Source: CTU
National leader agrees CTU numbers are right, but still no fiscal plan
National Party Leader Christopher Luxon admitted on Morning Report today that analysis by the Council of Trade Unions showing the cost of its tax plan blowing out to $8.2 billion was correct.
“We welcome Mr Luxon’s admission today that our numbers are right, but it is extraordinary that it took our work and a RNZ interview for this to be flushed out,” said CTU economist Craig Renney.
Mr Luxon said ‘I think that’s about right’ on Morning Report when asked about the CTU analysis of the blow out. That suggests he doesn’t actually know what the cost of his package is.
“Why are voters still denied a fully costed and audited plan from the Opposition when the election is only five months away?
“Mr Luxon needs to say how these now more expensive tax changes will be funded. It’s hard to see how National can afford the tax changes without cuts to core services like health and education.”
The CTU analysis shows the cost of the National Party’s promised changes to tax brackets has blown out by $1.5 billion – to a total of $8.2 billion over four years. On top of this, National has also committed to another $890 million annually in tax breaks for landlords.
The analysis incorporates new forecasts from Budget 2023 and has been independently verified by tax consultant Terry Baucher, director of Baucher Consulting.
“National has the Budget data. As we said yesterday, there is no need to wait until the Pre-Election Fiscal and Economic Update. They can do a line-by-line review of the Budget and tell voters how their numbers add up.
“The National Party tax plan favours those on higher incomes and landlords and will undoubtedly lead to deeper cuts to public services to fund them. It’s time National was upfront with voters.”
Background
National said its tax threshold adjustments would cost $1.66 billion annually when announced as policy in March 2022. This represents $6.64 billion over four years. The revised cost is now $8.2 billion – a $1.5 billion blowout.
National’s costing was based on 2021 wage data. The new analysis, based on Treasury’s Budget 2023 wage growth data, conservatively calculates the cost of the threshold adjustments at $1.94b in in 2024/25, rising to $2.14b in 2027/2028.
Methodology
The analysis of the cost of threshold adjustments uses wage growth figures from the Budget 2023 Economic and Fiscal Update to calculate the cost of raising the income tax thresholds as announced by National last year. National has since made comments about raising the thresholds further to account for subsequent inflation but has not released firm policy on this. This analysis also, conservatively, does not account for population growth, or account for in-year wage growth. The cost of the policy is likely to be higher as a consequence.
Landlord tax changes: National has never released a public costing of restoring tax breaks for landlords. It has also said these policies could be phased in over time, although Christopher Luxon said interest deductibility would be restored “immediately”. The annual cost of restoring the landlord tax breaks that Labour has removed would be $890m, based on Treasury’s estimates when those policies were implemented.
National’s estimated fiscal impact of the tax bracket changes are taken from the “Income Tax Inflation Reset – Fact Sheet” released in March 2022.
