Election 2023: Grant Robertson still keen on tax-free threshold as Chris Hipkins puts wealth, capital gains tax on bonfire

The Government was secretly working on a major tax-switch that would have seen most Kiwis get a $20-a-week tax cut, paid for by a wealth tax.

It was considering it right up until about a month before the Budget but then scrapped it.

Labour leader Chris Hipkins on Wednesday ruled out ever introducing a wealth or capital gains tax, and that's put a Labour-Greens coalition into question. 

It was just under two months ago that the Government's top team were in Parliament proudly clutching their big red folders on Budget day. 

They were full of little treats like free prescriptions and cheaper childcare. But the big whopper - tax cuts - was left on the Cabinet cutting room floor. 

"I wouldn't say gutted," said Finance Minister Grant Robertson.

"What I would say is it's an idea that clearly I think had some merit. I wouldn't have put so much work into it if I didn't think that it had merit."

Labour had been cooking up a major Robin Hood-style tax-switch - taking from the rich and paying it to the rest.

Documents released on Wednesday reveal the Government wanted to implement a ta- free threshold of $10,000 which would have given every Kiwi that earned over $10k a tax cut of about $20 a week.

"That would be, in my view, the best way to deliver tax relief," said Robertson.

But it's expensive. To pay for the eye-watering $10 billion policy, the Government considered a wealth tax.

The proposal was a tax on individuals with more than $5 million in net wealth or $10 million for couples. Everything they owned debt free over those thresholds would've been taxed at 1.5 percent a year. It would've excluded the family home. 

But Hipkins got chicken and made a captain's call to can it. 

"That might be something that I would have liked to have had to happen, but it's not happening," said Robertson.

"I'm a team player. I believe in the Labour Party. I believe in what we stand for and the good work that we are doing."

The Prime Minister on Wednesday sent a postcard to New Zealand from his Eurotrip, saying that: "Under a Government I lead there will be no wealth or capital gains tax after the election. End of story."

It mirrors former Prime Minister Dame Jacinda Ardern's pledge at the last election. She said, "I won't allow it to happen as Prime Minister".

The work on this policy went ahead despite that promise.

"The actual wealth tax side of it would not have come in before the election, so I think it fits our commitment, said Robertson.

And cue the Opposition attack line.

"You cannot trust Labour on tax," said National leader Christopher Luxon.

"You cannot trust Labour on taxes. If they have the chance to loot more money, they certainly will," said ACT leader David Seymour.

But its Labour's buddies most brassed off.

The Greens want a wealth tax and are talking tough, threatening to scupper Labour's path to power by refusing a coalition deal. 

"Sitting on the crossbenches is a possibility for us, we have always said that," said co-leader James Shaw.

That is problematic because Labour is down - way down - and needs the Greens and Te Pāti Māori scoring a catastrophic 31 percent in two new polls.

"It's a sharp reminder to everybody in Government that New Zealanders want to see us focused on the issues that matter to them," said the Prime Minister. 

Polls like that mean polarising policies must be put to pasture.