National promises three-yearly income tax cuts in first major speech of the year

2019-01-30 09:01:26

The rising cost of living is in National's sights with leader Simon Bridges committing to "rolling tax relief", by linking tax brackets to inflation.

The move would see income tax adjusted every three years, to allow New Zealanders keep more of what they earn.

Bridges made the surprise policy announcement at his "State of the Nation" speech, which he delivered to a packed business audience at the Canterbury Employers' Chamber of Commerce on Wednesday.

The promise of tax relief comes as the Opposition attempts to place its foot on the throat of the Government over its own tax plans, and whether it intends to introduce a controversial capital gains tax.

"Over the next four years, New Zealanders will be paying almost $10,000 more per household in tax than they would have been under National. The Government is taking more than it needs, only to waste billions on bad spending.

"On top of that, by 2022 New Zealanders on the average wage will move into the top tax bracket," said Bridges.

So National promised to amend the Income Tax Act to require Treasury to advise the Government on how much the thresholds should change after every election. It would include a "veto clause" however, so the Government could withhold changes in "rare circumstances".


In his scene-setting speech, Bridges said he was "positive about New Zealand's prospects" as a "confident, outward-looking nation".

"I believe in freedom and personal responsibility - in equal opportunities, not equal outcomes. And I know that most New Zealanders work hard to make ends meet and therefore the tax they pay should be treated with respect.

"Families have to live within their means, and so should the Government."

He said Government needed to keep investing in core services like health, education, transport and police, but Bridges also highlighted environment and climate issues, as well as National's bread-and-butter focus on law and order as key focus points.

On the economy, Bridges bolstered business as the agency to increase New Zealand's wealth, and he attacked the Government for not sharing the dividends of New Zealand's success since the Global Financial Crisis.

"For the first time in years our growth per person is falling behind Australia. For many New Zealanders, incomes are struggling to keep up with the rising cost of living.

"This Government's bad decisions are driving up the cost of necessities like petrol, rents and electricity and they can't help themselves from adding new taxes."

That was against "bad spending" such as the $2.8 billion fees-free tertiary education "for students already going to university, another $3 billion on a slush fund that NZ First is shamelessly using to buy votes, and almost $300 million on working groups because Labour didn't do the work in opposition".

Bridges said the Government had gone "soft on crime", claiming it had reduced the prison population without a plan to reduce offending.

"Its sympathy now rests with the criminals."

And he made an impassioned plea for New Zealanders to trust National with the environment, promising the first of National's planned policy discussion documents will be on the environment.

"We'll focus on cleaner water, protecting our fisheries, on our native species and iconic places, among other areas. Economic growth and improving the environment can and must go hand in hand."


Tax indexation would address what is known as "bracket creep", where people move into higher tax brackets without a real rise in incomes. ​Bridges said his tax plan would make a "real difference" to New Zealanders.

"Assuming inflation of 2 per cent, someone on the average wage would be $430 a year better off after the first adjustment, $900 after the second and $1400 after the third.

"A family with two earners - for example, one earning $80,000 and the other $40,000 - would be $600 better off a year after the first adjustment, about $1300 after the second and $1900 by the third."

The tax changes would effectively be automatic, unless there was a "compelling reason not to", which the Government of the day would have to explain.

National expected the policy to see about 580,000 New Zealanders in the 30 per cent tax bracket, to benefit by about $430 a year after the first adjustment.

"There are also more than 600,000 New Zealanders in the top income tax bracket of 33 per cent who would be likely to benefit by about $550 a year after the first adjustment.

"We expect about 84,000 people would be protected from moving into the top tax threshold after the first adjustment and 95,000 people would be protected from moving into the 30 per cent tax threshold after the first adjustment."

But Finance Minister Grant Robertson has questioned how National could afford it.

"I notice that they didn't do it in the nine years that they were in Government and they've got some serious explaining to do about how they're going to afford this.

"We're talking here about their estimate of $650m a year, maybe a little higher than that. On top of that, you've got Amy Adams needing to find around $30 billion over the next five years to manage her debt targets, we've got roading expenditure that they can't pay for because they're not going to tax for it, we've got Nikkie Kaye saying she's going to spend hundred of millions of dollars more on teachers' salaries. It just doesn't add up," Robertson said.

"They have to answer the question for all New Zealanders, what will they cut. Because ultimately they cannot afford what they're saying they're going to do. In fact, I think probably Simon Bridges has found Steven Joyce's fiscal hole in his back yard."

Bridges said the Government was pulling in $17 billion more in revenue than it had forecast, and was spending billions more on "wasteful" policies like free tertiary education, that it would not fund.

National also had more options on infrastructure given it would not rule out public-private partnerships to certain projects, the way Labour had.

He reaffirmed National's 2020 commitments to repeal the Auckland Regional Fuel Tax, ensure no increase in petrol taxes during its first term, have no new taxes in its first term and repeal a Capital Gains Tax.


While Bridges was speaking in Christchurch, the Labour Party caucus was holding its annual retreat, in Wairarapa. In her opening remarks, Prime Minister Jacinda Ardern promised a "year of delivery", where it would start making good on some of its bigger promises.

Ardern singled out climate change, housing, mental health, and the recommendations of the tax working group as key areas of focus.

Enacting the tax working group's likely recommendation of a capital gains tax would be a significant fight for the Government and within the Government, as Labour's coalition partner NZ First expressed reservations about such a tax in the past.

Parliament was set to resume on February 12, and a series of lightning rod issues are likely to keep the second year of term anything but dull.

The Government would deliver its first "Wellbeing Budget" in May, and a series of high-profile and potentially controversial decisions are expected to be made in coming months.

That included capital gains tax, an overhaul of the mental health system and major education reform.

The Government's flagship housing policy Kiwibuild is stumbling at the gate, with Housing Minister Phil Twyford's admission only a fraction of the 1000-home target will reached by July 1.

A series of potential referenda or conscience votes will also test the boundaries of public opinion.

Euthanasia is set to be voted on in Parliament this year, although Government coalition partner NZ First has negotiated an amendment with the bill's sponsor, ACT leader David Seymour, to kick it to referendum.

Meanwhile, Ardern has promised to deliver on abortion reform, with any changes likely to be voted as a conscience issue for all MPs.

The Government has also confirmed its intention to put the question of decriminalising cannabis on the ballot paper at next year's election.

But it is already facing accusations from National of "decriminalisation by stealth" after a number of changes introduced last year, directed police to take adopt a "health approach" to the use of drugs, over a criminal approach.

National is set to hold its annual caucus retreat next week in Hamilton and the party faces some tough internal questions of its own, as the return of exiled (now independent) MP Jami-Lee Ross threatens further destabilisation to the leadership of Bridges.

His personal polling as leader remains stubbornly below double digits, although the party remains in a strong position.

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