Election 2023: Greens propose guaranteed income, tax cuts for some, new top rate, wealth tax

The Green Party has unveiled its election tax policy, which it claims will lift every New Zealand family out of poverty by guaranteeing Kiwis' incomes never fall below $385 per week.

The 'Income Guarantee' will cost about $11b and includes a tax-free theeshold of $10,000, further adjustments to tax rates resulting in anyone earning under $125,000 receiving a tax cut, a replacement to the Jobseeker benefit and Working For Families, and payments to all tertiary students.

To pay for it, the Greens are proposing a wealth tax on net wealth over $2 million for individuals and $4 million for couples. A trust tax of 1.5 percent would be introduced, while the corporate tax rate would be hiked from 28 percent to 33 percent. A new top income tax rate of 45 percent would be applied to any income over $180,000.

These measures would bring in about $15.5 billion once fully implemented, leaving revenue for other priorities like investing in the public service and decarbonisations, the party says.

Greens co-leader Marama Davidson said on Sunday that the Income Guarantee would mean families will always have enough money for kai, to buy shoes, and to purchase warm clothes for children. 

"Students will no longer have to skip meals to make ends meet and can focus on their study. And if something happens that stops people from working, there is a guaranteed income that's enough to live on," she said.

"It is a transformational new way of doing income support that will lift every family out of poverty."

Co-leader James Shaw said any party that "stops short of promising to lift every family out of poverty, is actively choosing to make life harder for thousands of people".

"I am sick of the politics of excuses. Everything we need to make life better for people in Aotearoa exists. What's missing is the political willpower to use it. The time is now to lift every single family out of poverty and to pay for it with a fair tax system."

A wealth tax was also at the centre of the Greens' 2020 election manifesto, but was ruled out by then-Labour leader Dame Jacinda Ardern. She ultimately didn't need to worry about the Greens' policies though, securing a historic majority at that election.

The polls are far tighter this year, however, and it's very likely that if Labour is to be in government post-October 14, it will have to rely on the Greens' support. That gives the Green Party more leverage when it comes to negotiations.

Tax brackets

The tax policy announced by the Greens on Sunday morning guarantees every New Zealander's income will never fall before $385 per week after tax, regardless of their situation. The minimum weekly income for a couple is $770 and $735 for a sole parent.

The Greens want to achieve this by making several major changes to New Zealand's tax and welfare systems, including by indexing tax brackets and adjusting them for wage inflation every three years.

A tax-free threshold would apply to any income between $0 and $10,000. This means the first $10,000 of someone's income is not taxed. Currently, Kiwis pay a tax rate of 10.5 percent on income up to $14,000.

Under the Greens' plan, income between $10,000 and $50,000 would be taxed at 17 percent, while income between $50,00 and $75,000 would be taxed at 30 percent. Income between $75,000 and $120,000 would be taxed at 35 percent. 

The table below shows how those rates compare to the current situation.

The Greens say the plan means anyone earning under $125,000 will receive a tax cut of between $16 and $26 per week.

However, at the $120,000 mark, some significant new changes apply. Any income over this level, but below $180,000, would be taxed at 39 percent. Currently, the 39 percent tax rate - which was introduced by Labour after the 2020 election - doesn't kick in until $180,000.

But the Greens' plan introduces a new 45 percent tax rate for income above $180,000.

Guaranteed support

The Greens' are also proposing changes to the supports available to Kiwi families, students and those out of work.

In terms of the Jobseeker benefit, which those who are not employed can claim, the Greens would initially raise this to $385 per week. This would take effect from April next year.

Other changes to "restore trust and dignituty to the welfare system" include no stand-down period whe someone is made unemployment and adjustments to abatements.

From 2025, the party would also shift anyone receiving the Jobseeker benefit, the Sole Parent Support, and the student allowance to a single payment of $385 per week (plus any inflation adjustment). A sole parent top-up of $135 per week would be introduced.

Working For Families would also be replaced with a single payment. Parents would receive $215 every week for their first child and $135 per week for every subsequent child. Parents would receive an additional top-up of $140 a week for every child under three, with Best Start doubling.

"For those in work, the abatement threshold on the top-up will be $60,000 - which is significantly higher than the threshold the Government has set for Working for Families," the party's policy document says.

"The Green Party's plan will mean parents and caregivers can earn more from paid work before their top-up starts being reduced." 

The abatement rate would also be changed to 18 percent.

For students, the $385 per week allowance would be available to anyone regardless of their level of study, age or parental income. They will also receive this even if their partner works. 

The party continues to advocate for ACC to be turned into the Agency for Comprehensive Care, providing a minimum payment of 80 percent of the full-time minimum wage for everyone not in paid work due to a health condition or a disability.

How to pay for it?

The package would be phased in over two year, with the all measures implemented by April 1, 2025. In the first year, the Greens expect it to cost $11.2 billion, dropping to about $10.7 billion the following year.

To pay for this, the Greens would introduce a 2.5 percent wealth tax on net assets. This would only apply to assets above $2 million in the case of individuals or $4 million for couples.

The tax would apply to most forms of wealth and assets, including properties, shares, bonds and artwork. But not to furniture, electronics or vehicles with a value of less than $50,000.

"Māori land under the Te Ture Whenua Māori Act would be exempt and so would the assets of Post-Settlement Governance Entities, such as land returned under a Treaty Settlement or vested in a Treaty Settlement Entity," the policy document says.

"The assets of charities, NGOs, clubs, and other entities would also not be part of anyone's individual taxable wealth."

As this is a tax on net wealth, if someone owned a house worth $2.5 million, but had a mortgage of $600,000, they would not pay anything on it as it would be worth less than $2 million.

The Green Party says almost all family homes across the country come under the threshold and only 0.7 percent of New Zealanders will end up paying the tax.

A 1.5 percent tax would also be introduced on all assets held in private trusts. The party believes this will prevent people from moving their money into a trust to avoid the wealth tax.

"By extending taxes to trusts, we can ensure the wealthiest 1 percent pay their fair share. Trusts with a beneficial social purpose will be exempt, including Māori land trusts, post-settlement trusts, charitable trusts, or disabled beneficiary trusts."

The Greens' also want to return the corporate tax rate to 33 percent, arguing that corporate profits have soared over the past 15 years. It is currently at 28 percent. 

"The Green Party's proposal to return to a 33 percent corporate tax rate is a simple and effective way for large corporations to pay their fair share. This will mostly affect large, multinational corporations whose shareholders are outside New Zealand."

In the first year, the Greens estimate these policies will bring in about $14.4 billion, rising to $15.5 billion in the second year. In the second year, after paying for the Income Guarantee, the party would have about $4.7 billion left over.

Heading to the election

The Green Party's tax policy will likely be the cause of much debate heading towards the election.

Labour is yet to lay out its tax policy. Former Prime Minister Ardern ruled out introducing a capital gains tax during her time in office, but with Chris Hipkins now in the top job, such a restriction no longer applies.

Hipkins said the Government wouldn't introduce a capital gains tax or wealth tax at the Budget, but didn't rule it out for the party's election manifesto. 

He's also previously acknowledged that adjustments will have to be made to tax brackets due to wage inflation, but doesn't believe the time is right for tax cuts, given they would be inflationary.

The National Party has a policy of indexing tax brackets to inflation. The party's finance spokesperson Nicola Willis has confirmed the party will unveil its costed plan ahead of the pre-election fiscal update, including what it would slash to pay for its tax cuts.

On Saturday, she lashed out at the idea of the Greens introducing a wealth tax. 

"We think the last thing our fragile economy needs is more punitive tax measures," Willis said. "The problem with a wealth tax is it ends up catching a lot of people who we don't want to catch."

The ACT Party's alternative Budget also proposes tax changes. By 2025/26, it would have a two rate system, where any income up to $70,000 is taxed at 17.5 percent and income above it is taxed at 28 percent. It also proposes several credits and refunds, while abolishing the bright-line test.

The party wants to make some large cuts to operating allowances. It believes it could reverse 50 percent of the increases made since Budget 2021 "providing us with sufficient room to cover inflationary pressures, but without exacerbating that inflation through reckless spending".

Among the policies it wants to cut are fees-free, 'demographic ministries', and some industry subsidies and grants.

"The Greens' message is that your problems are caused by other people's success," ACT Party leader David Seymour told Newshub on Saturday.

"That's not the values that will make New Zealand wealthier. The ACT Party says we don't want to punish people for doing well, we want to widen opportunities so everyone does well."

The tax debate was stirred up earlier this year when research from Inland Revenue found the effective tax rate paid by New Zealand's wealthiest families is less than half of that of middle-income Kiwis.

This is primarily because the wealthiest families got most of their economic income through capital gains, which are mostly not taxed.

The capital gains came from increases in the value of businesses, properties and financial assets they owned or controlled.