Child poverty group backs Green Party tax policy but National says it will affect investments

The Green Party is promising a radical shake up of the tax system if elected this year, with an "income guarantee", a wealth tax, a trust tax, and a higher top tax rate.

Under the party's 'Ending Poverty Together' plan, which was announced on 11 June, anyone earning under $125,000 would pay less tax, with a tax-free threshold of $10,000.

The changes would put up to $26 a week more into the pockets of 3.7 million New Zealanders, the policy document says. Green Party co-leader Marama Davidson said yesterday for couples, the Income Guarantee would be at least $770, while a single parent would always have an income of at least $735.

Green Party co-leader James Shaw told Morning Report New Zealand was the only country in the OECD that did not have some form of tax on capital and there were 135 countries that did a better job of creating "a more inclusive and fairer society than ours".

"Our vision is that we take the 45,000 children who are currently living below the material hardship line in Aotearoa and lift them above that line," he said.

"Why would we leave anyone in poverty when we have the choice not to?"

The party's proposed wealth tax of 2.5 percent on net assets above $2 million (or $4 million for couples who jointly own assets) and 1.5 percent tax on assets held in private trusts, were projected to raise at least $12 billion in the first year, the Greens' policy statement said.

But Shaw said those estimates were conservative.

"There are advantages and disadvantages to both wealth taxes and to capital gains taxes," he said.

"We've punted for a wealth tax on this occasion because we've seen huge asset growth, especially during the Covid period, and a capital gains tax would not recover any of that."

He said the party believed its plan was bold but also realistic and it could be executed in the next term of Parliament.

"What we're saying to the electorate is, if you want to live in a civilised society which takes everyone with us, please vote for this and that will strengthen our hand in any negotiations that we are in post-election."

Redistribution of wealth necessary - Child Poverty Action Group spokesperson

Auckland University economist and spokesperson for the Child Poverty Action Group (CPAC), Susan St John, told Morning Report the Greens' package was comprehensive.

"They have made a very good effort to review and to change Working for Families in very, very good directions so that they've dealt with the inherent discrimination," she said.

"They've dealt with the complexity of it, and they've dealt with the huge disincentives that are built into Working for Families for those low-income families in work."

While CPAC had not yet analysed the full package in detail at the time of the interview, the policy that gave "a substantial increase to the first child", payable to all low-income families, was "an exceptionally good way - a very cost-effective way to improve the hardship and poverty amongst those low-income families", St John said.

She said there had to be a redistribution of wealth and it could be done in a number of different ways.

"We have to accept that until we do redistribute, we are not going to affect the growing inequality in this country, which is extremely damaging and economically very inefficient."

The current situation was "pretty dire" for many families on low incomes, she said, and the proposed package would have a significant impact on child poverty levels in New Zealand.

"We've got hundreds of thousands of families that don't have enough money at the end of the week to feed their children. The foodbanks are over-stretched, the NGO sector is reporting every day about how dire things are - is this the country that people want to live in?"

'The way out of poverty is if you can work, you should work' - National

But the National Party said the Greens' package was massive tax grab which could see wealthy New Zealanders leave the country.

"You simply can't tax your way to a stronger economy and it's only a stronger economy that can solve the cost of living crisis that has exacerbated New Zealand's poverty issues," National Party finance spokesperson Nicola Willis told Morning Report.

The Greens' proposal assumed wealthy people had "no choice but to live and invest in New Zealand", she said.

"That's not the case; what we've seen with wealth taxes around the world, including in France and Norway, is that many wealthy people will simply flee the country, take their money that was creating jobs, incomes and opportunities, and put it elsewhere."

Willis said she thought most New Zealanders understood that the "best and most sustainable way out of poverty" was to support people into paid work, which brought "independence and dignity".

"Effectively what [the Greens are] saying is we need a gold-plated welfare scheme, National's view is this: Actually, we need to send very clear incentives that the way out of poverty is if you can work, you should work. We think it's wrong to remove all sanctions so that people can actively choose not to be employed."

Willis said that "by the Greens' own admission, in their costings, they admit their policy would lead to a 25 percent increase in the number of people receiving a benefit in New Zealand".

While she acknowledged the proposed wealth and trust taxes would affect only a small number of people, she said some of them would be "everyday working people who, for family reasons, have family trusts".

"Those 0.7 percent of people, they affect all of us, because if they're not investing in our companies, and our businesses, if they're not building innovative start-ups, then we're not going to have the jobs and opportunities and incomes that New Zealanders need."

National was in support of tax reductions, but believed they should be funded instead by "stopping some of the ineffective, wasteful spending that government is doing on itself", she said.

"Yes to tax reduction for working people, absolutely, but at the same time we need to be thinking about how we encourage more job creation, more innovation, more investment."