While Labour said National is heading towards ACT Party-like austerity with today's tax plan announcement, ACT also piled on criticism of its frequent political ally - saying it’s unrealistic for National to both promise infrastructure while providing tax relief.
Labour’s finance spokesperson Grant Robertson said National’s tax policy was “ill-thought out”.
“National’s policy announcement today confirms how desperate and irresponsible they are when it comes to the economy,” he said.
“[National leader] Judith Collins’ unaffordable plan will lead to harsh cuts to public services."
He also criticised National for dipping into the $14 billion Covid-19 Response Fund, which remains unallocated after Budget 2020.
“It beggars belief that in the middle of a pandemic the National Party is planning to gut the money set aside to protect New Zealanders in case of another major outbreak of Covid-19,” Robertson said.
Prior to the announcement, Robertson this morning said National’s tax cuts would force it to “implement severe cuts” if it needed the ACT Party to form a Government after the election.
“ACT’s radical austerity plan puts popular programmes like KiwiSaver, Superannuation, the Winter Energy Payment and Working for Families at risk,” Robertson said.
His comments come as National unveiled it would slash income tax for 16 months to boost spending, if elected.
It could mean the average worker, earning $64,000 per year, would get to keep an extra $3226 over a 16-month period, with the policy estimated to cost $4.7 billion.
National’s finance spokesperson, Paul Goldsmith, said the $4.7 billion would come out of the Covid-19 Response Fund.
“We’ve allowed another $4 billion for potential spending, and then we’re working on the assumption we can use the rest of it to pay off debt.”
He said that would leave about $9 billion left to spend on the fund.
“Obviously, if we go into another heavy lockdown, we may have to adjust. But we’re obviously going to do everything we possibly can to avoid that.”
The party also wants to suspend Super Fund contributions and “eliminate wasteful spending like Fees-Free and KiwiBuild”.
Goldsmith assured core public services, including health and education, wouldn’t be cut under a National Government.
He said National would spend an additional $1.8 billion for health and education.
“It’s a temporary tax cut at the moment. Obviously, we’d love to be able to keep it permanently, but we can’t promise that.”
He said there may be room to adjust tax thresholds in future, which would have a more moderate effect.
Goldsmith last month also said that if National was in Government, it would aim to reduce net core Crown debt to about 35 per cent of GDP within the next decade. Today, Goldsmith said National was willing to be more flexible with its debt target and backtracked on the ambitious debt target.
He said the forecasts by Treasury and the state of the economy revealed in the PREFU showed the target was no longer possible.
Collins said the party wasn’t considering tax cuts earlier in the year, but had to reconsider after the second lockdown.
ACT: National ‘still trying to eat their cake and have it too’
ACT leader David Seymour said National’s policy of providing tax relief while promising large-scale infrastructure projects and other spending was “just not realistic”.
“National has today started to move closer towards ACT than Labour – but they’re still trying to eat their cake and have it too,” Seymour said.
“Hard-working Kiwis don't need tax cuts yo-yoing like we have seen with lockdowns. They deserve certainty.
“Most households budget down to the last cent. Is National telling parents that after 16 months they’ll have to cancel swimming lessons for their children when their tax cut is taken away?”
He said voters needed politicians to have “an honest conversation about debt”.
Robertson echoed Seymour’s criticism.
Yesterday, the Labour MP said National couldn’t “credibly” increase spending, reduce revenue and substantially reduce debt all at once.
Labour expects net core Crowd debt to be at about 46 per cent in 2030/31.
Greens: National 'gutting our crucial public services'
In response to the announcement, Green Party co-leader James Shaw said National's tax cuts would reduce the Government's spending allowance and risk gutting critical public services.
“Gutting our crucial public services to fund a temporary tax cut is completely irresponsible. Under this proposal, those with the least would suffer the most through reduced services, while those who are doing really well would just build up their wealth," he said.
“This plan would inflame the inequality this Government has worked so hard to reduce. Where the Green Party has a plan to put at least an extra $100 a week in the pockets of low income families who need it, National is proposing just $8.10."
Under the National policy, minimum wage workers would save about $8 a week.
When asked by 1 NEWS, Goldsmith said the policy “absolutely focused” on middle-income workers who earned about $60,000 a year.
“Those earning around $60,000 would get the maximum benefit in percentage terms,” he said.
“We think that’s striking the right balance in encouraging hard-working Kiwis to have more money to spend.”
He said the policy would make a “real difference” for middle-income families.
Other parties’ tax proposals
Labour is proposing a new top tax rate of 39 per cent for income earned over $180,000 if re-elected, which would impact about two per cent of Kiwis. Robertson estimated it would generate $550 million a year.
Currently, all income over $70,000 is taxed at 33 per cent.
Robertson said the policy is about "maintaining investment in important services that are so crucial for New Zealanders like health and education, while keeping tax rates exactly the same as they are now for 98 per cent of people".
Meanwhile, Green Party policy includes raising income tax on income over $100,000 to 37 per cent and to 42 per cent on income over $150,000.
Speaking to TVNZ1’s Q+A programme in July following the policy announcement, Greens co-leader Marama Davidson said “tax is love”.
“Tax is about making sure that everyone has enough to live, that we’ve got the public services,” Davidson said.
“We have an opportunity to re-imagine an Aotearoa that does take better care of all of our people, not just a few, and our planet and our living systems.”
As for ACT, according to data provided to Stuff today, Seymour said that under his party’s alternative budget, New Zealand would also return to debt levels at 35 per cent of GDP within the next decade.
Seymour also proposed a number of spending cuts, including abolishing the Government's Provincial Growth Fund, the One Billion Trees Programme and KiwiSaver subsidies.
He also wanted to cut benefit increases to match pre-Covid-19 levels, abolish increases to Working For Families payments and remove benefit changes in the Families Package.
Yesterday, New Zealand was officially confirmed as being in a recession after GDP fell 12.2 per cent over the June quarter – the second quarter of negative growth amid the Covid-19 economic fallout.