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Finance minister Nicola Willis and prime minister Christopher Luxon
Finance minister Nicola Willis and prime minister Christopher Luxon

The BulletinMarch 19, 2024

PM refuses to rule out new taxes to pay for tax cut plan

Finance minister Nicola Willis and prime minister Christopher Luxon
Finance minister Nicola Willis and prime minister Christopher Luxon

The finance minister is denying that there’s a $5.6b shortfall in paying for the government’s campaign promises, including tax cuts. At his post-cabinet press conference yesterday, the PM refused to rule out new taxes to pay for the cuts, writes Anna Rawhiti-Connell in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.

PM won’t rule out new taxes

At a post-cabinet press conference described by the Herald’s Thomas Coughlan as “slightly chaotic” (paywalled), prime minister Christopher Luxon stuck with the promise of tax cuts being delivered in this year’s Budget on May 30 but would not say whether they would be the size promised in the coalition agreement and would not rule out new taxes to pay for the tax cut plan, including new taxes on working people. That was a question posed in response to a promise by Nicola Willis last year, who told the AM show in August that “[There will be] no new taxes to working people, our view is that the tax system has become unfair because the squeezed middle of everyday working people are paying higher rates of income tax.” Willis ruled out a GST hike earlier this month on the AM show.

Deputy PM agrees with shortfall assessment

As’s Dan Brunskill reports Luxon said we need to wait for the Budget to see how the tax cuts look and how they might be funded. As Brunskill notes, elsewhere in the press conference, he said the tax package would be funded partly through “revenue raising measures” and partly through “savings that have been identified.” Muddying the waters is deputy prime minister Winston Peters agreeing with an assessment by Vernon Small published in the Sunday Star Times during his state of the nation speech on Sunday. It found the gap between National’s figures from August last year, and estimates now suggest there’s a $5.6b shortfall. The Herald’s assessment is slightly more favourable, suggesting there’s a $3.3b gap.

Willis holding the line

As RNZ’s Katie Scotcher reports, Willis is currently denying suggestions of a $5.6b shortfall, saying she won’t guarantee promised tax cuts will arrive in July until the policy has been discussed by the cabinet. Responding to speculation about how the Budget might look by saying cabinet needs to agree and to wait until it’s published is the government’s prerogative. Speaking to RNZ’s First Up this morning, Willis “I remain confident we can fund our tax reduction objectives in a way that’s responsible and affordable.” When asked whether the government can afford all its commitments after his state of the nation speech on Sunday, Peters replied, “our ones, yes.” The Post’s Thomas Manch has an astute read this morning on the length of Luxon’s wick in allowing Peters to raise questions about tax cut funding and make comments comparing co-governance to Nazi Germany. “How long will Luxon let this go on for? As long as Luxon wants the coalition to hold,” he writes. “This is quintessential Peters strategy,” he says.

‘It’s not the time for tax cuts’ – former Reserve Bank economist

If this is all sounding familiar, the run up to last year’s election was littered with talk of fiscal holes and wonky tax plan costings. Council of Trade Union analysis released last August suggested there was a shortfall of at least $3.3-5.2b in National’s tax and spending plans. It went both ways, with Peters claiming there was a $20b hole in the last government’s books and that public service bosses were being told to cut 10% from budgets to fund it. Three economists from across the political spectrum independently reviewed National’s figures on how much revenue the foreign buyers tax would raise and found it short by $450m. NZ First scotched that tax in its coalition agreement with National. One of the economists who made the independent assessment was former Reserve Bank economist Michael Reddell, who said yesterday, “I think many economists would take the view that we are starting with such a large fiscal deficit bequeathed to them by the Labour government that it’s not the time for tax cuts.”

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