National has reverted to type and in a predictable policy response to just about any problem it sees has promised tax cuts.
Yesterday in his state of the nation speech Chris Luxon promised to reverse Labour’s regional fuel tax, the proposed light rail tax, the extension to the bright line test, interest deductibility on rentals, as well as the new 39 per cent income tax rate and the proposed job insurance scheme.
If in power National would also adjust the bottom three income tax thresholds to account for the inflation seen in the last four years.
The Regional Fuel Tax as applied in Auckland is anticipated to raise $1.5 billion in the next decade. This unlocks a further $4,3 billion of Government spending. Doing away with it would knock a big hole in the $31 billion Auckland Transport Alignment Project spend and put us back into the situation, where we were in 2017 there was a $4 billion funding shortfall. This is the ATAP that the fiscal geniuses in National signed off on.
And it is strange but National has fought all the way Auckland’s Regional Fuel Tax but its MPs still show up to the photo opportunities presented by ribbon cutting events for projects that rely on the extra funding.
Doing away with the proposed light rail tax will do nothing for current cost of living pressures or for that matter congestion. The tax is not in existence yet and is designed to be a value capture tax so that when property values along the route increase, at some stage in the future where a portion of that increase is realised by way of capital gain. Private land owners will benefit from possibly the most significant public project since Julies Vogel started building the National Rail system. National appears to want to kneecap the project every chance it gets. It prefers that we rely on gas guzzling cars that will only pave the way to some dystopian world wrecked by climate change than build a project that will transform Auckland for the better.
The extension to the bright line test as is the bright line test and the removal of interest deductibility on rentals are having a significant benefit. A combination of policies and events, higher interest rates, a large number of new builds coming onto the market and landlords exiting the market has caused the banks to predict a 6-7% house price reduction in the coming year. Why National would do this while at the same time as complaining about increasing housing affordability is beyond me.
Particularly in relation to the removal of interest deductibility Treasury has said this:
We expect the removal of interest deductibility will have a material impact on house prices. Without this tax change we would have forecast an increase in house prices of 34% over the forecast period. Due to the removal of deductibility we revised our forecast to around 14%, a downgrade of around 16%.
And reversing the 39% new top tax rate will help those earning over $180,000 of which there are not many.
This cut and preventing tax creep will apparently save $1.7 billion a year. And the proposal is heavily weighted to the wealthy.
National’s rhetoric is deceptive. Luxon in his speech said:
Even after accounting for the $1.7 billion cost of these tax cuts, the remaining $4.3 billion would still be the biggest allowance for new spending initiatives ever. Or Robertson could even use some of it to pay down debt – but that’s not really in Labour’s DNA.
The $1.7 billion is the cost of reindexing tax rates back to 2017 levels and takes no account of the cost of the further tax cuts proposed. And to keep Auckland’s Transport projects on track a further $4.3 billion will be required to be found. National’s sums do not match up.
This is not the first time it has engaged in misleading rhetoric about tax cuts. Remember back in 2009 when they claimed that tax cuts they implemented would be fiscally neutral?
At a time when the country is reeling from a Covid surge and buckling down to address climate change the policy makes no sense. Trust National to seek to rely on personal greed and anti government rhetoric to try and curry support.
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