Professor Lisa Marriott runs the ruler over the National Party's tax plan.

The much-awaited National Party tax policy was finally announced on 31st August. It comes labelled as the “Back Pocket Boost” and targeted at the “squeezed middle”. There are several parts that are likely to be fairly uncontroversial – let’s start with those.

The proposal to move the income tax thresholds is sensible. This is long overdue. See the table below for the detail. However, as is usually the case when these brackets move, higher income earners benefit more. Those earning up to $44,000 a year benefit by $2 a week while someone earning over $78,000 gains $20 a week – 10 times as much. However, it does at least mean that someone earning minimum wage can work a few more hours a week before moving into the 30% tax bracket.

The proposal to extend the Independent Earner Tax Credit is also sensible. This is currently $10 a week and only available to those earning up to $48,000 (and abated heavily from $44,000).

Under National’s policy this would be available for those earning up to $70,000, with abatement starting at $66,000. Increasing Working for Families tax credits will be appreciated by those who qualify. And removal of the Auckland Regional Fuel Tax and other planned fuel increases will benefit many – but raises the question of how the much needed transport infrastructure improvements will be funded.

The introduction of the FamilyBoost childcare tax credits is a replacement for the Labour Party extension of 20 hours early childhood education for two-year-olds that is proposed to be implemented on 1 April 2024. The National Policy is a 25% rebate up to $300 a week – so $75 a week for childcare costs.

There is very little in the proposed policies for the lowest income earners – particularly those without children. Low income earners already received the Independent Earner Tax Credit if earning between $24,000 and $44,000 and - as already noted - will benefit by around $2 a week from the movement in the tax brackets. Low income earners could be worse off overall as, behind the headline policies, sit some services that are targeted for removal. Such as the Community Connect programme that provided public transport subsidies for low-income and young people.

Meanwhile, there are clear concessions for those who have assets in the form of houses. Moving the bright-line test back to two years and (eventually) restoring full interest deductibility for residential rental properties are unlikely to benefit those who are worst off in Aotearoa. Note the National Party claim that this will put downward pressure on rents but “downward pressure” is different from rent reductions. These changes are for the benefit of residential landlords.

Despite the assurance that the policies are fully costed and reviewed, many of the tax “savings” need further justification and explanation. And then there are the additional revenue streams.

Questions have already been asked about the numbers. For example – a new 15% tax for foreign buyers who purchase homes over $2 million. This would mean that a foreign buyer (who can only buy a house over $2 million) would pay $300,000 in tax on this $2 million purchase. This is forecast to bring in $740 million per year (or roughly 2,500 $2 million house purchases, every year).

There is also the $179 million from offshore online gambling operations that appears to be premised on the idea that all offshore gambling operations will be willing to comply with this policy. My colleague, Jonathan Barrett, describes this policy as fanciful.

When it comes to the environment, the National Party policy acknowledges that the Emissions Trading Scheme (ETS) is New Zealand’s main tool for reducing climate change emissions and meeting the Net Zero 2050 goal, before announcing that ETS revenue will be returned to New Zealanders.

This “return” is by way of funding some of the aforementioned policies, rather than “returned” in the usual sense of the word. Many will be dismayed that an environmental policy tool is proposed to be used for non-environmental purposes.

Lisa Marriott is Professor of Taxation at Te Herenga Waka—Victoria University of Wellington School of Accounting and Commercial Law.