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Labour drops tax cuts in favour of $1.5b of new spending

The Labour Party is ditching two of its flagship tax initiatives from the last election, giving itself an extra $1.5 billion for alternative policy promises.

Labour leader David Cunliffe announced the changes, which will see Labour drop its proposal to exempt fresh fruit and vegetables from GST and the first $5,000 of earnings from income tax.

The GST promise, while politically popular, was criticised by tax experts as creating a compliance minefield for retailers, while the $5,000 tax exemption threshold would have benefited wealthy people as much as low income earners while undermining one of the most reliable parts of the tax base.

Cunliffe said the changes would allow Labour "to create fresh opportunities for all New Zealanders."

"As leader, I have been reassessing how to give Kiwis the best bang for their hard-earned bucks. We will be removing the previously proposed $5000 tax-free zone and the GST exemption on fresh fruit and vegetables.

"This decision frees up around $1.5 billion per annum," Cunliffe said in a statement.

"While these were worthwhile policies, we believe there are better ways to help struggling Kiwi families."

Some flavour of policies that could be funded by the revenue freed up by dropping both promises would be outlined in his State of the Nation speech next Monday.


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Comments and questions

About time they gave up trying to tinker with a broadbrush, simple GST tax that is envy of Australia

So what Cunliffe is saying is "we don't trust New Zealanders with $1.5b so we're going to take it off you".

No he isn't silly. You are just letting your hatred of him corrupt your logic.

Possibly not silly but certainly dishonest - ref his CV. How could anyone seriously trust this guy

The start of Labour’s largesse, it is obvious by Mr Cunliffe’ s comments he forgoes one ‘gift’ for another that he practices Russell Norman's economics. Experts said his earlier tax rebates would not work so now he is just going to take that tax with the right hand and give it away with the left. And Mr Cunliffe is purported to be intelligent?

He'll need the $1.5 billion to pay for the promise to cut electricity prices.....take with one hand and give with the other, but the trouble is that the more wealthy - who tend to consume more electricity than the less well-off - will get the major benefit.

Voodoo economics.....

Mr Cunliffe is going to have to try harder rather than fiddling with a populist yet utterly impractical gst fiddle. After reading this Dotcom is looking wonderful, and he hasn't even set up a party yet.

I wonder if the left side of the media will pick up on this. Cunliffe and labour flip flopping!

Of course they've picked up on it, and the opinions are about as mixed as you'd expect.

It's hardly Cunliffe flip-flopping; it wasn't his policy to begin with. And of course Labour is flip-flopping. There are some serious arguments going on there, which are hardly private, and which many on the left are quite rightly annoyed about.

Is it really a flip flop when the policies have been dropped before by his predecessor; surely more of an arse/elbow situation than a flip flop?

Shows how anonymous David Shearer was as leader - even his own party have completely forgotten his policy promises.

And so the great 2014 lolly scramble begins!

Can't wait til we see how they will buy their South Auckland votes with my hard fought tax dollars. Not.

Capital Gains Tax, Financial service tax and an increase in the marginal tax rate back to 39% from $60k - all waiting to be implemented to fund the largess to the needy in South Auckland. Largess? I mean election bribes.

And GST to stay at 15%.

Capital gain tax? did things get cheaper as a result of GST increase?
Are you just asking for another property price hike?

Great shame about the $5000 tax free policy, this works well in the UK and gives low wage earners and new starters a real incentive. Here it would mean my 15 year old not having to pay tax for washing up in the local cafe, a disgraceful situation and a shame on the country!

Dropping the GST part makes sense on a practical level. As for dropping the $5k tax free threshold, his quote says it all - " I have been reassessing how to give Kiwis the best bang for their hard-earned bucks".

Here's an idea, why not let us keep our "hard-earned bucks" and decide for ourselves how to spend it.

But you cant be trusted to spend it "properly". Labour knows better than you do what you "need".

Far better for Labour to spend your money for you. They know better than you do what you want and need.

Best thing that Cunliffe could do to "help struggling Kiwis" is to get out of the way and make it easy for SMEs to employ (and fire) one or two extra staff - unemployment gone, dole payments slashed. Can't see that he will do anything other than add more complexity and cost and thus discourage the above.

The only good policy Labour had was taxpayer's first $5,000 of income tax free. It had another good policy in legalised euthanasia, but Cunliffe forced Street to remove her private members bill from the ballot. So Labour now how no good policy, and is set to only destroy the prosperity the NZ economy is working itself into by tax and spend. Just leave people with their own earnings, and get the state out of their lives.

Unpopular and outdated Labour Party Policies need to be omitted....signs of a new Labour Government in 2014 election.

Spending on "the poor" with mad abandon all in the name of "social justice" is so fraught with dangers - as a wise man once said "You cannot help the poor by destroying the rich"

That isn't going to stop Labour and the Greens trying.

wait til they announce 45c top tax rate.

The scramble and "vote buying" has started already - these clowns so don't get it.

I'm not looking forward to this election... buying votes with promises is the lowest form of political electioneering.
How about a Political party coming forward with policy that is good for all New Zealanders??? How about policies that are smart and fair to both rich and poor. How about policies that are good for the future of our country in the long term, instead of just planning for the next 3 years?
No Vision, No Strategy - just buy some votes then relax and run the country into the ground and increase your own personal wealth. At least the MP's will be rich at the end of their term running the country eh...

Totally agree. I want the John Key we had before he was elected. Where he had policy for the country. Not policy for his political future. The MMP system is making bold decision making impossible.

No matter what they do, they will be flogging funds from where ever they can get their hands on them, to redistribute elsewhere to the "tyre kickers" sad but a fact.
Instead of running the Country for the benefit for all of NZ'rs, and making it a great place to live and prosper for all of us, they will be pre occupied with the bottom of the Barrel, and be warned!! Head Office in the Northern Hemisphere will be running the show, and trying to get unfinished business pushed through, so that the bottom of the Barrel, will not be able to live their lives without the financial support/help of the Labour Government, they almost got it at the last term in office, but not quite!! and if they succeed this time round if they get back in, we will never ever get them out, so be warned people be warned.
It is the bottom of the Barrel that breeds like flies, so their population compared to the rest explodes, and when the voting numbers get up there, you will never get them down again, and we will become a third world Country, totally dependent on the Government for Survival, a real scary thought, Korea rings the same bells.
Think about it!!!

Hearing Cunliffe on Larry Williams' NewstalkZB shows what a huckster he is, denying he is a trader when it came to forging alliances. He described himself as a "planner" but was caught out by Larry Williams when he said he would be prepared to talk to Kim Dotcom, should he form his own political party.
He tries his best to project this persona of unflinching integrity - by the measured way he speaks - but his political pores secrete enough smarminess to soak a gym towel. We see Cunliffe for what he is -- says anything he thinks will boost his popularity.

What popularity..?? He has about as much street cred as Len Brown. How does it happen that you and I pay so much money to these two dimwits?? There ought to be a law against it.

Just woke up from a fantastic dream.

Labour decided to wipe Working for Families, Paid Parental leave and Interest free student loans and give tax cuts across the board to 20 cents flat.

They also made ACC cut levies by 70% and provide insurance from the return off their 25 billion fund or they would introduce competition.

All maori grievance issues were stopped immediately. The ETS charge on petrol was recinded and the smacking bill was reversed. Is this all true?????Maybe we have a leader for a change.

"This decision frees up around $1.5 billion per annum," Cunliffe said in a statement. Huh? It’s income already being spent by government that should you give it away you have to replace it. So there is no freeing up on any funds. This is the magician at the circus, and what a circus it will be Russell Norman in charge of finance and Cunliffe in charge of all else. Norman and Cunliffe can taste the Prime Minsters and Deputy Prime Ministers residence and all that goes with them, already and they will sell their mother’s to achieve their goal of running (destroying) NZ Inc.
We can only hope that apart from the Trade Union and Greens, the rest of NZ’ers will see them for what they are, 5 cent hucksters at the carnival

This I is gold for key. Will national be smart enough to respond with vision rather than thin promises.