National’s ‘Society of Opportunity’ will be tested next year

National promises to remove six ‘taxes’ advanced by Labour and to stop some of its biggest spending projects and policy reforms if elected.

Halfway through the election cycle, National’s new Leader Chris Luxon has promised to reverse “Labour’s tax grab” if he wins power from 2023.

He nominated six ‘taxes’ to repeal and challenged the government to increase income tax thresholds in this year’s Budget.

National’s Playlist

Tax is the first base for National.

Still to come on the usual playlist: cutting public spending, resurrecting work for the dole and penalties for welfare malingerers, cutting business red tape, funding roads of variable significance, pledging more frontline police and powers against gangs, and scoping new competition in public services.

Luxon’s first State of the Nation speech was a muted affair – held in a dim hotel conference room to a pandemic-limited audience of 50 party members and delivered almost sotto voce at times as there was no need for proclamation or dynamism.

It set National apart from the incumbent government on tax – and ticked off what Luxon must see as raw nerves that National can soothe for voters.

There was no need, as under his predecessor, to Demand the Debate. Instead, he got the right to it with an early, predictable point of differentiation.

 
Christopher Luxon with a member of the National Party in Auckland 
on March 6, 2022 (Photo by Tim Murphy)

But it was also a peculiar speech, with Ukraine’s horrors getting a sentence or two at the beginning and Covid getting just a few words at the end. In Luxon’s eyes, the fertile political turf on Covid might have passed – he would see that he has demanded and won concessions on RATs, opening the border and a forecast from the PM for easing of mandates. So comfortably is he now ‘living with Covid’ that he hugged at least two members of the audience as he personally thanked attendees at the end.

A small number of National MPs was present: Deputy Nicola Willis, Chris Bishop, Louise Upston, Andrew Bayly and Simeon Brown. Absent, isolating due to Covid, was Finance Spokesman and former Leader Simon Bridges, who had pushed the proposal to raise income tax thresholds (rates kicking in at $15,600, not $14,000, then $53,500, not $48,000 and at $78,000, not $70,000). National wants Labour to adopt these in its forthcoming Budget.

The six taxes for repeal on the hit list are Auckland’s regional fuel tax, a purely conceptual light rail tax, the IRD’s 10-year bright-line test on some home sales, rental property interest deductions, the 39% top income tax rate, and the new social insurance scheme (‘the latest jobs tax proposal’).

Luxon was tellingly silent on a seventh, the so-called ‘Ute Tax’ so opposed by farmers and tradies. It was an interesting omission. When Labour brought in the EV subsidy, National spokespeople were at first supportive but their current finance spokesperson Simon Bridges pushed a harder line.

Luxon’s leaving the Ute Tax off his list might well indicate a reality check on National’s climate policies. There was just a single mention of climate in his 25-minute speech on the state of the nation (Air New Zealand under his leadership helped to start a Climate Leaders’ Coalition) and it was not about the state of the nation, let alone planet.

[Update: Luxon tells Morning Report on Monday morning that the Ute Tax does not make sense and would also go].

 
Christopher Luxon masked and unmasked (Photo by Tim Murphy)

But then, the six taxes that the Party will remove are not all orthodox ‘taxes’ either.

The Auckland Light Rail Tax, a proposed charge on ‘value uplift’ for developers and others who benefit from the new public transport system, is so far from being decided, let alone implemented, that it is doubtful a first-term Luxon government would have anything to repeal. Regardless, it was included by Luxon when he said “the last four years have been a massive tax grab.”

The Social Insurance Scheme proposal is new and would be an additional impost on business and workers but more akin to the ACC system of levies, which both main governing parties put up whenever necessary.

Some of the other taxes for the chop might present National MPs with a quandary. One Caucus member, the MP for Botany, might find repealing the Auckland Regional Fuel Tax leaves his own electorate’s prized public transport project (the Eastern Busway from Panmure to Botany) short of a bob or two or delayed by a year or three, to voters’ dismay. That MP, Luxon, claimed that National would instead try to fund it directly through the ATAP agreement with Auckland Council, but that would presumably just mean direct taxpayer funding.

The Bright-Line Test

Then there is the Bright-Line Test (“a Capital Gains Tax by stealth”) that National would repeal, but only wind it back from the proposed 10 years under Labour to the two years brought in by the previous National administration. Not a new tax, and not quite a repeal and originally not Labour’s idea.

Luxon says changing tax thresholds is something Labour should do in the Budget in May, at a cost of $1.7 billion. And that it should come out of the extra $6 billion spending foreshadowed by Finance Minister Grant Robertson as an allowance for new spending next year.

Questioned after the speech on whether that meant National was accepting Labour’s current spending plus at least an extra $1.7 billion, he said that there were other targets for savings: his Party would not be spending $15 billion on the Auckland Light Rail Project, would not spend $1 billion on the Three Waters Reforms or $500 million on restructuring the health system.

The Bermuda Triangle

Later yesterday, Robertson dismissed the National leader’s calls. 

”The maths just does not add up. Christopher Luxon wants to cut taxes, reduce debt, and keep on spending. This is the same fiscal ‘Bermuda triangle’ that got Paul Goldsmith in trouble, and nothing seems to have changed for National.”

In his speech preamble, Luxon spoke of his career at global consumer goods company Unilever and how it was important to understand “the lives of the people who were buying our products.”

He would visit Unilever outposts and he claimed to spend time with locals before meeting his management teams. Talking to a couple in Moscow had shown him that “socialism had abjectly failed and created misery.” 

Here, National will prepare for a return of former Finance Minister and Leader Bill English’s social investment approach to policy. “This will be back under National,” Luxon said.

Ever the consumer markets man, the new Leader seems to be focus group-testing a personal vision for New Zealand, using the term “a society of opportunity” twice, including in his concluding line.

He will have heard enough from voters over the summer to know that talk of repealing taxes and upping tax thresholds might yet give him a political opportunity – in 18 months’ time.

Tim Murphy is Co-Founder and Co-Editor of Newsroom. The above article and pictures have been published under a Special Arrangement.