Labour discusses Capital Income Tax on ultra wealthy individuals
Labour leader Chris Hipkins said the partyās tax policy is still a live discussion after the Labour Party social media account shared an account of a party meeting where former Revenue Minister David Parker allegedly discussed
something called a Capital Income Tax.
Hipkins confirmed members were discussing a range of taxes,
āThereās a lot of conversation within the Labour Party at the moment around different forms of taxation: capital gains tax, wealth tax, combinations of the two, land taxes,ā Hipkins said.
āIf you look at capital gains tax and wealth tax, they sit on the same spectrum. Itās about taxing capital and they are variants of a similar theme.ā
On August 19, Labourās WhangaparÄoa account shared a post titled, āMeeting David Parker - Itās a Capital Income Taxā.
The post described a meeting with Parker,
who was Revenue Minister when the Labour Government developed the wealth tax proposal that was later killed by Hipkins. Parker told a party meeting about something called a āCapital Income Taxā or CIT. The author says this is ādifferent from a capital gains tax - and not really a wealth tax - but a capital income taxā.
Much like 2023ā²s wealth tax proposal, it appears the revenue raised from this tax might help fund income tax cuts for workers in the form of a $10,000 tax-free threshold, meaning the first $10,000 people earned would not be taxed.
When asked about the Capital Income Tax idea on Tuesday, Parker told the
Herald that a capital income tax was essentially a wealth tax.
āThe Labour Party is having a debate as to whether in the tax space we should have a capital gains tax or a wealth tax and a wealth tax can alternatively be described as a tax on capital income - a Capital Income Tax,ā Parker said.
When asked whether he favoured using the revenue raised from any change in tax policy to fund additional services, or whether it should be used to redistribute income to workers, Parker pointed to the wealth tax proposal he put up last year as Revenue Minister.
āI wonāt talk about the future but last time we proposed it, it was a tax switch,ā he said.
Details on that policy was released after research published by the IRD showed the wealthiest New Zealanders paid tax at a rate half that of ordinary āmiddle-wealthā New Zealanders, mainly thanks to the fact that income earned through working is taxed lightly. The
study found the average tax rate paid by a sample of 311 high-net-worth New Zealanders was just 9.4%. That compares with a tax rate of 20.2% paid by āmiddle-wealthā New Zealanders.
Finance Minister Nicola Willis took to X (formerly Twitter) to question why Parker was the one fronting the tax discussion, given he quit the R
evenue portfolio in Government after losing the argument on a wealth tax.
āI understand that Labour loves talking about more taxes. Whatās harder to work out is why would David Parker be stepping in to comment on Dr Russell and Hon Edmondsā portfolios: He hasnāt held the revenue portfolio for more than a yearā Willis said.
Hipkins confirmed one option under discussion was a combination of a CGT and a wealth tax, listing several things the party was discussing: ācapital gains tax, wealth tax, combinations of the two, land taxesā.
āWeāve had an internal conversation in which all sorts of combinations are on the table. We will set out our tax policy in due course,ā he said, adding Labour had not got far enough through the process to discuss anything.
The idea mentioned in the post of mixing a capital gains tax with taxing wealth over $20m could be one Labour opts to pursue.
The 2023 wealth tax triggered at net wealth of over $5m which would have been taxed at 1.5%. This would have taxed the wealthiest 0.5% of New Zealanders. Treasury documents released on that tax proposal said more than 55% of the $3.4 billion rising to $3.7b the tax would have raised would be paid by people whose wealth was $20m or more - New Zealandās wealthiest 0.05%.
Chris Hipkins confirms Labour debates varied taxes, including capital gains.
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