Will the New Zealand opposition fall into the same tax trap as Liz Truss? | | Henry Cook

Grant Robertson and Gordon Brown have a lot in common.

Robertson, New Zealand’s Chancellor of Finance and Deputy Prime Minister, dreamed of leading his own party as the Labor Party suffered from opposition, as Brown had done with his own party. Like Brown, Robertson put these dreams on hold and settled on a financial portfolio as a more charismatic ally led the party to victory.

Both men are political wrestlers. In the words of Australian Prime Minister Anthony Albanese, they “like to fight the Tories”. And to do this, both set basically the same trap. It’s a new income tax bracket that applies only to very wealthy people. Brown returned in 2010 and Robertson in 2021.

Brown’s trap has just been set for Britain’s new Prime Minister, Liz Truss, who sought to abolish the tax rate. Shamefully U-Turns After Public OutcryThe National, New Zealand’s right-wing equivalent, is still fully committed to abolishing ours.

The details are slightly different. New Zealand’s top tax rate is 39% instead of 45%, but the overall political calculations are similar.

Both top tax rates are set so high to capture the tiny fraction of the population that can be comfortably described as ‘rich’ without anyone heckling, so the wider scheme mostly raises real income No. This means that when right-wing parties talk about cutting or abolishing these taxes, it is very easy for the left to say they are cutting taxes for 1%.

In the UK, about 200,000 people belonged to the highest tax rate when it was introduced in 2010. This is about 0.3% of the population. Income has increased since then, so that group has remained small, now around 0.9%. About 59,000 people in New Zealand belong to the top Robertson tax rate. That’s 1.1%.

Another reason these taxes are great political tools, even if they don’t raise meaningful revenue, is in personal stories.anytime National Party leader Christopher Luxon talks about abolishing top tax rate Labor is just putting his potential salary as prime minister on the calculator and talking about an $18,000 tax cut. Very effective politics.

The quirk of both situations is that right-wing parties have far more popular tax cut policies, which the left-wing opposition has essentially given up on contesting. The UK Labor Party has said it would support lowering the “basic tax rate” from 20% to 19%, but in New Zealand the government has tactically made reference to the National’s policy of linking various other tax rates to inflation. rarely do. Both Labor parties know that these tax cuts will put significant sums into the pockets of the average income earner, but that they will be much harder to credibly oppose.

National naturally hates comparisons with the UK. And it’s fair to point out that different countries have very different finances.New Zealand has much lower government debt and a much more sustainable energy mix, so there’s no need to splurge. Energy subsidies close to UK sizeThis means New Zealand tax cut financing does not require the same degree of borrowing and is therefore unlikely to bring about the havoc seen in the recent UK market.

But there is an overall challenge that National shares with Truss. It is about satisfying the masses who want European social services, not US tax rates. As in the UK, most of New Zealand’s national budget cannot be easily cut without serious political and often social pain. But if you take a serious look at the budget, you’ll see people spend a lot of time on things like funding the arts (0.4% of the 2022 budget) and health (0.4% of the 2022 budget). 17%) and education (12% of the 2022 budget), these generally need to grow each year to keep up with population growth and public expectations.

This is not an impossible bondage for National, as the party has not yet proposed a particularly large tax cut. There’s some big capex in things like the Oakland light rail that National says it’s canceling, capex is a one-off, tax cuts are forever, so there’s room to operate early. There is. The Communist Party can always use the old trick of slowing down the rate of increasing funding to areas such as health and education. In practice, we make real cuts to match inflation and population growth, technically increasing our funding each year.

This story is somewhat premature: the public still has to win next year’s elections to be in a position to make such a choice. It looks good, but it’s nothing like an unassailable margin. Things could get tougher in an election year, with increased scrutiny over National’s costs and an opportunity for the government to set its budget. It can be obtained.

Then Robertson’s tax trap will be the biggest – but it will take more than that for Labor to actually win. Gordon Brown may feel right now I’m sorry, but in 2010 we were still losing.