NZ Election 2020: National rejected zero-tax band for low-income earners because they already get help from Work and Income - Judith Collins

Judith Collins says the National Party considered proposing a zero-tax band for income up to $10,000, but decided against it because it would have cost "a huge amount of money".

She told The AM Show on Wednesday the party instead opted for cuts aimed at "average earners" rather than those earning less because the latter group already get assistance from Work and Income.

National's tax plan will give earners a temporary 16-month tax cut by shifting the tax bands upwards. It massively favours the country's top earners - people on $90,000 a year would get $58 a week back in the hand, compared to someone on the minimum wage who'd only get $8. 

"We are focused on the middle income New Zealanders - people earning $50-, $60-, $70,000 per year and putting $3000 in their hand over the 16 months from the first of December," National finance spokesperson Paul Goldsmith said last week.

In contrast, Labour wants to add an extra top tax bracket which would leave 98 percent of workers' income where it is, and the Greens want to introduce a more progressive tax system with a guaranteed minimum income of $325 for all. 

Some countries - such as Australia - have a zero-tax band at the bottom. Australians don't have to pay any federal tax on their first AU$18,200 of income - this is offset by higher taxes for the top earners. 

Some economists say it's better to target tax cuts to low-income earners because they are most likely to spend it, boosting the economy.

"We have actually considered that, and we looked at it... that would be a huge amount of money in terms of taxes," Collins said. 

"The other thing, we felt that with all the other help that comes from Work and Income is that we felt that the average earners who are actually working full-time, they need the help right now and they need to actually have that money."

National has claimed the "average earner" pockets $64,000, and would get $47 a week. But this figure is skewed upwards by a few very high-income earners. Stats NZ statistical data analyst Jessica Honey told AAP this week the figure was taken from the Quarterly Employment Survey and shouldn't be used as a measure of annual income.

Judith Collins.
Judith Collins. Photo credit: The AM Show

"It excludes business owners, the self-employed, and industries like farming and NZDF's military branches. It also represents a pay week in the middle of each quarter, so can miss short-term jobs, while counting people with multiple jobs several times."

Instead, she said it was better to use the median income - the true middle point, with half of all incomes above and half below. For salary and wage earners, that's $55,271 - under National's plan they'd get just $26 a week. 

And for all Kiwis over the age of 15, the median income was $33,280 - eligible for just $8 under National's plan.