Sam Sachdeva
Wellington, January 31, 2019
Simon Bridges’ first major speech of the year was a fairly workmanlike affair, but beneath the blandness is a solid tax policy – even if it owes a heavy, ironic debt to Michael Cullen – and the makings of a coherent election strategy.
State of the Nation
New Zealand’s “State of the Nation” speeches at the beginning of the political year always feel slightly off.
The name seems like it should be accompanied by a grandness of both vision and oratory, yet that is all too often lacking in our politicians’ speeches.
In that respect, Simon Bridges’ address to a Christchurch audience was workmanlike rather than wowing.
The colour was limited to a quip about talk of a new “teal” political Party to buttress National at the next election (“My tie is green and my suit is blue, so there you go,” he said) and a cartoon version of Bridges explaining the Party’s policy announcement in an online video.
The real-life National leader said his cartoon counterpart was “an interesting way of getting the message across.”
Sadly, any parents still looking after their children before school restarts may need to look elsewhere for a distraction (unless their seven-year-old is really into the intricacies of our tax system).
Otherwise, Bridges’ speech served as a laundry list, hitting the same targets that the Opposition has been taking shots at since the Government took office.
Speech dull, but tax plan worthy
The Government was “wasteful,” Bridges said, with over 200 working groups and billions spent on pet projects.
It was soft on crime, “its sympathy now rest(ing) with the criminals;” in education, it wanted to “take power away from parents in favour of bureaucrats”.
There was mention of National’s own plans – for instance, its work on a draft RMA bill and series of public meetings to discuss education reforms – but overall, it was hardly thrilling (although after the Party’s end to 2018, boring may suit Bridges just fine in some regards).
Tax Policy
At first glance, the Party’s big announcement – the linking of income tax brackets to inflation – would seem to fit in the similar category of “dull but worthy,” yet on closer inspection it feels like sound policy.
The proposal is designed to address the issue of “bracket creep,” where both incomes and the cost of living rise but tax brackets do not, meaning some people start paying higher rates of tax without becoming wealthier in real terms.
More cuttingly, Finance Minister Grant Robertson questioned where National would make cuts to cover the $650 million in foregone tax revenue: Bridges made generic gestures towards “stopping the waste,” but a more thorough accounting would be needed to satisfy voters.
According to Bridges, the last time the tax brackets were changed was in 2010, when the average income earner was $21,000 short of paying the top 33% tax rate.
Now, the average worker is only $8000 short of the mark, and by 2022 they will likely be paying that top rate.
By tying the tax thresholds to inflation, that unintentional creep is averted and workers are not pushed into higher brackets than they probably should be.
Veto to Finance Ministers
National would also put a “veto” in place, allowing Finance Ministers to call off a threshold adjustment in the event of a major change to circumstances like an economic crisis.
The policy is not without its problems. In its interim report, the Government’s Tax Working Group said there would be compliance costs with annual threshold or tax rate changes (although that would be presumably mitigated by National’s plan to adjust the threshold every three years).
Tax Boogeyman
Perhaps the most ironic thing about the policy is its striking resemblance to the one devised by National’s current tax boogeyman and former Labour Finance Minister Sir Michael Cullen.
Cullen’s now-infamous “chewing gum tax cuts,” announced in the 2005 Budget but later scrapped after much mockery, were also based around indexing tax thresholds to inflation.
Bridges insists his policy is different, claiming Cullen was proposing a one-off adjustment rather than rolling alterations, but the media release from 2005 is clear he also intended for the threshold changes to take place every three years.
Robertson borrowed from the attacks against Cullen in responding to Bridges, noting that someone on $40,000 a year would only save $1 a week, suspiciously close to the price of a packet of gum.
Of course, taking inspiration from others is no crime: ACT leader David Seymour could feel entitled to take some of the credit too, given his relentless campaigning for an end to bracket creep in National’s last term of government.
‘It’s the economy, stupid’
What is clear is that Bridges intends to stick to the mantra that drove Bill Clinton’s 1992 Presidential Campaign: “It’s the economy, stupid.”
By putting the focus so squarely on taxation, the cost of living and the state of the economy more generally, the hope will be to contrast National’s reputation as sound fiscal stewards with the cliché of left-wing parties’ profligacy (even if those stereotypes are sometimes far from the truth).
As far as pre-election strategies go, it is not without merit given Labour’s traditional speed wobbles over the issue of taxation during campaigns.
Succeed again, and force a wedge between Labour and New Zealand First over the polarising issue of a capital gains tax, and Bridges’ approach could bear fruit.
Bullish talk
Of course, National successfully knocked Labour around on the issue of tax before the last election and still failed to form a government, suggesting that the economy may not be the be-all and end-all for voters.
There is plenty of bullish talk within National about the Party’s plans to roll out thorough policies and discussion documents in the run-up to the 2020 election.
Delivering on that may be the real test of Bridges’ and his Party’s fortunes.
After all, remember what did for Clinton’s opponent at that 1992 election, George HW Bush: ”The vision thing.”
Sam Sachdeva is Political Editor of Newsroom covering Foreign Affairs, Trade, Defence and Security Issues based in Wellington. The above article and pictures which appeared in the Web Edition of Newsroom today (January 31, 2019) have been reproduced here under a Special Arrangement.
