Income tax rejig tipped
The Government is believed to be weighing up whether to propose raising the top rate and threshold of income tax, as ministers debate the tax policy it should take to voters at next year’s election.
There has previously been speculation the Labour Party might propose increasing the threshold at which the top rate kicks in to more than $100,000, and pay for that by increasing the top rate of tax.
Representing the political party at a tax seminar hosted by Victoria University in Wellington, Labour MP Deborah Russell said she would like New Zealand to be ‘‘the most equal country in the world – fullstop’’.
‘‘I want to aim for real, radical equality because I think that is how you get a decent, functioning democratic society,’’ she said.
Russell, who also chairs Parliament’s finance and expenditure select committee, indicated Labour’s tax policy would not be finalised ahead of its party conference next month.
‘‘Part of the discussion there is where we go on that.’’
PwC tax partner Geof Nightingale has argued that a change to the top band of tax income is ‘‘inevitable’’ after the Government ruled out a comprehensive capital gains tax earlier this year.
Wage rises were taking a growing number of teachers, police, nurses and other traditionally middle-income earners into the top tax bracket, he said then. A rise in the top rate of tax and its threshold could address the arguable anomaly that the top tax rate is only 3 percentage points above the 30 per cent rate, which kicks in on income over $48,000 a year. The latter is an income that is below the average full-time wage.
Revenue Minister Stuart Nash said he would not comment on speculation.
Russell said there was a need for a ‘‘careful conversation’’ on tax. ‘‘If you are living in Auckland on an income of $120,000, you do not feel rich.’’
Labour leader and Prime Minister Jacinda Ardern this year ruled out a comprehensive capital gains tax during her tenure.
But Russell said there was a need to ‘‘revisit the conversation about what we tax and why’’.
‘‘That is a conversation we are starting to have in a pretty intense fashion within my party.’’
But it was one that initially needed to take place behind closed doors, she said.
Russell said her own view was the ‘‘biggest single best thing’’ Labour could do to promote equality was to support children.
‘‘I want to see transfers to children. We have the Best Start package, which is a good start but I would like to see it significantly expanded,’’ she said.
‘‘We have a universal basic income for people who are aged 65 and over, called New Zealand Superannuation.
Deborah Russell Labour MP
‘‘I think we need to start work on doing an equivalent sort of thing for children.’’
Other options the Government has not ruled out include an inheritance tax, or other form of wealth tax.
It has also not ruled out gradually extending the range of capital gains on which income tax is payable, for example by extending the ‘‘bright line’’ test on investment property and extending it to other asset classes.
Russell, who specialised in tax policy at Massey University before her election as a Labour MP in 2017, said she was disappointed the Government could not get a comprehensive capital gains tax across the line.
National Party revenue spokesman Paul Goldsmith, speaking at the same event, said he remained greatly surprised that Ardern and Finance Minister Grant Robertson never advocated clearly for a comprehensive capital gains tax, despite appearing to support it.
National Party leader Simon Bridges has promised to indexlink tax thresholds to remove ‘‘bracket creep’’. Goldsmith said the party would like to go further but that would depend on what it inherited in terms of surpluses.
‘‘I want to aim for real, radical equality because I think that is how you get a decent, functioning democratic society.’’