National’s top-rate tax cut plan ‘totally crazy’ – Robertson

Treasury Secretary Grant Robertson has made it clear that there will be no major tax reforms for the remainder of this term as the National Party proposes cutting the top tax rate.

National Party leader Christopher Luxon is determined to cut taxes on those best paid when they take power in next year’s general election, despite a similar plan sparking unrest in the UK.

Robertson told Morning Report that while it was gratifying to see the government’s books showing a smaller-than-expected deficit of $9.7 billion, now was not the time “to waste that on tax cuts.”

“Our priority … is investing in public services and investing in infrastructure and supporting New Zealanders by putting ourselves back in surplus. That is a much higher priority for me than tax cuts. I am not considering any tax cuts during this time.”

The National Party said the government’s treasury is flooded with incoming money and needs to find room for cautious tax relief.

But Robertson said the world is still going through uncertainty from Covid-19 and conflict.

“At a time like this, cutting the top tax rate is completely insane.

“We’ve seen in the UK the impact that kind of policy would have and there are billions of dollars that the National Party would have to find, on top of, I could say, various spending commitments that they make. I don’t think their proposals are right .”

He believed the government had done well to keep the balance against the backdrop of the pandemic and global conflict, but said it was time to “consolidate things and cut our clothes”.

“Every minister knows that, we know that our government spending will fall to about 30 percent of GDP, we did well to spend up to 35 percent of GDP in Covid to keep people in work, to get through the health response.”

Bagrie Economics economist Cameron Bagrie supported the cautious stance, saying that the better-than-expected financial position should not be seen as a license for a package of major spending or tax cuts.

While the government’s latest bills were positive, the country was heading for a more difficult period in the coming years, with the party that wins next year’s election would have to lead a tight fiscal ship and avoid cotton candy economy, Bagrie said.

“No more pouring money into an inflationary bonfire, whether through tax cuts or spending increases.”

Robertson said it was possible to make changes to the tax system before the surplus was reached – as National suggested – but warned any government should be absolutely sure of their progress before committing to it.

“What’s important in any kind of change in the tax system, I think, [is they] should be those who support low and middle incomes rather than those who earn [the most].”

It has been the government’s priority to reach a surplus, which is expected in 2024-2025, but to do it faster would risk “substantial cuts” in spending in areas such as health, education and housing. , he said.

“We have mapped out a path to surplus and we want to ensure we continue to make progress on that path.”

Looking ahead, the Labor Party has not yet announced its tax policy for the 2023 elections.