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Labour's tax promise 'politically timid' - Fran O'Sullivan

Labour's upper tax rate promise is "politically timid" and a rethink is needed in New Zealand as the country faces huge debt levels, says NZME's head of business Fran O'Sullivan. 

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NZME's head of business Fran O'Sullivan and economist Shamubeel Eaqub discussed tax and the economy. Source: Q+A

O'Sullivan and economist Shamubeel Eaqub discussed tax on TVNZ'1s Q+A panel, after Labour this week promised to introduce a new tax bracket of 39 per cent on income earned above $180,000, if re-elected. 

"I think they could have gone much further, the threshold doesn't capture MPs for example," O'Sullivan said. "It's very much like the people in Parliament against capital gains reforms, a lot of them have investment properties of their own."

"We have huge debt out there, we have the country just piling on debt to sustain livelihoods, and I think we really need to rethink things."

Eaqub said that New Zealand had been so focused on the pandemic response that a conversation around tax policy had not taken place. 

"I think they're being very careful to not spook the horses and hopefully they're thinking this policy will last a change of Government in the future.

"My sense is that this is not the time to be introducing wholesale, big changes to tax policy because people wouldn't want it to be the focus."

"But come the election next time (2023), it has to be a central pillar because we're going to take on this huge amount of debt and we have currently no articulated plan across the political spectrum of how we're going to deal with it."

He said the housing boom amid a recession was not surprising due to low debt levels and record amounts of Kiwis returning.

"We still have to have that wider conversation around capital gains and wealth taxes."

O'Sullivan said no political parties were showing courage on the issue of tax. 

"This is an election where everyone is promising as little as possible because they want to scoot over the line. 

"Fundamentally, at some stage we're going to have to ask, where is the revenue coming from?"