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Labour promises tax hikes for high income earners

Labour says it will lift the top tax rate on New Zealand's highest income earners from 33% to 36%, if it leads the next government.

In its alternative Budget presented today, the party said that if elected it will introduce a progressive top rate of 36c in the dollar for those who earned over $150,000 a year. Currently the top tax bracket is 33c in the dollar for income over $70,000 dollars a year.

Leader David Cunliffe says the extra tax take would help a future Labour government to pay down debt.

Finance spokesman David Parker says Labour will also “clamp down” on tax avoidance by multi-national corporations.

Mr Cunliffe says the new top rate of tax would affect just the top 2% of income earners.

The new rate, combined with the introduction of a comprehensive capital gains tax, would allow a Labour-led Government to run surpluses and pay off "National's record debt" by the end of its second term in government, he says.

'Same old tax and spend'
National has issued its response to labour's policy describing it as the opposition's usual approach to public finances.

“After nearly six years in Opposition, all Labour can come up with is a re-hash of its failed old recipe of taxing more and spending more,” Finance Minister Bill English says.

“Labour want to increase taxes so they can spend more without any focus on better results. They are out of touch with New Zealanders’ expectations that the measure of good government is better results, not more spending."
Mr English says Labour’s "complex" capital gains tax would slap a new tax on 2.3 million KiwiSavers and on every New Zealand farm and business without addressing the real issues around housing affordability.

“As for the proposed new top tax rate, it’s just the politics of envy. It wouldn’t actually raise much money, it would encourage those who could do so to shelter money in companies and it would ignore the fact that these taxpayers already pay 22 per cent of income tax - even though they are just 2 per cent of taxpayers.”

Comments and questions

Labour sure are determined to demonstrate their complete unsuitability to lead Government.

At least they're consistently inconsistent.

it is about paying the bills somthing you people have forgotton about you cant live on no economic growth and debt for ever .

Fair call, except historically Labour use taxpayer money to buy votes, not pay bills.

Labour in office means an oversized government and poor financial management, taking away motivation of those with drive and freebies for those not necessarily deserving it.... as in the past.

Current Government staff levels are equivalent to what they were prior to National getting in.

What do you consider poor financial management? Is it taking on $60 billion debt, selling income generating assets for returns way less than the cost of borrowing?

Maybe you borrow and hope also?

And labour does not borrow, and hope?

Labour under Clark and Cullen lived on no new economic growth and increasing hidden debt for nine years. National have spent six years addressing this mismanagement and associated 'economic millstones'.

Just did a calculation, I earn $70k per annum, have a rental property and have kiwisaver account. I have 2 kids and married.

I am now $3k worse off per annum.

Its not really that bad.

Alot of people get paid way too much as an employee, and any increase in a tax collect from these people should be considered natural justice and fair redistribution. Ask any self employed person that, and they will agree.

Trusts have long been a vehicle for private business, including the splitting of income. It would appear consistent to raise the tax to the same rate as the higher earners. One can always set up a company within a trust to reduce the burden, but will have to retain earnings.

What seems to be overlooked are Charitable Trusts however. Some of the most wealthy use these as a smoke screen for the business activities. I would suggest a cleared definition in tax legalisation is needed to catch clear cases of avoidance.

The tax department should also levy a tax on overseas companies turnover, as its clear their internal accounting is playing games with us all.

Theres a saying 'if you earn it, you should pay it'. With the significant rise of inequality in this country, tax should be all about paying a fair share.

With earners paying 2 days out of every 5 days earnings to the State they are already paying more than their fair share. Your argument is absurd and perhaps you'll find a cursory glance at the Laffer Curve instructive.

There has not being a significant rise of income inequality in New Zealand. In fact income differentials have largely remained flat since the mid 90s and income inequality remains much the same now as it did in 1995. Do try to keep up. We've had enough of your socialist claptrap.

While inequality may not have grown in the past 15 years, which you say and I still doubt, middle management and executive pay is way out of sinc with the factory floor pay. Ask yourself how can a chief executives pay be 100 times that of workers at the entrance levels?

There shouldnt be this level of difference. These executive salaries are only driven by the non accountability of public companies, who are not spending their own money and generally provide a piss poor return to shareholders.

You need to do your own homework before calling me a socialist. Not that I have a problem with this, given I have been self employed for two decades, likely to fall into the 1% of NZers regarding high net wealth, while still volunteering my time to community projects when time permits.

Unlikely you, I recognise the value of fellow man, and that everyone should be given a fair go; rather than a hand out you are suggesting.. You wouldnt happen to be a money market dealer or advocate professional practitioner by any chance?

Twenty years, not 15, and it's not me saying it, it's Statistics New Zealand and the Ministry of Social Development who are saying it. I consider their research and reporting on the matter to be both robust and impartial, unlike the Labour Party's and its associated flunkies. And you are right, it was quite improper of me to call you a socialist. After reading the above it would have been far more accurate to have referred to you as a concerned chardonnay socialist of Herne Bay. And no doubt you've noticed my restraint. I withheld the hand wringing bit.

Where have you been for the last 7 years?
Inequality has increased faster than at any time in NZ history, thanks to the rapid rise of real estate values.

In other words redistribute hard earned income to breed more state dependent labour voters

Exactly!!!!! Can I challenge all of you here, if you are self employed it doesn't matter which Govt is in, they will take around 47% of you gross turnover, sit down with your accountant and work it out, as that is what my Accountant explained to me some 15 years ago so if you want to earn $2000 per week you need to turnover something like $4200 per week, and that was no easy task, as most high income earners or professional people, seem to think that a Tradesman running his own business is not entitled to do that, so they play games to screw your pricing to what they think it should be.
To be self employed is no stroll in the park let me assure you all.

The ordinary backbench MP will be pleased to know that Labour's tax increase threshold of $150,000 is just above their $147,800 per annum MP's salary!

an interesting assumption

As Marx said "From each according to his abilities, to each according to his needs". That worked out really well.

Short sighted silly stuff designed to placate the envious, most unlikely to increase the tax take, and certain to do more harm than good. Will they never learn!

If Labour really wants to clamp down on tax avoidance perhaps they can start with secret trusts or is that just too close to home? And the average Joe in the street is still saying ‘How does this help me?’ Labour, lost again!

How about a change in the tax free status of Nga Tahu and Tainui.

Totally agree same for certain charitable business's like Sanitarium and tax overseas entities like Google say a witholding tax of 15% on NZ turnover subject to adjustment after payment on production and agreement with IRD of accounts.

What a brilliant new idea. This would really propell NZ into a prosperous future. How could they be so ignorant.

How do they propose to "clamp down" on "tax avoidance". Perhaps these entities simply don't make much in NZ. Surely current transfer pricing rules and IRD action if required is sufficient.

look its not the rich that create jobs that is a pack of lies it is cunsumers that create the jobs an wealth etc. in Australia and other ferms would be still in business . it is CONSUMERS THAT create jobs and wealth . by the side it was a multi millionaire who told me that . warren buffet who would make you all look like under achievers also concurs . you the consumers it is called supply and demand .WE ECONOMISTS CALL THIS SUPPLY AND DEMAND OK .

Time to take your pills for today michael...

I think you'll find the rich spend more Michael. Which puts money back into the economy. It keeps people employed. It also means we can continue to support all those wonderful people who choose not to because they can't be bothered or think they are entitled to everything for nothing.

The present Government reduced taxes and then borrowed heavily to cover the deficit. That wasn't exactly bright either.

Taxes were never reduced, just shifted around. What was stupid was the borrowing to keep working for families and interest student loans. A pure vote buying programme.

defintion of insanity - doing the same thing & expecting a different outcome

Take that, rich pricks!

And that cutting edge 'ready to lead' political analysis has been proudly brought to you by the swivel-eyed foaming frothers of the Left.

Jealousy and envie at its best!

Greed will end up destroying this country's social fabric with more social problems and crime. I have seen this happen in other countrys I have lived in.
The only way to slow or stop the widening wealth gap is a complete change in the tax system and by bringing in a capital gains tax.
Of course National will not have a bar of this as the wealthy will always vote for them to increase their wealth at the expense of others.
Good on Labour for having the balls to at least do something!!
I voted National last time, not again.

Actually flat tax rate would be more productive fall all.

One of the main benefits of the last tax system tinkering was that it bought companies / trusts / high earning individuals closer in line with each other, and removed some of the weird anomalies that were creating distortions (and instances of avoidance) in the tax system.

Oh well. At least we will be able to rack up some fees restructuring clients if these clowns get in.

Restructuring for 3c? Pin ya ears back.

Trust me - 3 cents adds up on decent income streams

Maybe so, but if you were a high salary earner, you'd need to be $300k plus to justify faffing around with it. That'd save you gross $4500p.a. before structuring costs and ongoing admin. As anodday succinctly puts it, it might provide more fees but end net result would be minimal for most.

People do it though - they view marginal tax rates as simply unfair when they are already contributing largely to the tax take. Add $4,500 over say 2 terms and its worth it.

So if it not saving much doing that then equally a Labour Govt. would not be gaining much with a 3% increase.

That's part of the story. The other part is that every action taken by most people takes into account the tax effect. The higher the tax -the more it stops things happening. Simple Laffer curve stuff.

By my calc it is 8c, company 28c and individual 36c. Pretty good incentive to restructure there.

Absolutely correct, tax differentials will lead to restructuring. The way to increase the tax take is to build a governance structure and a business culture that encourages companies to come and setup shop in NZ and bring high paid employees into the economy. Increase the base, not increase the slice.

So which one of you is it. Penny or Hooper?

Yep, time to go back to using companies owned by trusts...paying directors fees for pocket money, rather than trust distributions...

Will they never learn they cannot defeat us

A great move to help force hard working motivated skilled people off shore. Not all high earners are actual business owners (eg wielded to NZ) , but people who smart business owners appreciate and use to create wealth and other jobs. Just what NZ needs !. Good one Labour.

If you want to turn the country back 40 years, vote labour. If you want bold change and forward decision making vote ACT.

The last time Labour increased the tax rate I talked to my accountant and, totally legally, ended up paying less tax. I am sure I was not the only one who did this.

It's a bit rich for National to paint Labour as a "tax and spend" party, given that they raised the fuel excise rates to pay for their bloated and unnecessary motorway building programme. Particularly since the motivation for the tax increase appears to be paying off the debt that National has spent the past 6 years accumulating.

At some point those who vote for a living will outnumber us who work for a living.

That scenario is almost here now. If you took government into account as tax consumers the ratio of those who provide and those who consume taxation is worse than 1:1

Having multi-tiered tax rates causes higher administration costs for IRD to police it and the end result is less actual spare cash for the government to use. It is not the answer. National just spent time simplifying the tax system to get rid of these issues. The only winners are the Accountants and Lawyers who charge for the services to setup structures to spread income so all income ends up on lower tax rates. It's just not worth it.
Ultimately it just upsets(punishes) professionals who have worked hard to become successful. Distribution of income through high tax and then income subsidies is a costly and stupid system.

Ah the politics of envy.
Obviously to encourage the talented and skilful to emigrate.

As I'm reading this drivel in support of higher taxes... 2% of God-awful Kiwis who earn too much... taxing higher earners more to help pay for those who don't work at all.... I'm thanking my lucky stars that I moved to Singapore a year ago and am certain I won't be back if Labour are ever in power again.

Yeah, but living in Singapore means you miss out on life's simple pleasures like being free to chew gum.

You're mistaken - you can chew gum in Singapore, you just can't buy it. And no, I don't miss finding the disgusting remnants on the soles of my shoes. Nor do I miss paying more tax in a month than I did for 6 months' work last year.

And living in Singapore means you get to save 45% of your salary each year - compulsorily. Has not impacted on living standards there - in fact, it has gotten better and better year after year for Singaporeans.

Contrast that with NZ where taxes have been going up decade after decade (GST was 10%, remember?) and the State tells you not to save - that buffoon Muldoon's national super legacy.

Yes but you live in a very hot crowded place with very little democracy if any. You might be paying very little direct tax. As always there is never a free lunch. They must be taking tax off you indirectly to keep the place running.

Well, for the likes of Melisa White et al, who can tolerate living in a social and political vacuum under a dystopia regime -- where daily life is often antiseptic -- in order to pay less tax, then, I guess it's a case of 'Each to their own'. But I opt for the freedom to buy gum, and chew it when I please. Not all, can endure the tacit pressure of the daily genuflecting to LKY and his son, in order to progress in Singapore.
Oh, and don't even think of performing an impromptu haka in public.

Vote for us and we'll take someone else to pay for stuff you want.

The NZ way. Take from success and reward failure

I think the majority of NZers want the following, but no party is willing to offer it for some reason:
1. Low taxes so there is reward for hard work. NZers are on the whole hard grafters or south east asian migrants. Both categories believe in reward for effort and low, but fair, tax. Labour don't get this. National don't articulate it well.
2. Fair taxation with sensible policies that create opportunities for all and balanced long term fiscal position and growth. This means removing our unhealthy, tax preferred, economic bias to unproductive real estate investment. National don't get this. Labour accidentally offer some policies that are right, but they don't really understand or articulate it.
3. A level local playing field with no preference for the wealthy who try to buy influence. Neither Labour or National get this as it is too easy for them with their noses in the trough.
4. Protection of our interests as NZers. This means encouraging only the foreign investment that adds value to NZ. ALL other countries do this successfully but for some reason we live within this false world that we believe we need to open ourselves up to offshore economic exploitation to be competitive. This is absurd and patently untrue. You need only compare Singapore to eg Bangladesh, or look at US restrictions on foreigners buying property (FIRPTA tax) to understand that smart foreign policy can be so much more productive than the dog's breakfast we currently have that only leads to property bubbles and crashes.
NZ First is the closest to the mark, but are too preoccupied with sensationalist stories trying to make Winston supposedly look "clever", rather than promoting sensible policy.
Why won't someone step up and give Nz an option we all want?

Excellent letter. The trouble is that policies that promote prosperity, independence and personal responsibility do not win elections, much to our continueing detriment.
I thought John Key was going to take the bold steps but that has not happened. He has become a very good politician but not a leader.

The biggest problem I see here is not the proposed increase to 36 cents on over 150K, rather should Labour get in they will be in a very weak political position within government and beholden to a raft of other small parties who will want a share of the government spend.

So these ideas - of so called fiscal restraint will simply not be within their control and the small amounts of extra tax that they think they may possibly get from this (assuming of course that people who will be caught by will do nothing to reduce their new tax position) will be nowhere near enough to pay for all that the Greens will want, that Mana will want, and or whoever else they have to join up with. This is the scary issue.

In the past we have had strong major parties in government with a few tokens to the onesies and twosies that make up the numbers but we are now facing a government lacking party control. Now this maybe a good thing but it is risky and indications are that it will be costly and not only to the rich who are best placed to duck and dive to avoid the shock.

The Middle will pay for sure as that is where the bulk of the tax base is.