Out of touch Luxon demands that poorest pay

Nation­al Lead­er Chris­toph­er Luxon’s speech today pro­posed an eco­nom­ic agenda that is out of touch and would only boost debt, pump up infla­tion and make it harder for middle income and work­ing New Zeal­anders to get ahead, says CTU Chief Eco­nom­ist Craig Ren­ney.

The speech high­lighted that National’s pro­posed tax cuts would simply put money in the pock­ets of the top 3% of income earners in New Zea­l­and, would make the hous­ing crisis worse, and would add fuel to already chal­len­ging infla­tion­ary pres­sures.

“The latest data from IRD shows that remov­ing the 39% tax brack­et would bene­fit only the top 3% of income tax­pay­ers. How­ever, it would gift those lucky few with more than $2bn across the next few years accord­ing to IRD estim­ates. The inequity involved in provid­ing those at the top with yet high­er incomes, whilst being unable to agree on a Min­im­um Wage increase is start­ling. Espe­cially as those with the highest incomes have faced a much lower rate of infla­tion over the past ten years.

“The sug­ges­ted changes to the tax­a­tion of hous­ing show that Nation­al has no plan for how to tackle the hous­ing crisis except to make it worse. Remov­ing recently intro­duced changes such as the bright-line exten­sion and interest-rate deduct­ib­il­ity will simply give prop­erty investors great­er abil­ity to buy hous­ing at the expense of first home buy­ers. It will add more money into an already over­heated mar­ket.

“These tax cuts will be hugely expens­ive, cost­ing roughly $3 bil­lion – blow­ing out the debt and defi­cit and only fur­ther ramp­ing up infla­tion.

“Mr. Luxon hasn’t provided any ana­lys­is with­in his speech to show how his pro­posed grab-bag of cuts will lead to lower infla­tion. Nor has he shown what would be cut to pay for it. Either he doesn’t know or he doesn’t want New Zeal­anders to know. Either should have us wor­ried. Cut­ting invest­ment in the crit­ic­al pub­lic ser­vices that we all relied upon dur­ing COVID-19 to pay for a tax cut for the wealth­i­est New Zeal­anders would be an act of eco­nom­ic self-harm.

“If delivered, the policies set out in the speech would make infla­tion worse, would make the hous­ing crisis worse, and weak­en our abil­ity to rebuild pub­lic ser­vices after dec­ades of under­in­vest­ment. The costs would be borne by Kiwi’s who need hos­pit­als, schools and homes, and who would pay in the pock­et for these mis­guided policies,” says Craig Ren­ney.