Despite a recent Treasury report confirming the country had recorded a smaller-than-expected budget deficit of $9.7 billion thanks to boosted tax revenue collection and slower growth in spending, Finance Minister Grant Robertson has said that there are no plans by the government to cut the tax rate for top earners. This deficit result is about half of what was forecasted in the 2022 Budget.
Robertson’s comments are contrary to a proposed plan by the National Party led by Christopher Luxon, which has said they will seek to cut the tax rate for top earners if elected into power during next year’s general elections. Robertson has termed cutting the tax rate for top earners as completely crazy, pointing to the impact a similar policy proposal had on the UK economy only recently.
This similar proposal in the UK was shelved by British PM Liz Truss after severe backlash from the public, lawmakers, and investors. Despite the U-turn, some within the conservative and labour parties indicate that the plan had already damaged the government’s economic credibility and the economy.
Robertson added that though there was a smaller-than-expected deficit, now was not the time to spend the gains on tax cuts. He said that the priority should be on investing in public service, infrastructure and supporting Kiwis. He also noted that the world was still facing uncertainty after the pandemic and conflict, and that the National Party’s proposals did not seem to add up.
Luxon has however said that the country’s economy was in a different situation from that of the UK. He said that the Labour government was spending at will, tax collection was on the rise, and debt was increasing at the same pace as interest rates. Luxon added that lowering the tax rate on top earners would provide an incentive in attracting foreign engineers and surgeons. In face of the end to cost of living payments, Luxon expressed confidence that adjustments to the tax thresholds would be a better move.
The country’s largest trade union is also raising concerns over National’s proposed plans to cut some 14,000 public service jobs. This is expected to contribute towards the party’s $3 billion tax cut package and result in a more efficient public service. Public Service Association (PSA) president, Benedict Ferguson wants Luxon to clarify what services would be cut under this plan, at a time when he believes the public services are already running efficiently. He noted that the growth in the public service was due to underfunding by the previous regime and a need to keep up with population growth. Nevertheless, he reiterated that there was a delivery of high-quality public service and questioned where Luxon expected the 14,000 workers to go.
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