National calls for tax cuts

The opposition says it would cancel every new tax brought in by Labour to help control increasing living costs, but the government argues that will make things worse

Mōrena and welcome to The Bulletin for Monday, March 7, by Justin Giovannetti. Presented in partnership with Z Energy.

In today’s edition: Decline in Covid numbers could be premature; Interislander crossings cancelled; refugee numbers swell from Ukraine; but first, why Christopher Luxon wants to cut your taxes.

National leader Christopher Luxon says the government should rein in spending. (Image: RNZ / Samuel Rillstone)

Luxon promises tax rollback if National wins government.

With New Zealanders facing increasing costs for housing, at the pump and the supermarket checkout, National’s Christopher Luxon announced in his first state of the nation address that a tax cutting programme is needed. The NZ Herald reports that if National wins next year, Luxon will cancel most of the new taxes introduced by Jacinda Ardern’s Labour government and adjust income tax rates for inflation. That would mean cancelling the new job insurance programme, the regional fuel tax, a light rail tax, the bright line extension and resuming interest deductibility for rental owners.  

The issue of income tax bracket creep. 

Tax brackets have not been adjusted in years, which means as a worker’s pay increases with the rate of inflation, they could be pushed into a higher marginal tax rate. This has been identified as a problem, especially for lower-income New Zealanders. Stuff wrote about the issue a few weeks ago. Someone on the minimum wage now only needs to work 44 hours a week to end up in the 30% tax bracket. A minimum wage job probably shouldn’t be in the middle tax bracket. National’s solution is to increase the thresholds for each bracket based on the last four years of inflation. So instead of starting at $48,000, the 30% bracket would start at $53,500. That could mean significant tax cuts for people. Labour has said it doesn’t want to adjust the brackets.

Inflation is at a three decade high and Russia’s war will worsen it. 

Luxon has argued that Labour has created a divided society, with some getting ahead and others falling behind. Two weeks ago he said in a major speech that the protesters outside parliament were a symptom of that division. Now he’s following a line of attack honed by his finance spokesman Simon Bridges, that government spending is driving inflation. As RNZ writes, Luxon said a cost of living “crisis” is the country’s biggest problem after Covid-19. His argument is not without many critics who say the current bust of inflation is global, with government spending having no impact on petrol prices topping $3 a litre. It’s unclear how removing the top tax rate will lower food prices. Brad Olsen, an economist, told Newshub that a “perfect storm” is hitting the economy.

What would National need to cut?

National says all the tax changes would cost $1.7 billion, a fraction of the $6 billion in extra allowance the government gave itself for the 2022 budget to spend on health and climate change. One News reports that Luxon said there would be no cuts in health and education. In a statement, finance minister Grant Robertson disputed the opposition’s numbers and said it would need to slash spending. “The reality is that Christopher Luxon’s proposals will just make things worse. There will be more congestion on Auckland’s roads, it will be harder for first home buyers to buy a house and those on low incomes will fall further behind,” he said. The minister didn’t provide examples of where he though National’s math was wrong.

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Too soon to celebrate drop in Covid numbers: Rod Jackson.

The daily count of new infections fell sharply over the weekend, but those numbers are suspect, according to experts. Epidemiologist Rod Jackson told RNZ they should be taken with a “grain of salt.” The numbers could reflect growing fatigue in terms of self-reporting rapid tests and people with symptoms not going forward for a test. Covid-19 minister Chris Hipkins told Q+A that the number of cases in the community is likely much higher than the official tally of infections. Recent models predict the actual number of cases could be five times higher than detected. The outbreak isn’t expected to plateau nationally for a few more weeks.

The Spinoff’s Covid data tracker has the latest figures.

More refugees from war in Ukraine as Russian army advances.

The first week of Russia’s war in Ukraine didn’t go according to plan. The Russian army faced stiff resistance on the battlefield while president Vladimir Putin is now overseeing an economy smashed by unprecedented sanctions. However, Reuters reports that over 1.5 million Ukrainians are now refugees. While the economic hammers continue to rain on Russia, with Visa and Mastercard now blocking the country, the Russian army is slowly capturing ground in Ukraine. According to The Guardian, Putin compared the economic sanctions to an “act of war”. He also threatened to dismember Ukraine as a nation in the future. His forces are now hitting the country’s cities with punishing strikes. On Friday, Russian forces set fire to a building during combat at Europe’s largest nuclear power plant. I’m still grappling with the thought we now live in a world where armies are fighting around nuclear power plants.

How to increase competition between supermarkets.

The commerce commission will be reporting back on Tuesday on how it wants to increase competition between the country’s grocers. Stuff reports that the $22 billion grocery sector is on edge to see what the commission recommends. In a draft report in July (I wrote about it at the time), the commission found the current system isn’t working and left itself significant room to recommend changes. It could go so far as to call on the government to break up the Countdown and Foodstuffs duopoly.

Thousands could be stranded as Interislander sailings cancelled due to crew shortages caused by Covid.

Coben Storer told the Dominion Post that he could spend days waiting in his car in Wellington due to cancelled sailings. He’s been warned by the Interislander office that passenger sailings across the Cook Strait might not resume for a week as so many staff are now sick most crossings can no longer operate. Some departures are still operating but as freight-only runs. The cancellations impacted over 900 passengers on Sunday alone. Bluebridge has reported some crew sick with Covid but said it hasn’t had an impact on operations yet.

Wellington protesters now at Government House.

With some members of Wellington’s weeks-long occupation now spread around the capital region at campgrounds and alongside roads, dozens appeared outside Government House yesterday and called on parliament to be dissolved. The governor general’s office told the Dominion Post that she has no plans to dissolve parliament. That is unless the prime minister requests it, which likely won’t happen until late 2023 when it’s election time again.

Give us your thoughts on The Bulletin’s updated look.

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Cricket great Shane Warne dead at 52.

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