National fires off tax-cut plan to get economy ‘ticking’ after Covid
National leader Judith Collins will be hoping her party’s “massive” temporary tax cut plan will be enough to lift her party’s polling as election day draws closer.
But she faces criticism from her political rivals for “raiding” the Covid19 contingency fund and making U-turns on parts of National’s economic policy.
The cornerstone of the plan outlined by Collins and finance spokesman Paul Goldsmith was temporary tax cuts to low, middle and high-income earners.
Tax thresholds would be cut from December 1 this year until March 31, 2022.
The bottom tax bracket for people earning $14,000 would be moved to $20,000, the middle bracket would rise from $48,000 to $64,000 and the top tax threshold would be lifted from $70,000 to $90,000.
“We are facing the biggest economic downturn the world has seen in living memory,” Collins said.
“To keep our economy ticking, New Zealanders need money to spend.” For a middle-income earner, the changes would mean they would pay $3000 less in tax every year — an extra $50 a week.
National also announced a plan to get businesses “spending like crazy”.
Its proposals include doubling deprecation rate for businesses which spend money on equipment and new machinery over the next year.
National also promised to get the Government books back in the black by 2027. Under current forecasts, there will be deficits for at least another 14 years.
But the policy was a significant walk-back in a number of key areas.
The party’s ambitious debt reduction target of 30 per cent by 2030 was pushed out to 34 per cent by 2035.
Goldsmith said the initial debt target was not “practical or feasible”.
This gives National billions of dollars more wiggle room to pay for its plans.
The other major reversal came with the tax cuts themselves.
On September 10 — just over a week ago — Goldsmith said his party’s plan was to hold taxes but adjust thresholds for inflation.
And on August 5, Collins said: “We are not expecting to be announcing tax cuts, although let’s just wait and see.”
That change in position was seized on by Labour. Robertson told reporters in Wairarapa yesterday “it feels to me it’s been done on the fly”.
Ardern also noted there had been a significant change in policy by National in this area.
Before taking questions yesterday morning, Collins addressed the change in position, saying she had made the comments before Auckland’s second lockdown and the situation has since changed.
And on the debt levels, Goldsmith said National had to wait to see Treasury’s updated assessments. Labour reserved its harshest criticism for how National would pay for its plans.
The total cost of National’s plans was $10 billion over five years, with $4.7b for the tax cuts. It would use $4b from the so far unallocated Covid-19 contingency fund.
Ardern said it was “totally irresponsible” for National to be “raiding” the Covid-19 fund to pay for tax cuts, at a time such as this.
The rest of National’s plans would be paid for by spending less than Treasury was forecasting an incumbent Government to spend.
Its policy shows its operating allowance — how much new money the Government plans to spend each year — was $51b less over the next 14 years than current forecasts.
The plan does not show National reducing new spending — just increasing it at a lower level than a Labour Government would.
Goldsmith yesterday categorically ruled out any funding cuts to key areas, such as health or education.
The Greens co-leader James Shaw sad: “National is planning for a decade of children learning in run-down, overcrowded classrooms, longer wait times for essential medical treatments, and less protection for nature.”