Christopher Luxon responds as Council of Trade Unions says National's tax plan has blown out by $1.5 billion

Christopher Luxon is standing by National's tax policy after analysis found the party may have miscalculated how much it will cost.

New analysis by the New Zealand Council of Trade Unions (CTU) found the cost of the National Paty's tax threshold changes has blown out by $1.5 billion to a total of $8.2 billion over four years.

The CTU's analysis of the cost of threshold adjustments used wage growth figures from Budget 2023 to calculate the cost of raising the income tax thresholds as announced by National last year. The data has been independently verified by Terry Baucher, the director of tax consultancy firm Baucher Consulting, the CTU said.

CTU analysis doesn't account for population growth or in-year wage growth.

Indexing tax thresholds to inflation is a major National Party policy, but it had received some criticism for benefitting those on higher incomes more than the lowest earners. 

Speaking with AM on Wednesday, party leader Luxon said inflation had become worse under the current Government.

"We proposed the [tax threshold changes] idea 18 months ago," he told host Ryan Bridge.

"We've got heaps of money in New Zealand to be able to fund… that."

Christopher Luxon.
Christopher Luxon. Photo credit: Newshub.

Luxon said the plan was to cut "wasteful" spending to be able to fund the tax threshold changes.

However, CTU economist Craig Renney said voters "deserve to know" exactly how National intends to fund its tax cuts.

"National said its tax bracket adjustments would cost $1.66 billion annually when announced as policy in March 2022. This represents $6.64 billion over four years. 

"The revised cost is now $8.2 billion - a $1.5 billion blowout.

"On top of this, National has also committed to another $890 million annually in tax breaks for landlords.

"The scale of these tax cuts is around the same cost as cutting the entire annual police budget. We're not talking about spare change that can be made up by cutting a few consultants."

Craig Renney.
Craig Renney. Photo credit: Getty Images

Luxon admitted the plan would cost about $300 million more per year than initially thought.

"It's not a lot when you consider there's $48 billion in extra tax that the Government's collecting because people are being thrown into higher tax brackets because of inflation," he said.

"That difference is a drop in the bucket compared to the amount of money that the Government's raising in taxes."

Bridge questioned Luxon on whether he was rejecting the CTU's analysis of a $1.5b blowout.

"No, I think that's about right," he responded. "Because inflation has gotten worse under this Government. As the CTU's pointing out, people are going backward harder and faster."

Renney was calling on the National Party to show how it will fund its tax cuts and also meet rising cost pressures in health, education, climate change and superannuation.

"ACT published its alternative Budget last week. Labour in Opposition published its election-year alternative Budget shortly after the Budget and then updated that Budget at the Pre-Election Fiscal and Economic Update. The scale of the changes being proposed here demands that National do the same," Renney said.

He added there isn't a need to wait until the Pre-Election Fiscal and Economic Update because National has "all the data it needs now".

"They can do a line-by-line review of the Budget and tell voters what they would cut to fund their tax cuts."

But Luxon hit back at those calls, reiterating the policy would be funded by cutting "a lot of wasteful spending".

"Why would you give $140 million to a profitable, large, foreign steel manufacturer?" he said, referring to the Government's recently-announced emissions reduction project to subsidise a new electric arc furnace for NZ steel. 

"I'm going to tell you, by the time we get to the election, we'll have a fully-costed tax and fiscal plan. You'll have it all in plenty of detail in plenty of time," Luxon told Bridge.

While Labour had yet to reveal its tax policy, it hiked the tax rate for trustees in last week's Budget to align with the top 39 percent income tax bracket. That 39 percent bracket was also introduced by Labour after being re-elected in 2020.