political debate, or that National would review its direction after losing power in 2017, it is also depressing.

After Bridges made the promise, critics on the Left immediately claimed it was a sign National would starve public services. That is a valid question, but it is not necessarily so.

While it may be temporary, right now the economy is throwing an unexpectedly large amount of tax Treasury’s way. The Crown accounts are healthy. Unemployment is now so low that one of the major issues emerging for the Government is there is so little spare capacity that it is struggling to get new projects under way.

National has not been delivering a message of less spending. Since Bridges became leader, the party has promised to shrink class sizes, made supportive noises about public sector pay, and recently its MPs have even lamented the closing of NZ Post shops.

The problem with Bridges’ tax pledge was actually exposed accidentally by groups that support a low-tax economy.

Hours after the promise was made, ACT leader David Seymour welcomed the move, but also warned that New Zealand had been here before, with National’s campaign manager Steven Joyce making a similar pledge ahead of the 2014 election.

In the years that followed, Seymour said, National extended the bright-line test (which the party would eventually describe as not entirely unlike a capital gains tax), as well as increasing tobacco excise, imposing a border clearance tax and introducing a ‘‘Netflix tax’’. The Taxpayers’ Union also welcomed Bridges’ stance, warning that ‘‘fees, levies, excise taxes, ACC charges, and the bright-line regime are all forms of taxes’’.

At face value, Bridges’ promise would appear to rule out measures which are not always popular, but are the necessary and right decisions to take, whether you generally want taxes to be lower or not.

Take the Netflix tax, which imposed GST on digital services from late 2016. This came after a new type of consumer spending emerged that was not covered by a tax which locally based services faced, effectively creating a small hole in the tax system, which was only going to grow. As unfortunate as it was for someone who uses such services, the former National Government was right to close that hole; otherwise even more of the tax burden would fall on the rest of the economy.

Is National saying that when future, not-yetenvisaged services emerge, it will not move to address the problem? Should the likes of Uber, Facebook or Google not pay tax here just because they claim the services are not happening in New Zealand?

There are other problems which a government dogmatically tied to no new taxes could quickly find itself facing. What if, for example, New Zealand’s agricultural sector decided in the future that biosecurity threats were so severe that a major increase in spending was needed?

Even if the sector was prepared to cover the cost itself, National’s policy would either rule that out, or rule that the existing tax base would cover it.

Many councils are facing rising costs from an influx of tourists. While Tourism Minister Kelvin Davis has announced a new visitor levy, this may not cover the costs created everywhere.

National’s policy appears to rule out even the possibility of a local solution, condemning the costs to fall on ratepayers who may not be benefiting.

If anything, Bridges’ policy would make it more difficult for National to deliver tax cuts for ordinary taxpayers because he is ruling out imposing new taxes even for future costs created by particular groups, including ones we cannot know are coming. Unless, of course, that is not what ‘‘no new taxes’’ means when National says it, and instead it is just a meaningless aspiration.

Given that this was billed as one of National’s new priorities, it is hardly an inspiring start.

Bridges’ promise would appear to rule out measures which are not always popular, but are necessary and right.