Grant Roberson calls National Party policy of cutting top tax rate 'completely crazy'

Finance Minister Grant Robertson has been clear there will not be any major tax reforms for the remainder of this government term as the National Party proposes to cut the top tax rate.

National Party leader Christopher Luxon has been staunch about cutting taxes for the highest paid if elected to power in the general elections next year, despite a similar plan causing turmoil in the United Kingdom.

Robertson told Morning Report that while it was pleasing to see the government's books showed a smaller-than-expected deficit of $9.7 billion , this was not the time "to fritter that away on tax cuts".

"Our priority ... is investing in public services and investing in infrastructure and supporting New Zealanders by getting ourselves back to surplus. That is a much higher priority for me than tax cuts. I'm not considering tax cuts in this term."

The National Party said the government's coffers were awash with incoming cash and it should find room for prudent tax relief.

But Robertson said the world was still going through uncertainty off the back of COVID-19 and conflict.

"Cutting the top rate of tax at a time like this is completely crazy.

"We've seen in the UK the impact that that kind of policy would have and there are billions of dollars that the National Party would have to find, on top of, I might say, various spending commitments they're making. I don't think their proposals add up."

He believed the government had done well in maintaining balance amid the backdrop of the pandemic and global conflict, but said it was time to "consolidate things and cut our cloth".

"Every minister knows that, we know that our government spending will go down to about 30 percent of GDP, we did the right thing in Covid to spend up to 35 percent GDP to keep people in work, to get through the health response."

Bagrie Economics economist Cameron Bagrie backed the cautious position, saying the better-than-expected financial position should not been seen as licence for a big-spend-up or tax-cut package.

While the government's latest accounts were positive, but the country was headed for a tougher period over the next few years, which would require whichever party wins next year's election to run a tight fiscal ship and avoid sugar-candy economics, Bagrie said.

"Not pouring more money on to an inflationary bonfire whether that be through tax cuts or whether that be through spending increases."

Robertson said making changes in the tax system before reaching surplus - as National proposed - was possible, but warned that any government would have to be absolutely certain of their progress before committing to that.

"What's important in any kind of changes to the tax system, I believe, [is they] have got to be ones that support low and middle income earners rather than those earning [the most]."

It was the government's priority to reach surplus, expected in 2024-2025, but to do it any quicker would risk "significant cutbacks" in spending on areas like health, education and housing, he said.

"We've got a pathway to surplus mapped out and we want to make sure we keep making progress on that path."

As for the future, the Labour Party has yet to announce its tax policy for the 2023 elections.

RNZ