Breaking: National's $14.6b tax, cut and tax plan
National's $14.6b of tax cuts aimed at 'squeezed middle', but $2.3b for landlords; Paid for from $2.4b climate fund, $5.9b of cost cuts; $5.6b of new tax on foreign buyers, migrants, office owners
TL;DR: National has unveiled a $14.6 billion package of tax cuts aimed at voters in the ‘squeezed middle,’ which it says will be paid for with $14.7 billion of offsetting spending cuts, a $2.4 billion raid on the Climate Emergency Response Fund (CERF), and $5.6 billion of new taxes on foreign property buyers, migrants, overseas tech firms and commercial property owners.
The package aims to thread the political needle in which National provides tax cuts more targeted at middle income earners and pays for it with new taxes on foreigners and commercial property owners, and with money that would have been used to reduce climate emissions.
The package will be harder for Labour and the Greens to attack than they might have expected, given income tax threshold benefits are capped at just under $80,000 per earner and much of the tax relief is directed via Working For Families and childcare subsidies, and it does not pay for the tax cuts with extra borrowing. This package is much less generous to those earning over $100,000 than National’s initial plan soon after Christopher Luxon was elected leader, although it does deliver $2.3 billion in benefits over four years to landlords by re-introducing interest as a tax deductible expense and winding the bright-line test back from 10 years to two years.
It will also be difficult for Labour and the Greens to defend removing the new tax revenues introduced under National’s plan, including:
a new 15% tax on foreign buyers of properties worth more than $2 million;
the removal of depreciation as a taxable expense for commercial property owners, (which Labour also included in its election policy);
an increase in visa fees for migrants; and,
an increase in taxes on overseas tech firms and online gambling operators.
However, the decision to simply confiscate $2.4 billion from the CERF to use to pay for the tax cuts will generate outrage from Labour and the Greens, although National’s attempt to call it a climate dividend may soften the electoral blow.
As leaked this morning, the package would deliver up to $254 a fortnight extra to a family with two incomes and children in childcare.
Paying subscribers can get more detail below the paywall fold and in the podcast above.