New Zealand Election 2023
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New Zealand will hold a general election on Saturday 14 October 2023. Voting starts on Monday 2 October.
This page looks at the election and the policies of the main political parties from a human rights and Basic Income perspective. The page compares the Basic Income policy and tax changes of various political Parties. The universality of payments and the equitable distribution of wealth are considered with particular emphasis on Basic Income payments, universal services, and equitable taxation changes.
This page does not consider all aspects of any party's policies. Anyone intending to vote in the election should undertake their own investigations, consider other aspects and policies and make their own decisions based on their knowledge and understanding.
Basic Income and Universal Basic Services, such as free public education, free medical care, and other universal services provided by the government are regarded as complimentary, not mutually exclusive. Boosting universal services, such as providing free or subsidised dental care for adults, may give both individuals and families more financial relief than changes to taxation, and provide better targeting of government resources to an area of need, boosting the overall well-being of the nation. Similarly, a Basic Income paid to all will provide better targeting of government resources to those that need it the most than tax cuts that invariably provide larger cuts for the wealthy than for those on low incomes.
While tax cuts can provide some short-term relief to some individuals, tax cuts that are not carefully targeted toward those who need them the most, give a benefit that is often short-term term as prices will rise to eliminate any gains within a year. Broad tax cuts invariably result in reduced government income and are likely to be followed by cuts in government expenditure, and cuts to government and universal services that will result in people being worse off. Cuts in government expenditure are invariably followed by economic downturns.
On this page
The following are introduced or discussed on this page. Scroll down to read or follow links to other pages.
The purpose of government
Government in New Zealand.
The economic situation in New Zealand
The policies of the political parties
The Opportunites Party (TOP)
The Green Party
Te Pāti Māori
New Zealand First
The purpose of government
The primary purpose of government is to ensure and enhance the well-being of all of a nation's people, not some at the expense of others. To achieve this, governments will act to ensure:
law and order, justice, and protection against harm
protection against invasion by malevolent forces
good quality education and health, and
an adequate albeit basic standard of living for all citizens and
equitable distribution of wealth
Many of the requirements for a government to achieve these objectives are outlined on our United Nations page.
To maximise well-being governments should ensure efficient management of government resources. This includes the management of the distribution of funds.
The more efficient a government is, the more it can achieve with the income it receives from taxation.
Government efficiency is maximised and intervention minimised when payments are made to all on an equal basis with broad targeting achieved with an appropriate tax system that ensures that those who have the most pay tax in proportion to their ability to pay.
In contrast, narrow targeting of benefits to individuals requires a greater use of government resources and this results in more and less efficient government.
New Zealand Superannuation is a good example of an efficient system. Taxable payments are made to all on an equal basis so those with the highest incomes will pay tax on the income received from New Zealand Superannuation at their highest marginal tax rate. This provides broad targeting of the payments to those most in need. Government administration costs for New Zealand Superannuation are minimal. Money paid out is spent by those who receive it and taxes ensure the money paid out is returned to the government over a number of cycles. For more details see our New Zealand Superannuation page.
When money is collected as taxes, those who have the most should pay more in taxes than they receive from the government in payments while those who have little should receive more from the government than they pay in taxes.
Governments should avoid actions that transfer wealth from those who have the least to those who have the most.
Government in New Zealand
New Zealand has a unicameral parliament with a mixed-member proportional (MMP) voting system and a parliamentary period of three years. Although there are two larger parties, Labour, centre left, and National, centre right, most elections under the MMP system require a coalition between one of the larger parties and a smaller party in order to form a government. This has sometimes led to minor parties having disproportionate influence in government.
The economic situation in New Zealand
Past attempts to reform New Zealand's economy have led to a growing disparity between rich and poor. Gross domestic product grew by 35% between 1982 and 2011. However, almost half of the increase went to a small group who were already the wealthiest in the country. The average income of the top 10% of earners (those earning more than $72,000) went from $56,300 to $100,200, almost doubling, while the average income of the poorest tenth went from $9,700 to $11,000, an increase of just 13%!
The top 1% of the population now own some 16% of the country's wealth and the richest 5% owns 38%.
In contrast, 50% of the population, including beneficiaries and pensioners, earn less than $24,000.
Those on the lowest incomes struggle to make sufficient income to pay for food and accommodation. Households often have two adults working long hours just to ensure that they can meet basic requirements.
From this, we can see that there is a need for the government to enhance the well-being of those on the lowest incomes but there really is no need for any government to enhance the incomes of the wealthiest sectors of the population.
While there are many in the top 50% of the population who feel that life is financially difficult, the major reason for this is the shortage of housing related to the failure to increase the housing supply to match population increase. This shortage has led to increased house prices and increased rental rates. Increasing the housing supply is the best way to ease both house and rental prices. Simply providing more money to people with incomes in the middle range without increasing the housing supply is likely to lead to corresponding increases in both house prices and rental charges.
Governments create money and distribute it to their citizens in order to provide a means of exchange. However, the circulation of money and trading invariably result in some individuals accumulating more money than others. The more money an individual has, the easier it becomes to accumulate more. Unchecked, all money would accrue to a few individuals while the remainder would live in poverty.
To ensure that money retains its value, governments limit the amount of money in circulation. They do this through taxation. The most equitable way to tax people is to tax them in proportion to the amount of money they have and pay money to everyone equally in the form of a Basic Income. However, rather than tax wealth, governments have traditionally taxed incomes and expenditures.
New Zealand has a five-stage progressive income tax system. Income up to $14,000 is taxed at 10.5%, and income from $14,000 to $48,000 at 17.5%. From $48,000 to $70,000 the rate is 30% and from $70,000 to $180,000 the rate rises to 33%. All income earned over $180,000 is taxed at 39%. The average rate that a person pays, the effective tax rate, is always lower than the rate that a person pays on the last dollar they earn, the marginal tax rate.
The current tax rates were applied from 1 October 2010 except for the 39% rate that was introduced in 2022. Apart from the 39% rate, tax brackets have not been adjusted for inflation since 2010 resulting in bracket creep". This means that as incomes have increased without adjusting the income tax brackets, taxpayers have ended up paying a greater proportion of their incomes in taxes. This leads to the argument that tax brackets should be adjusted to correspond with inflation. This assumes that the tax rates and brackets were correct when they were set, but they were in reality a matter of debate at that time.
For the 2023 election, it would appear that all political parties considered here, except Labour, are proposing to either alter the tax brackets or both the tax brackets and tax rates but with different objectives.
The Maori and Green parties are both proposing a reduction of rates for the lower tax brackets and increased rates for the higher tax brackets. National, ACT, and New Zealand First are proposing adjustments of the tax brackets for inflation which will provide a greater increase in net income to those on higher incomes. The TOP tax changes are in the first stage similar to those of Maori and Green but in the second stage will provide a greater advantage to those with the highest incomes.
More details of the proposed changes by each political party are included in the details for each party below.
The policies of the political parties
In the sections below we will look at the policies of political parties relating to income and taxes to see who will benefit the most from the changes that are proposed.
The Opportunites Party (TOP)
The Opportunities Party are at the top of our list because they are the only political party to propose a Basic Income.
Interestingly, TOP have a two-stage policy. In the first stage, TOP will change the tax rates and thresholds. They will introduce a $15,000 tax-free income threshold, and increase the thresholds and tax rates for all subsequent tax bands. A 20% tax will apply from $15,000 to $80,000, 35% from $80,000 to $180,000, 42% from $180,000 to $250,000 and 45% on incomes over $250,000.
Introducing a tax-free threshold of $15,000 will provide tax relief for those on very low incomes who are currently taxed at 10.5%, but will also benefit everyone with incomes higher than $15,000. Those earning under $15,000 will receive a tax reduction that is proportional to their earnings while everyone earning over $15,000 will receive the maximum possible value of the discount, $1,470. To counter this and avoid a tax reduction for those with very high incomes, it is necessary to increase the higher marginal tax rates. However, increasing marginal rates above 40% is known to lead to those on higher incomes looking for and finding ways to avoid taxation.
An examination of net incomes received shows that everyone earning under $255,000 will benefit from the TOP first stage tax proposal while those earning over $255,000 will progressively pay more tax due to the increases in the highest marginal tax rates from 39% to 45%. However, as those earning over $255,000 are only a small percentage of taxpayers, the extra tax raised is unlikely to be sufficient to balance the tax lost by reduced taxes on those earning less than $255,000.
Land Value Tax - stage one
To raise additional tax, TOP will introduce a 0.75% land value tax on all urban residential property paid annually. Commercial, rural, conservation, and Maori land will be exempt. Family homes will not be exempted. The annual tax on a mid-range property with a land value of $500,000 will be $3,750 to be paid annually in addition to rates. Those renting a home are likely to see increased rental charges as the property tax will be passed on to them by landlords.
A person with an income of $70,000 will receive a $3,020 income tax reduction but with an additional $3,750 in land tax on a property worth $500,000 they will pay $730 extra in taxes. A person on a lower income of say $50,000 will receive only $1,020 in tax relief so with a property with the same land value they will be harder hit needing to pay an extra $2,730 in taxes. A person on $95,000 will receive a $4,020 income tax reduction so they will be $2,700 dollars better off with a property of the same value. This policy favours those on higher incomes.
While this policy favours those on higher incomes who own homes of the same value, there is a tendency for people with higher incomes to buy more expensive properties with higher land values. Because the land tax is proportional to the land value, this tax will discourage people from buying or renting more expensive homes.
In the second stage, TOP will introduce a $16,500 per annum tax-free Basic Income for everyone aged 18 to 65. New Zealand superannuation will remain unchanged for those over 65. The Basic Income will be topped up to existing benefit levels for anyone on an existing benefit. As the existing adult jobseeker support is $17,622 after tax it appears that a large proportion of benefits will require topping up.
The Basic Income will be accompanied by a 35% uniform tax rate for personal, company, and trust income. This increases the income tax rates for those on lower and middle incomes but lowers the marginal tax rate for those earning over $180,000. Those in the low and middle-income range will still be better off as they will receive more from the Basic Income than they will pay in increased taxes. Those on higher incomes will however receive a double benefit. Those who currently earn over $180,000 will see an increase in their marginal tax rates under the first stage but they will now see a reduction in their marginal tax in the second stage to 35% which is less than the present level of 39%.
Land Value Tax - stage two
The land value tax also increases by 0.5% from 0.75% to 1.25%, so the land value tax on a property with a land value of $500,000 will increase by $2,500 from $3,750 to $6,250. When the Basic Income, increased income tax and additional property tax are all considered, those on low incomes will be better off while those earning between $70,000 and $235,000 will be worse off. Those earning more than $235,000 will be progressively better off as their income increases.
With the TOP second stage proposal, we find that the net result is that those on middle incomes, from $70,000 to $235,000 will be paying additional tax to support increased incomes for those on lower incomes and for those on very high incomes. It would have been preferable to see those on very high incomes paying more tax.
If the Basic Income had been paid as a taxable amount, chosen to give the same after-tax amount as the tax-free Basic income to those on low incomes, in conjunction with an appropriate tax to ensure that those on very high incomes do not receive a tax cut, this problem might have been avoided and the objective of broad targeting achieved. An example of an appropriate tax might have been a two-stage tax with a 33% tax on incomes below $180,000 and 40% or more on incomes above $180,000.
As most New Zealand families aim to use their savings to pay their mortgages and end up with a mortgage-free home for their retirement, failure to exempt the family home from the land tax may be a disincentive to savings and disadvantage a large section of the population, increasing poverty in old age. The TOP policy allows payment of land taxes to be deferred by those on superannuation until such time as the property is sold. This will allow wealthy people with a large amount of accumulated wealth invested in areas such as rural land or shares to pass their wealth on to their children when they die while those who just own a family home will see the government take a share as land tax.
Exempting all rural and other land from the land tax is questionable as some wealthy individuals buy up large amounts of rural land in order to get capital gains and do not utilise the land well. This increases land prices while disadvantaging owner farmers who often make better and more productive use of the land.
The Labour Party does not have a Basic Income policy and does not intend to alter the tax rates. Previously, some individual Labour members of parliament have expressed interest in Basic Income but it has never become official policy.
The Green Party
The Green Party have previously expressed interest in Basic Income but now has a policy of a Guaranteed Minimum Income.
The Green 2023 policy includes a six-stage tax scheme to replace the existing five stages. The first $10,000 of income will be tax-free, with 17% from $10,000 to $50,000, 30% from $50,000 to $75,000, 35% from $75,000 to $120,000, 39% from $120,000 to $180,000, and 45% on all income over $180,000.
The Green Party tax policy will reduce taxes on those with low or middle incomes but will progressively increase taxes on those earning more than $128,000. Those on the minimum wage will see a tax reduction giving an increase in net income of $957 per annum and those on the Living Wage a tax reduction giving an annual increase of $1,220. Those earning from $50,000 to $70,000 will receive a net income increase of $1,220. Those earning over $90,000 will receive a declining increase in net income that becomes a reduction in net income above $128,000.
Because the marginal tax rate for income over $180,000 is increased from 39% to 45%, a difference of 6%, the additional tax paid in dollars for those earning over $180,000 will climb progressively.
The Green party propose an Income guarantee of $385 per week for an individual or $770 for couples.
The most efficient way to guarantee everyone receives a minimum income, involving the lowest cost and least work hours to administer with the best outcomes is to provide a Basic Income. However, it appears that the Green Party is proposing to individually target the minimum income to individuals using methods such as a mixture of negative income tax and benefit payments. This type of targeting is known to be inefficient and difficult and costly to implement.
To target payments this way, everyone's income must be assessed and then the decision made to either tax them or pay them. It can be done reasonably easily for a person in regular employment with a reasonable income and fixed and regular hours of work. The problem is different for those on low incomes. People on low incomes find it difficult to spread a relatively small annual payment over a year so require regular, perhaps weekly payments. Additional problems arise for those who are self-employed or have low incomes and are working part-time and occasional hours as their total annual income is difficult to predict and they will require payments that vary significantly from week to week. Determining how much they require each week in advance is often very difficult and prone to errors requiring back-payments or requiring individuals to refund overpayments which might create financial difficulties for people who have accepted money in good faith and spent it.
This type of problem already occurs with the present benefit system.
In contrast, a Basic Income ensures that everyone receives a guaranteed modest income that they can rely on and that they are free to enhance by working or by other legitimate means. A Basic Income is delivered with minimal administration costs and broad targeting is achieved with little administration by removing money from circulation with an appropriate tax scheme.
The Green party would do well to consider using a Basic Income as a means of delivering a Guaranteed Minimum Income.
Free dental care
The Green Party proposes the introduction of free dental care for everyone. This is a worthwhile extension of universal basic services and an area where New Zealand is lagging well behind the UK where free dental care was introduced in 1948. Australia is ahead of New Zealand with some free or subsidised dental care depending on the state or territory. In New Zealand, free dental treatment is limited to those under 18 and is otherwise extremely restricted. New Zealand is known for poor oral health.
It appears that the Green Party may only be providing free dental care through a new government-owned New Zealand Dental Service. This may not be the best way of providing such a service. While an expanded government dental service may be worthwhile in some areas, it may be preferable to provide payments to existing dentists to enable them to provide basic services free or at a very much reduced cost rather than set up a full government monopoly on free dental care.
The Green Party propose introducing a 2.5% wealth tax on total net assets applied to total net wealth exceeding $2 million for an individual or $4 million for a couple where the assets are jointly owned. The tax will be on all net assets, after mortgages are deducted, and will include such items as property and shares that exceed the threshold.
Allowing a tax-free threshold of this magnitude allows people in the low to middle-income range to work and save for a family home, invest money for their future, perhaps own a holiday home, or own a rental property, without exceeding the threshold.
Restricting the tax to a tax on wealth over $2 million dollars will help achieve a more equitable distribution of wealth.
While the Green tax rate of 2.5% is higher than the 1.25% proposed by TOP in their second stage, the $2 million threshold ensures that only those who have high levels of net wealth will pay the tax. Statistics New Zealand estimated the average net wealth of New Zealand households at $397,000 in 2021 so this policy allows a couple to own ten times this amount before they start paying the wealth tax. Unlike the TOP proposal, which is restricted to urban properties and will impact all homeowners and renters while allowing the very wealthy to escape the tax by investing in rural properties, the Green policy will have little impact on homeowners buying their first home. However, the Green policy may discourage people who buy multiple urban properties for rental purposes.
Te Pāti Māori (the Maori Party)
Te Pāti Māori (the Maori Party) propose a six-stage tax. The first $30,000 of income will be tax-free, with 15% from $30,000 to $60,000, 33% from $60,000 to $90,000, 39% from $90,000 to $180,000, 42% from $180,000 to $300,000, and 48% on all income over $300,000.
Te Pāti Māori tax policy will reduce taxes on those with low or middle incomes but will progressively increase taxes on those earning more than $207,000. Those on the minimum wage will see a net income increase of $4,704 per annum and those on the Living Wage an annual net income increase of $5,660. Those earning from $70,000 to $90,000 will receive the largest increase at $6,220. Those earning over $90,000 will receive a declining increase in net income that becomes a reduction in net income above $207,000.
The Te Pāti Māori scheme gives the greatest tax cuts for those on low and middle incomes with lower marginal tax rates but this is coupled with higher marginal tax rates of 39% on incomes over $90,000, 42% on incomes over $180,000, and 48% on incomes over $300,000. While only those earning over $207,000 will pay extra tax, those on higher incomes will progressively pay more tax and Te Pāti Māori will have the highest taxes when compared with other party proposals on incomes over $555,000.
The National Party
The National Party will retain a five-stage tax but will adjust tax brackets to compensate for inflation. The first-rate of 10.5% will apply to income up to $15,600 (previously $14,000), 17.5% from $15,600 to $53,500 (previously $48,000), 30% from $53,500 to $78,100 (previously $70,000), 33% from $78,100 to $180,000, and 39% on all income over $180,000. The final threshold of $180,000 remains unchanged.
National party tax policy will reduce income taxes for all income earners earning more than $1,000 per annum. Those on the minimum wage will see an annual increase in net income of $112 and those on the Living Wage will see an annual increase of $800. Everyone earning over $80,000 will receive the largest tax cut or increase in net income of $1,043. This tax policy will clearly advantage the highest income earners.
To add extra net income for working income earners in the low to minimum income range, the Independent Earner Tax Credit (IETC) which currently provides a tax credit of $520 for anyone earning from $24,000 to $44,000 and then abates to zero at $48,000, will be extended. Under the National proposal, it will pay $520 to anyone earning $24,000 to $66,000 and abate to zero at $70,000. The IETC is not available to anyone on a benefit or those receiving NZ Super.
While the upper limit has been extended, it is notable that the value of the IETC, which has not been adjusted for inflation for many years, is unchanged.
As eligible persons earning less than $44,000 are already receiving the full IETC, only those earning $44,000 to $70,000 will benefit from the changes to the IETC. With the IETC, those on the minimum wage will see their net annual increase increase from $112 to $551, while those on the living wage, or anyone earning between $55,000 and $66,000 will see their annual increase increase from $800 to $1,320. Those earning more than $80,000 will receive no additional increase above the $1,043 that everyone receives.
While National presents its tax cuts as being for the benefit of the squeezed middle, a couple earning a total of $120,000 or $60,000 each, giving an increase in net annual income of $2,640 between them, they do not mention that couples earning a combined total of $160,000 or more will receive a combined increase in net income of $2,086, or that those couples with a combined income of less than $40,000 will either receive no increase or at the most, $224 per annum.
The tax cuts appear to be targeted at the middle voters while also giving a clear and significant benefit to those on higher incomes. Those on the lowest incomes are forgotten.
ACT released a revised "Alternative Budget" proposal on 21 September 2023 which proposes a three-stage tax scheme, 17.5%, 30%, and 33%, to replace the existing five-stage tax scheme, 10.5%, 17.5%, 30%, 33%, and 39%. The proposal also replaces ACT's previously proposed two-stage tax, 17.5% and 28%. The new proposal uses two higher tax rates than the previously proposed maximum of 28% reducing the size of the previously proposed tax cuts for those on higher incomes.
The benefits proposed by ACT for those on low incomes are near zero and the smallest for all the political parties compared here while the tax cuts and benefits for the wealthy and superwealthy are the largest for all the parties! It would appear to be clear that ACT's objectives are to target benefits toward the superwealthy.
Tax proposal released on 21 September 2023
On 21 September 2023 ACT released a new "Alternative Budget". With the new alternative, ACT proposes to alter tax rates and thresholds in three stages over three consecutive years to reduce the current five-stage tax to a three-stage tax. ACT originally proposed a two-stage tax with their "Alternative Budget" released in May 2022. With the latest "Alternative Budget", tax on the lowest income earners will be increased from 10.5% to 17.5% while tax on the highest earners will be reduced from 39% to 33%!
ACT also proposes to pay an $800 "Low and Middle Income Tax Offset" (LMITO) to low and middle-income earners that will partially offset the higher tax that low to middle-income earners will be paying. ACT says that "the tax offset, together with the Carbon Tax Refund, will ensure that no household pays more tax". The proposed $800 LMITO is insufficient to offset the additional tax without the Carbon tax refund.
In the first introductory stage, ACT intends to abolish the lowest 10.5% tax rate, which applies up to $14,000, and charge tax for those in this band at 17.5%. This will reduce the number of tax bands from five to four. The 17.5% tax band will be extended from the previous $48,000 maximum up to $60,000, 30% will apply from $60,000 to $70,000, 33% from $70,000 to $180,000, and 39% above $180,000.
In the second introductory stage, the 33% tax rate will be abolished. This reduces the number of tax bands from four to three. 17.5% will apply up to $60,000, 30% from $60,000 to $180,000, and 39% above $180,000.
In the third and final stage, the 39% tax rate will be reduced to 33%. The three stages will now be, 17.5% up to $60,000, 30% from $60,000 to $180,000 and 33% above $180,000.
Without the LMITO or other compensating payment, from the first introductory stage, all those earning less than $58,000 will see an increase in tax. This increase in tax will be zero for those without income but increase progressively to $980 with an income of $14,000. The increased tax will remain constant at $980 from $14,000 up to $ 48,000 and then decline to zero at $55,840. All those earning above $56,000 will see a reduction in tax that increases progressively with income. Those on very high incomes can expect to see an 8.5% increase in net income!
Above $55,840, everyone benefits from tax cuts. The benefit increases steadily with income. A person on $70,000 will see a $520 increase in net income, (0.9%) and someone on $180,000 will see an increase of $3,820 (3%). In both net dollars and as a percentage, the increase just keeps getting bigger. A person with a million-dollar salary will see an increase of $53,620 or 8.4%.
If we look at net incomes with the LIMTO but without the Carbon Tax refund, those on the minimum wage can expect to be $180 per annum worse off, those on the living wage $102 per annum better off, those on $180,000 will be $3,820 per annum better off, and those on $720,000 will be $36,220 better off.
Low and Middle Income Tax Offset (LMITO):
It is assumed that the LMITO proposed by ACT will replace the current IETC although they do not say so. The LMITO is essentially the same payment as the IETC. However, the LMITO at $800 is a larger payment than the $520 IETC, is phased in between $2,000 and $12,000 compared with the sudden introduction of the IETC at $24,000, and is phased out between $48,000 and $52,000 compared with $44,000 and $48,000 for the IETC.
ACT states on its tax web page ( https://www.act.org.nz/tax ) that:
"In order to ensure that every earner would receive a tax cut, ACT would also create a new Low and Middle Income Tax Offset (LMITO), starting in fiscal year 2022/23. This tax offset would be worth $800 per annum for all earners earning between $12,000 and $48,000. It would gradually grow at a rate of 8% from $0 per year for taxpayers earning $2,000 to the full $800 for taxpayers earning $12,000. At incomes above $48,000, the offset would abate at a rate of 8%, reaching $0 at an income of $58,000."
However, as taxpayers in the $14,000 to $48,000 range will pay $980 extra in tax, the LMITO will not completely offset this and people in this range will be $180 per annum worse off. Any claim that "every earner would receive a tax cut" with the LMITO alone is incorrect.
Those on the minimum income will pay an extra $980 per annum in tax without the LMITO, or $180 extra with the LMITO. Those on the living wage will pay an extra $197 per annum in tax without the LMITO but will be $102 per annum better off with the LMITO.
This would appear to be a case of those on lower incomes paying extra tax in order to pay for the tax cuts of those on high incomes.
Carbon Tax Refund
ACT is proposing that the money collected through the Emissions Trading Scheme (ETS) be refunded on an equal basis to every person in New Zealand including dependent children. The payments for dependent children will be paid to their caregivers. ACT estimates that this will produce an annual payment of between $180 to $250 per person over the next four years. ACT say that this will allow carbon taxes to discourage carbon usage while making the taxes more politically acceptable as everyone will gain a benefit from it and the payments will help people meet the cost of living.
This proposal is a move toward a Basic Income payment similar to the Alaska Permanent Fund dividends and is to be welcomed for this reason.
New Zealand Superannuation
ACT say that they will gradually increase the age of eligibility for New Zealand Superannuation to 67, at a rate of 3 months per year from the 2024/25 fiscal year. Once the age of 67 is reached it will then be indexed to life expectancy. This, they say, will ensure that each generation will receive the same proportion of their life on the pension as previous
ACT would do well to read and understand our New Zealand Superannuation page. As explained on this page under the heading "Suggested changes to New Zealand Superannuation", a better solution is to couple New Zealand Superannuation to an appropriate tax regime. This will require those who accept New Zealand Super to be taxed with an appropriate tax regime that achieves improved broad targeting of the payments to those with the lowest total incomes. Doing this achieves greater savings than raising the age of eligibility.
Increasing the age of eligibility can be discriminatory against both individuals and groups who have limited life expectancy.
ACT's proposals need to be taken with a great deal of caution. Greater efficiency in public services are certainly a good idea if they ensure that services are delivered with the lowest possible overhead costs and not wasted on excessive levels of management and other inefficiencies. However, tax cuts often lead to corresponding cuts in government services which are likely to have a negative impact on those with low incomes.
Tax cuts proposed for those on very high incomes serve little real purpose and are likely to lead to an increasing accrual of wealth by a small percentage of people who do not need additional income or wealth. Increased narrow or individual targeting of benefits to reduce total payment costs can result in larger and less efficient government. It is preferable to use low-cost broad targeting of expenditure with an appropriate tax regime.
ACT would do well to consider the possibility of increasing the size of their LMITO and making it available to all and large enough to replace some of the welfare system. This would eliminate the big government wasteful employment of people who do little more than adjust peoples payments on a weekly basis to ensure individual targeting in an attempt to minimise the total payments. The maximum tax rate could be kept at the current level to provide broad targeting of income to those who need additional income the most without a negative impact on high earners.
Proposal before 21 September 2023.
This section is here for historical reasons. ACT originally intended to replace the present five-stage tax with a two-stage tax. In ACT's "Alternative Budget - A Time for Truth", released in 2022 they propose a 17.5% tax on incomes up to $70,000 and a 28% rate on incomes above $70,000.
While a two-stage tax simplifies the tax system, only taxpayers with incomes greater than $55,840 per annum would have benefited from this proposal. Those earning less than $14,000 would have seen their tax rate increase from 10.5% to 17.5%. The extra tax paid increases up to a maximum of $980 dollars for an income of $14,000. From $14,000 to $48,000 the extra tax paid remains at a constant $980 and then declines to zero at $55,840.
Above $55,840, everyone benefits from tax cuts. The benefit increases steadily with income. A person on $70,000 will see a $1,770 increase in net income, (3%) and someone on $180,000 will see an increase of $7,270 (6%). In both net dollars and as a percentage, the increase just keeps getting bigger. A person with a million-dollar salary will see an increase of $97,470 or 15.5%.
The extra tax paid or reduction in net income for those with incomes less than $55,840 is partially offset with a new Low and Middle Income Tax Offset (LMITO) grant valued at a maximum of $800 per annum.
New Zealand First
New Zealand First state: "We will ensure tax income brackets are adjusted to inflation."
As previously noted, simply adjusting tax brackets for inflation assumes that the tax brackets were correctly set in the first instance. Doing so will result in tax cuts that increase progressively as incomes increase with those with incomes in the highest tax bracket receiving the largest tax cuts.
There is no indication of how New Zealand First might raise additional taxes to compensate for the loss of tax revenue resulting from the adjustment of tax brackets. New Zealand First has given no indication of how or if benefit rates might be varied.
New Zealand Superannuation
New Zealand First states that "There will be no change to the age of eligibility for Superannuation under New Zealand First." This party has a long-standing history of protecting New Zealand Superannuation, one of the world's longest-standing Basic Income payments and probably the best superannuation scheme in the world. It delivers universal benefits to all eligible New Zealanders and a larger percentage of the retired population at no more cost than more restrictive schemes in other countries. Administrative costs for New Zealand Superannuation are negligible.
Revised: 24 September 2023