How big will the tax hikes be?

Newshub reports:

The AM Show host Duncan Garner questioned Robertson on whether higher taxes could help pay for the spending. 

“No, this Budget is not about that. This Government has made clear that is not the direction we are going into. The election campaign is still to come. My focus has been squarely on making sure New Zealand responds, starts to recover and starts to rebuild. Those are questions for another day. We are focused on making sure we support New Zealanders through this.”

Pushed on whether he would rule them out, Robertson said: “The Labour Party’s policy will be released before the election.”

It is inevitable that Labour will hike up taxes if re-elected. They can’t pay for their spending without doing so. They’re not going to go into the election with any details of tax increases – instead they will try and get away with a blank cheque – where they say they’ll decide once the economic situation is clearer.

They’ve increased spending by $25 billion a year – and not just for one or two years – but basically permanently.

There is no way economic growth alone will close that gap and get us back into surplus. So after a couple of years of massive debt increases, Labour will turn around and say we need to hike up tax to pay for all this spending.

So what could happen to tax rates? Let’s assume $15 billion of their extra spending can be eventually funded by economic growth so they only put taxes up by $10 billion a year. What would that represent?

  • The top tax rate going from 33% to 63%; or
  • The bottom rate of 10.5% and 2nd bottom of 17.5% going to 25%; or
  • GST going from 15% to 22.5%; or
  • An asset or wealth tax of 0.7% on your assets

The idea that you could increase spending by 30% but not increase taxation is a fairy tale.

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