National’s back of the envelope $715 million tax calculation

Written By: - Date published: 8:58 am, September 25th, 2023 - 39 comments
Categories: grant robertson, national, nicola willis, same old national, tax - Tags:

New Zealand politics has been waiting with baited breath for National to release its methodology about how its tax on foreign purchasers (excluding Australians and Singaporeans and possibly Chinese) of luxury homes homes worth more than $2 million could earn $715 million in the first year.

There has been a certain level of incredulity about the figures, incredulity that I have shared in.

And the incredulity extended to a former Treasury Official whose previous job was to analyse these sorts of proposals.

The estimate by Michael Reddell was that the tax would raise $210 million in the first year, not the $715 million promised.

Reddell noted that National had not released its modelling.  Since then there has been a sustained chorus from the media asking for the calculations so that they can see if the policy actually has legs.

As I said 11 days ago if National’s calculations are robust then National should release them.  Otherwise it can expect this issue to dog it for the rest of the campaign.

Even occasional Standard commenter Matthew Hooton thought that the policy was bollocks:

“National’s tax policy was much worse than expected. It reveals a party undeserving of being taken seriously.”

Yesterday on Q&A Nicola Willis had the chance to give the media sufficient detail so that the viability of the policy could be properly investigated.  But this happened:

The look on Jack Tame’s face matched the look of every person who watched the show.

A $715 million in the first year policy being described in a couple of sentences and a basic maths calculation.  This really feels like back of the envelope policy.

National is treating us all like idiots with this policy.  Its refusal to release its workings and analysis about how the policy would work shows a level of contempt I am not sure I have witnessed before.

The scary thing is that if National is elected it will make the changes.  If it actually works house prices and inflation will go up.  If it does not work then National will cut and slash through every budget it can get away with.  We should all be very, very afraid.

39 comments on “National’s back of the envelope $715 million tax calculation ”

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  1. Mike the Lefty 1
    25 September 2023 at 9:13 am

    It all reminds me of the time in the 1970s when Rob Muldoon built a cult around himself as the economic wizard, partly because he had been an accountant and thus he saw himself as being superior to trendy lefty teachers (Rowling).

    It all came down with a crash following the failure of some of his Think Big projects. A couple of them were actually very progressive – particularly electrifying the railway main trunk line (the best thing National has ever done but I wish they had finished the job).

    We need less wizardry and more practical application, but National’s promises of pots of gold at the end of rainbows shows which way they are going.

  2. Ffloyd 2
    25 September 2023 at 9:21 am

    Why would we not trust a political party who is …ahem…’good with numbers and serious people’ …..Good with numbers! Little Johnny down the road is ‘good with numbers , and he is only 6 yr old. (Mythical) For crying out loud. Surely their financial geniuses should be a whole lot better than ‘good with numbers’ GGMS.

  3. dv 3
    25 September 2023 at 9:36 am

    From the stuff comentary on Aussie vs Wales rugby

    Some names have been changed

    Luxon (Kerevi ) is out of sorts. He finds the ball in his hands and doesn't know whether to throw a wide pass and charge into a carry. He does neither. He drops the ball without a Welsh hand laid on him.

  4. AB 4
    25 September 2023 at 9:51 am

    National are such great managers of an abstraction called "the economy" that they can easily do it on the back of the envelop – they are even allowed to do it without any envelope at all. Everyone knows this.

    What lies behind this is a myth that "the economy" is like a sort of machine. It has a single prescribed and correct way of operating. If you don't replace the oil and water or pay an attentive ear to any funny noises, it might cack out on you. National are seen as being like great mechanics, they'll keep it running properly on the smell of an oily rag and the blood of a strangled renter. It's a convenient myth because it removes the economy from any social context or purpose, i.e. it could be that most of us really need a different machine, or not a machine, but a tree.

  5. Ffloyd 5
    25 September 2023 at 9:53 am

    It’s a pity we couldn’t read Willis’s reckonings on that piece of A4 paper so she could prove that she is ‘good with numbers’.

  6. Barfly 6
    25 September 2023 at 12:11 pm

    All IMO –

    National is lying (not mistaken) – they know they are lying – they are perfectly happy to lie – National has a long history of lying and as long as it is profitable they will continue to lie.

    The National and Act Parties are the 'Ferengi' of New Zealand

  7. tc 7
    25 September 2023 at 12:22 pm

    Harsh Mickey, as a former Fonterra senior figure that's probably what passes there as robust analysis.

    Maybe she needs a milk carton to explain better.

  8. Roy Cartland 8
    25 September 2023 at 1:33 pm

    Here's a question. Is there a level of arm-twisting by powerful foreign states?

    Anecdotal, but a friend in the 80s was at a LP do and got a moment with Lange. He said that Lange told him that a US envoy of some kind had told him that there was a limit to what they'd tolerate. Nuclear Free sure, for now; but any kind of socialist moves and they'd tank the economy overnight, withdraw support and protection, basically destroy us. (Bit harsh, but the US does have form.) And that must happen all the time, if at all.

    What do you insiders know about any of this?

  9. tsmithfield 9
    25 September 2023 at 3:49 pm

    I think Labour's clamour over a supposed gap in National's tax plan being done as a major distraction so the media doesn't ask them how they will pay for all the promises they have been trollying out.

    • SPC 9.1
      25 September 2023 at 4:21 pm

      Supposed gap …. .

      Anyone not a complete moron knows that National will meet its budget gap via adopting ACT policies – and in the mean time, denies it has any intent to adopt those policies.

      Thus if the public is capable of remembering any of this deception, the chance of Luxon having a higher popularity rating 3 years from now are zero point one. And Willis won't last 3 years as a Minister of Finance.

    • Drowsy M. Kram 9.2
      25 September 2023 at 4:21 pm

      Is it only "clamour" though, if the Nats want to be in govt and can't show the working behind their flagship tax policy? If Willis isn't up to it (can't face the "technical numbers"), then how about that chap who used to run a govt-owned airline – he can count to 7.

      Tbh, it’s disappointing Willis can't show her working – it was a common enough instruction in my high school exams. I remember teachers saying that you could get some marks [votes] for showing your working, even if your answer was up the boohai.

      Could be that 'Willis working' wasn't a vote-winner in focus groups – for an impartial assessment, why not ask the ACT spokesperson for Education, Chris Baillie.

      Future Act MP held ‘climate hysteria skeptics’ meetings at high school
      [13 October 2020]
      David Seymour is quoted as saying Baillie would bring common sense to parliament.

    • Roy Cartland 9.3
      25 September 2023 at 4:23 pm

      That would be true if it were just Labour doing the clamouring. But it isn't is it.

  10. SPC 10
    25 September 2023 at 4:37 pm

    Meanwhile in publiclandia a lot of tenants are wondering how to afford the rent increases of the next three years without much prospect of wage increases (no NACT plan to increase MW much, if at all and the removal of the FPA industry awards).

    Some ideas, cater to couch surfing, share facilities with those parking a caravan or van in the street front, let someone sleep in a stretcher by the car in the garage, another in the car, backyard mountain tent (all of the above to stay a step ahead of the landlord).

    But ultimately the consequence of NACT's policies will be that the market will absorb the migrant workers because after resorting to these tactics for a few years, generation rent will give up and go to Oz.

    NACT’s policies do not add up for them because they were not designed to.

    • Belladonna 10.1
      25 September 2023 at 4:57 pm

      Some ideas, cater to couch surfing, share facilities with those parking a caravan or van in the street front, let someone sleep in a stretcher by the car in the garage, another in the car, backyard mountain tent (all of the above to stay a step ahead of the landlord).

      All the things they've been doing over the last 3 years, when Labour presided over the highest rent increases ever.

      https://figure.nz/chart/azFwYTVvUcrcxT3m-Cn6TyuSQBZ8Kacee

      • Roy Cartland 10.1.1
        25 September 2023 at 5:22 pm

        So you’ll be voting further left than TLP? Great, same. TPM and GP are good options.

      • SPC 10.1.2
        25 September 2023 at 5:48 pm

        when Labour presided over the highest rent increases ever.

        FACT CHECK

        Rents under National went from $300 to $410. Showing they moved fastest in the last term – 2014 to 2017 $350 to $410.

        https://www.opespartners.co.nz/property-management/historical-rent-increases

        In Labour's first term about the same ($70 to $480, $10 more more over 3 years one month off a higher base is not really an increase.

        Sure its been at a higher rate this past term. $95 to $585.

        I'll bet a chocolate fish now the rent increase under National will be higher 2023-2026, while wage increase in that period will be lower than under Labour (2020-2023).

        So rents will reach there most unaffordable level in our history in the next term.And it will be because National will not stop the rent increases but will slow wage increases.

        The Greens proposed a rent freeze to manage the cost of living spiral (no support from NACT or Labour) and have now moved or their current policy of a 3% increase pa cap.

        • Belladonna 10.1.2.1
          25 September 2023 at 7:40 pm

          Anyone renting is going to look at the increase from 2020 – when Labour had an unprecedented single party majority – and therefore total freedom to implement policies to control or limit rent rises.

          If they failed to do so in the last 3 years – why should we believe that they will do so now?

          As you, yourself, point out (reluctantly) in your FACT CHECK – this last term has been the highest rate (something you've carefully chosen your graph to not display).

          • SPC 10.1.2.1.1
            25 September 2023 at 8:11 pm

            As you, yourself, point out (reluctantly) in your FACT CHECK – this last term has been the highest rate

            Reluctantly, you insinuate – I noted

            Sure its been at a higher rate this past term. $95 to $585.

            And bet a chocolate fish it will be higher in the next term under National (and under Labour unless they adopt Green policy I'll add now). Reluctant, you're the one not disputing my assessment.

            something you've carefully chosen your graph to not display

            Are you serious? It was in the graph you supplied and I mentioned what it showed.

            The graph simply showed a wider trend 1994 to July 2021. And that was that two things influenced rent levels, incomes and house prices (influenced by demand and supply).

            If the rents rise because of market imbalance – and incomes are constrained then rent unaffordability will go higher than now.

            • Belladonna 10.1.2.1.1.1
              25 September 2023 at 8:26 pm

              So, if Labour were unable to fix rent-inflation between 2020-2023 (and indeed the rate increased), then why should anyone believe that they will do so between 2023-2026?

              • SPC …
                25 September 2023 at 9:25 pm

                They won't and neither will they under National, but under one incomes go up more and under they go up less. So under National unaffordability will be worse.

                However if Labour required Greens and TPM as coalition partners, there might be some policy to cap rent increases.

  11. Vaughn 11
    25 September 2023 at 6:32 pm

    Has anyone read or heard anything articulating National’s plans for the c. $2 billion annual contribution to the so-called Cullen fund? As we all remember, they stripped that fund of billions in contributions when last in government. My fear is this could again be used to prop up their tax plans to mask any deficiencies. If it hasn’t already been done, they need their feet held to fire in a public forum to explain their intention’s clearly.

    • SPC 11.1
      25 September 2023 at 7:06 pm

      National has intentions, ACT have policies.

      ACT would stop the payments into the Cullen Fund.

      Reprise.

      https://thebfd.co.nz/2023/09/18/the-cullen-fund-is-doing-well/

      • Vaughn 11.1.1
        25 September 2023 at 7:29 pm

        Thanks, SPC. I did see that article, but it doesn’t help allay my concern about whether National intend to repeat history. I’m of the view they need to be held to account about an aspect of the country’s future that is important.

      • Belladonna 11.1.2
        25 September 2023 at 7:47 pm

        Do you have any evidence for this claim?

        While both National and ACT have proposals to gradually raise the age of entitlement to 67 – I've not seen any policy from either to suspend payments to the NZ Super Fund.

        Nicola Willis made a commitment to continue payments – in April this year. I wouldn’t regard it as a guarantee – but a strong indicator of where their thinking is right now.

        https://www.nzherald.co.nz/business/national-rules-out-stopping-super-fund-contributions/WMY36YJHKNEIPG26M7KSR4G6KY/

        • SPC 11.1.2.1
          25 September 2023 at 7:53 pm

          Act wants to cut back on the winter energy payment (end the payment) KiwiSaver (end $500 tax credits for those paying in) and the NZ Super Fund (end contributions into it) as part of its alternative budget.

          Also end best start payments and first year free fees

          https://d3n8a8pro7vhmx.cloudfront.net/actnz/pages/2652/attachments/original/1620723316/15813_A_Budget_for_Middle_NZ_Document_%282%29.pdf?1620723316

          and also

          Pause minimum wage increases for three years

          (this would be around $40 a week less in the first year and $120 week less by the end of 3 years).

          • Belladonna 11.1.2.1.1
            25 September 2023 at 8:33 pm

            Thanks for the link.

            However, the rest of your posts this evening make it clear that you think this is immaterial – Winston Peters will ride in on his white charger, saving the country from the horrors of an ACT/National coalition.

            • SPC 11.1.2.1.1.1
              25 September 2023 at 9:44 pm

              I'd frame that otherwise.

              1. David Seymour has saved us from a National 35% ACT 15% coalition where he got to offer confidence and withhold supply unless he got ACT policy – when in a moment of hubris and over-confidence he declared his intentions.

              2. This took National to 40% and ACT to 10% and still falling.

              3. And scared some centrists from National to NZF raising them from 4 to 5%.

              4. Now Luxon can use Peters against Seymour, like Putin uses FSB supplied tea bags by window seats on planes.

              5. It's Luxon using Peters as his white charger, while pretending to want a NACT coalition.

              6. Even Key says it's not the game he played, but the game is constantly evolving and has to be played differently.

              7. NACT would be like the 1990-1993 government under MMP – one term.

              8. Key plays the long game – boil the frog. Seymour is an impatient opportunist grifter to be managed.

              9. National wants to play off ACT and NZF, so it can govern for the 10%. ACT and NZF illiberalism does not prepare us for the post boomer event 2040.

              10 That coalition does not deal with the issues before us – that Labour Greens and TPM are facing up to.

              The coalition of chaos

              ACT have never been in a coalition government.

              NZF have never lasted three years in a partnership with National.

              National's only past coalition government, one with NZF failed.

              National government 2008-2017 ruled as a minority government with support agreements with United, ACT and MP – it played them off against each other to have the major say.

              This ACT party has talked about denying supply if it does not get what it wants and NZF has prided itself on keeping parties on the right ACT, or left Green, out of government.

  12. Patricia Bremner 12
    26 September 2023 at 1:46 am

    Sadly I do think what you say is accurate SPC.

    What worries me is the hardship coming for those hit by this "Money is key" attitude of these jockeying fools full of hubris.

    Their distain for "the backroom boffinsangry", their strip mining- sell the silver mentality will beggar any resilience.

    When they hit the first calamity, the cupboard will be bare, as they will have rewarded the billionaires club, and devil take the hindmost… and bottom feeders.

    It will be a tragic farce, and there will be sorrow and regret. imo.

  13. jpwood 13
    26 September 2023 at 7:01 am

    Could we consider the fundamental lack of vision. We have an economy that over concentrates on selling houses to each other. That is failing as a viable means of generating wealth, so the solution is to sell houses to other people?

  14. Christopher Randal 14
    26 September 2023 at 3:35 pm

    The Herald has published another "what if we have a huge earthquake" piece today.

    I have no doubt that if one happens and causes 10s of millions in damage and severing communication and travel thoughout the motu National/ACT will not be able to cope.

  15. Clive Macann 15
    27 September 2023 at 2:36 pm

    Winston will put the kybosh on any of that policy.
    It goes against his grain in a big way.