In brief
- Te Pāti Māori’s proposed tax changes are huge and cast a wide net.
- up to 8% wealth tax, a 33% tax on the increased value of vacant houses, and the removal of GST from food.
- Do they have any idea how disruptive implementing these changes would be?
- Greens also want a wealth tax. What will Labour agree to if it has only one path to power?
Te Pāti Māori releases tax policy
They’re proposing higher taxes to go after the rich and “greedy property developers and landlords”.
The announcement includes some fantastic numbers and claims, such as:
- The treasury would have collected $200B since 1917 if a capital gains tax had been implemented.
- Ordinary people are subsidising the lavish lifestyles of the rich.
- There is $7B yearly in tax evasion just waiting to be harvested.
There is no credible support for these claims but they do cite the IRD High Wealth report headline numbers, albeit ignoring the errors that have been pointed out making those headline numbers meaningless. They also seem to have missed the point that over 40% of people in NZ pay no net tax.
Is there any chance of these policies being implemented?
Hipkins will certainly need the support of at least one partner to form a Government in October. Both of the partners he might need, the Green Party and Te Pāti Māori, are now calling for a wealth tax.
Hipkins has so far ruled out either a wealth tax or a capital gains tax on his watch. David Parker resigned his post as Revenue Minister in protest to Hipkins’ captain’s call.
Grant Robertson was also presumably supportive of the wealth tax as it was in the recent budget until shortly before unveiling. Could this issue be big enough that Hipkins gets replaced as leader so he can say he was true to his word, but his party nonetheless adopts a wealth tax to retain power?
It is worth mentioning a Newshub Reid Research poll suggests 53% of Kiwi’s support a wealth tax. However, do they really mean a wealth tax or just some tax, like capital gains, that has the wealthy paying more? And do they know the huge administrative burden a wealth tax creates? Also, the survey was shortly after the very one sided IRD High Net Worth study referred to above.
Specifics
Te Pāti Māori’s policy calls for earnings under $30,000 to be tax free. The current top rate of 39% would start at $90k and the rate would max out at 48 per cent over $300k.
They say they’ll remove GST from all food, increase the Company Tax from 28%to 33 per cent and introduce a foreign companies tax.They will also introduce a wealth tax, land banking tax and vacant house tax.
Net Wealth Tax rates will be for individuals and the combined net wealth of couples. It will start at 2% over $2M and max out at 8% over $10M.
Te Pāti Māori claim approximately $7 billion is lost to tax evasion every year. They’re proposing to invest $500 million to investigate and address tax evasion.
Some thoughts and reactions
Of the few OECD countries left with wealth taxes in place, Te Pāti Māori’s proposed top rate of 8 per cent is more than seven times the 1.1% in Norway that has lead to an exodus of wealth.
The Taxpayers’ Union says “The proposals laid out by Te Pāti Māori come from a place of fundamental misunderstanding of economics and incentives.”
