Steven Joyce has put Labour’s numbers through the Treasury calculator (found at http://www.treasury.govt.nz/government/fiscalstrategy/model) and found that it is far worse than even Labour were revealing.
Labour’s own numbers revealed that their tax plans would lead to greater deficits and debt for the next six to seven years. They desperately did not want people to know this, so left this document off their website.
But their own numbers were inflated, such as as imaginary $300m a year from reduced tax avoidance (despite them wanting to have an 11c gap between the top tax rate and the company rate). They also failed to take account of interest costs, and over-estimated revenue from some of their measures. The numbers on the CGT itself were largely accurate, but on the rest of their package were crap.
So what does it mean? It means Labour’s package will result in less tax revenue until 2024! And then when you take account of the interest on the extra borrowing, it will result in an extra $15b of borrowing between now and 2025.
But it does not end there. This assumes that Labour will keep to National’s spending track. That they will not pledge one cent extra in spending than National. That there won’t be one cent extra for early childhood education etc.
So the $15b of extra debt is just on the revenue side. Wait until they release their spending plans and see that number increase exponentially.
The problem is not Labour’s CGT per se. The problem is that their promise to remove income tax on the first $5,000 of income is unaffordable. It has no fiscal credibility and can only be funded by increased borrowing.Tags: CGT, Labour, tax