Tax policy from two sides of the political aisle
Given that either Labour or National are likely to enter into coalition agreements of some form with the Green Party and Act, respectively, and the tax policies of the two main parties are more ‘vanilla’, it is worth reviewing the tax policies of the two minor parties as this is where unexpected change may come from.
The Greens have taken the approach of increasing tax across the board. Their key policy is a 2.5% annual tax on net wealth above $2m ($4m for couples). This would apply to most forms of assets, with things like property and shares valued based on their market value. They have indicated that taxpayers would have the option to defer the payment of the wealth tax until the asset is sold, to assist those who don’t have the cashflow necessary to pay the tax. They also propose an
annual 1.5% tax on all assets held in private trusts to ensure taxpayers cannot avoid the wealth tax through sheltering assets in a trust. No minimum asset value exists before the tax applies, meaning those who own an average family home in a trust would be caught by the tax, despite having net wealth below $2m.
In contrast, Act is looking to reduce taxes levied on assets. Act has opposed the bright-line test since National introduced it in 2015, with Seymour describing it as an “acorn of a capital gains tax”. Currently, any residential investment property that is sold within 10 years of purchase (that is not a ‘new build’) is subject
to the bright-line test and any capital gain will be taxed. They plan to abolish the test, as well as reinstating interest deductibility for residential rental properties.
When it comes to marginal tax rates, the Green Party are looking to introduce a new top tax rate of 45% on income above $180,000, as well as reducing the brackets such that the 39% rate kicks in at $120,000. A tax free threshold would also be introduced between $0 - $10,000. Act wants to simplify things, eventually reducing down to a two-tier system. Income from $0-$70,000 would be taxed at 17.5%, and all income above $70,000 would be taxed at 28%. They note this would result in low and middle income earners becoming worse off in many cases, so would also introduce a specific tax credit for these earners to
offset this.
Other notable policies are that the Greens would increase the corporate tax rate back to 33%, and Act would divert emission trading scheme revenues
into an annual tax refund for every New Zealander. Looking at these policies, a clear dichotomy exists between the two parties. Execution of the policies
will be tempered by their respective coalition partners, but as more voters stray from the centre who’s to say what will make it through to tax policy
when the new government is formed.