- Tax cuts and guaranteed income for those making under $125,000.
- Hikes for those making more, including a wealth tax.
- Wealth taxes can be a nightmare to administer. Greens provide no detail on this.
- Greens say the policy will pull in over $12 billion per year from the richest 0.7 percent, but this number appears to be a wild guess.
Stated theme is ending poverty together
The Green’s ambitious policy Ending Poverty Together is an update from 2020 and about as Robin Hood as you can get. It includes $385 weekly if you’re in school, and aims to greatly increase total taxes, mostly from what they consider to be the top .7%.
In their projections, their increased taxes will pay for Income Guarantees to “lift every family out of poverty”, also reduce taxes for those earning under $125K and leave the Government with more than $4B extra per year.
The lift will work through several levers, including direct payments, reducing tax rates and changes to ACC.
What the Greens don’t talk about is how to deal with difficult to value assets. Wealthy people have a lot of things, like companies in the development stage or business disputes, that cannot be reliably valued. The range can often be several hundred percent.
Also, unlike capital gains tax, a wealth tax can be double taxation because the same asset you’re paying wealth tax on (for instance, a term deposit) also generates taxable income.
Seems more like ending poverty off the backs of a few
Most of the new tax (over 80%) will come from a yearly asset/wealth tax on trusts and individuals. For trusts, it’s 1.5% on all assets. For individuals, 2.5% but with an exemption amount of $2M.
There is also an increase in the corporate rate from 28% to 33% (Māori corporations would continue with their preferential 17.5%). And an increase in the personal tax rate for anyone earning more than $125K per year, with a 45% top rate over $180K.
The Green’s have projected their wealth tax would only apply to the top 0.7 percent of income earners.
Let’s talk about numbers
The Greens project about 85% of the incremental tax, totalling around $12B (of the extra $14B plus per year) will come from this wealth/trust tax.
Is it realistic to expect .7% of the adult population (say 24,500 people) will be able to pay that much extra tax?
It would average around $500K for an individual and $1M for a couple, each year. However, there’s really no solid information on what this .7% owns or whether they will stick around to pay.
Proposed tax swims against the current
New Zealand’s right-leaning parties are predictably against a wealth tax. Labour has said nothing yet except they will bring their own policy forward before the election.
There are very few remaining wealth tax regimes in the world. Two countries are Norway and Switzerland.
In Switzerland, the rate varies from about .1% to 1.1% between provinces (Cantons). There is often a simple way of calculating and you can often pay a fixed amount instead of a percentage. In Norway, it was recently raised to 1.1% and many very-wealthy are leaving.
Note: The Norway rate and the maximum rate in Switzerland is well less than half that proposed by the Greens.
Māori land exempt from proposed wealth tax
Māori land under the Te Ture Whenua Act will be exempt.
To be continued
There will be an article next week on wealth tax compared to capital gains tax.
Feature image by User:Larzatron