February 2019

In his state of the nation speech delivered at the end of January, National Party leader Simon Bridges explained that his party will offer ‘rolling tax relief’ to help with increased expenses.

“New Zealanders’ incomes are struggling to keep up with the rising cost of living because this Government is imposing more red tape and taxes,” Bridges said.

The plan for tax relief comes as the National Party aims to put pressure on the current government’s tax plans, its decision on whether or not to proceed with introducing a ‘controversial’ capital gains tax.

The current Income Tax Act sees New Zealanders paying $10,000 more tax per household than they would under the National Party’s proposed plan. On top of that, the current plan sees those on an average income being moved up to the top tax bracket by 2022.  

“The Government is taking more than it needs, only to waste billions on bad spending," Bridges said.

The National’s plan links tax brackets with inflation, ensuring taxes are adjusted every three years to be in line with changing cost of living. This strategy would allow New Zealanders to keep more of what they earn, helping people cope with higher costs. The threshold would be adjusted based on the Treasury’s advice.

Bridges argues this change will address the "bracket creep", which sees New Zealanders being moved into higher tax brackets without a real rise in income.

"Assuming inflation of 2 per cent, someone on the average wage would be NZ$430 a year better off after the first adjustment, $900 after the second and $1400 after the third.”

Based on these estimates, the first change would save taxpayers an extra NZ$650 million a year. 

The party would include a veto clause in the plan so the Government at the time could withhold changes if there is a good reason to do so.

Criticism of the plan

Despite Bridges arguing the government can afford the tax cuts “by managing the books prudently and spending wisely," Finance Minister Grant Robertson has questioned this claim, stating that the National Party has “some serious explaining to do about how they're going to afford this.”

Robertson says the NZ$650 million tax cuts will go on top of the NZ$30 billion the National Party’s Amy Adams will need to find to cover her debt targets, expenditures the Nationals won’t tax, and the “hundred of millions of dollars more on teachers' salaries” promised by the National Party member Nikki Kaye. To Robertson, the plan “doesn’t add up.”

Moreover, for the average earner, the tax cuts will be around NZ$8 per week in 2021 – and for some, the tax cuts may be as low as NZ$1 per week. Robertson questions whether this amount would be worth it for the taxpayers. "For the cuts to services that would be needed to pay for it, this is small change" he says.