The top two percent of Kiwi income earners would face a higher tax rate under Labour, with the party revealing its revenue policy to help fund the costs of Covid-19
The Labour Party has announced plans for a new top tax rate covering the wealthiest New Zealanders, saying the move is necessary to avoid public service cuts or spiralling debt levels.
The 39 percent tax rate would apply to New Zealanders earning more than $180,000 a year, which Labour says represents only two percent of the population and would bring in roughly $550 million in additional revenue a year.
The top tax rate is currently 33 percent but has a lower income threshold, applying to all Kiwis earning over $70,000.
Announcing the party’s revenue policy, Finance Minister Grant Robertson said New Zealanders wanted certainty for both public services and tax rates following the instability caused by the Covid-19 pandemic.
While billions in additional borrowing had been necessary to fund emergency measures like the wage subsidy, Robertson said the Government needed to be careful about not running up more debt than was necessary for the recovery.
“I have made it my focus over this term of government to manage our books carefully and bring down debt. That focus will continue. Generating extra revenue now will help keep debt under control.”
The proposed new tax rate would cost $23 a week for someone earning $200,000 a year, but would make it easier for the Government to help the economy “bounce back” from Covid-10, while leaving income tax levels unchanged for about 98 percent of people.
Revenue Minister Stuart Nash said Labour’s policy compared favourably to Australia, which had a top tax rate of 47 percent (including a two percent Medicare levy) for those earning more than A$180,000.
“We know from the experience of other countries – like Australia, Canada and the UK – that their economies grow strongly when higher earners are paying tax rates above 39 percent,” Nash said.
“When New Zealand previously had a 39 percent top rate, it certainly didn’t stop GDP from growing at annual rates of three percent and four percent.”
Robertson said Labour also remained committed to working with the OECD on a solution for multinational corporations who did not pay their fair share of tax.
It was also prepared to implement national rules if international agreement was not possible, with a digital services tax – applying to digital platforms which relied on a base of users for income from advertising or data – among the options on the table.
Robertson said there would not be any new taxes, or further increases to income tax beyond the new top rate, if Labour was re-elected or another term.
He challenged National to explain how it would fund its spending promises, alleging its numbers “simply do not add up unless there are tens of billions of dollars of cuts to services like health, education and police” – a claim the party has denied.
