Labour softens its tax stance

HIGH-INCOME earners will face a tax hike under Labour but it has backed off the big rise it campaigned on in 2011.

Labour leader David Cunliffe said the party would impose a new top tax rate of 36 per cent on income above $150,000 a year, a move that would cost someone on $200,000 a year about $30 a week.

It is a major softening of former leader Phil Goff’s 2011 plan to lift it to 39c.

However, a parallel rise in the tax on trusts to 36c would see it bring in about the same amount of extra revenue.

‘‘This, combined with our capital gains tax, will allow the Labour-led government to run surpluses and pay down National’s record debt by the end of our second term,’’ Cunliffe said.

But Finance Minister Bill English described Labour’s alternative Budget as ‘‘a rehash of its failed old recipe of taxing more and spending more’’.

Prime Minister John Key said Labour had got ‘‘cold feet’’ on its previous 39c rate.

Even at 36c it was an ‘‘envy tax’’ that would encourage avoidance because the company rate stayed at 28c.

‘‘The only people who will really pay the top 36 per cent tax rate are those that can’t structure their affairs.’’

The current top tax rate is 33 per cent on income above $70,000.

Labour finance spokesman David Parker said the new rate would affect 2 per cent of taxpayers and cut in from October 2015.

The party’s 27-page alternative Budget, aimed at portraying the party as fiscally responsible, included surpluses larger than those forecast in the May Budget. ‘‘We will not be writing cheques we can’t cash,’’ Cunliffe said.

Tax cuts could be possible after 2017, although only if they benefited the vast majority and were fiscally sustainable.

Parker said aligning the trust rate with the top tax rate would avoid trusts being used as taxavoidance vehicles.

The 15 per cent tax on capital gains, excluding the family home, would bring in $790 million a year by 2020.

A crackdown on tax avoidance, particularly by multinationals such as Facebook and Google, would bring in $200m a year by 2018-19.

Inland Revenue would ‘‘embed’’ auditors in companies with a history of tax avoidance.

Labour would also set aside an extra $1 billion a year to cover the impact of inflation and the increasing population.

Other moves would see a resumption of contributions to the New Zealand Superannuation Fund, starting at $750m in 2015-16.

About $500m would be set aside next year for future policy promises.

Beyond that, the allowance for new spending would be the same or less than the Government’s figure.

Key said a capital gains tax would hit 2.3 million people in KiwiSaver, every business and every farm. ‘‘Why on earth would you do that at a time when the economy’s growing and it’s earning more than it’s spending?’’

But a Labour spokesman said Key was wrong.

KiwiSaver earnings and payouts would be exempt, and there would be no extra capital gains tax on them beyond those levied now. – 60 per cent on $22,000-plus

April 1, 1982 to March 31, 1983 – 63 per cent on $38,000-plus

April 1, 1983 to September 30, 1986 – 66 per cent on $38,000-plus

October 1, 1986 to March 31, 1988 – 48 per cent on $30,000-plus

April 1, 1988 to June 30, 1996 –

October 1, 2008 to March 31, 2009

April 1, 2009 to September 30, 2010

October 1, 2010 to present per cent on $70,000-plus