Tax Cuts – Breaking Down the Budget

Default Profile ImageBen O'Connell
Breaking Down the Budget

The 2024 Budget is consistent with National’s promise to deliver tax cuts, boost education, and save funds where able. But Labour says it’s a Budget of broken promises and backdowns.

Prime Minister Christopher Luxon says Budget 2024 delivers on the Government’s promises, with savings across the public sector being reinvested in frontline services and meaningful tax reductions to support hard-working Kiwis. 

But as the Beehive hummed with this news, outside Māori rights protesters called for radical change. Let’s break down the Budget’s tax changes that have sent shockwaves through our nation’s political world.

Tax Cuts

The 2024 Budget sets aside $14.7 billion to deliver tax cuts and rebates. Cuts to income taxes, rebates for early childhood education fees and tax cuts for landlords are included.

For many median-income earners, together, those changes translate to the promise of an extra $50 per fortnight by August.

“The tax package in Budget 2024 is fully funded from savings and other revenue measures – meaning it will not add to debt and inflation,” Rt Hon Christopher Luxon said. “But it will allow hard-working New Zealanders to keep more of what they earn.”

“On 31 July this year, New Zealanders will experience tax relief for the first time in 14 years. This relief is well overdue and will help hardworking Kiwis who have endured a prolonged cost of living crisis,” Finance Minister Nicola Willis said.

Relief for Families

She said the tax package targets relief to low—and middle-income households and that families with young children will benefit most. She said that equates to up to $102 a fortnight plus FamilyBoost childcare payments of up to $150 per fortnight for eligible families.

“Our Government will raise income tax thresholds to help compensate for wage growth, expand eligibility for the independent earner tax credit, introduce the FamilyBoost childcare payment and increase the in-work tax credit for low to middle-income working families.

These tax cuts are to be expected and show National following through on their coalition Government commitments. Tax relief for the squeezed middle in line with the National Party tax plan, and targeted investments in public services, including a $16.68 billion multi-year funding boost for health services, $2.93 billion for education and $2.92 billion to restore law and order, are some of the promises fulfilled.

A $7 billion boost to capital funding, savings of $23 billion over four years to fund tax relief and boost frontline services, and fiscal discipline are other key tenets of this year’s Budget.

“This year’s Budget is the clean-up job New Zealand needs after six years of economic mismanagement,” Nicola Willis said. “We are welcoming in a new era of careful government spending, lower taxes for hard-working New Zealanders and a strong focus on rebuilding the economy.”

“A Good Start” says ACT

Associate Finance Minister David Seymour says this Budget makes a good start in reducing low-value government spending, and there is more efficiency to be found in future Budget cycles. 

“The coalition Government inherited a dire fiscal situation. Core Crown expenditure increased nearly 70 percent between 2017 and 2023. Debt blew out from $60 billion to $155 billion. But the quality of government services didn’t improve to anywhere near the same extent, and in some cases went backwards,” says Seymour. 

“Getting the books back in surplus and reducing government spending as a proportion of GDP will require serious discipline over several years.

“Broken promises” says Labour

But to pay for these tax cuts, there will be myriad slashes in other departments. The opposition parties hit back against the Budget reveal.

“This is a budget of broken promises and political backdowns,” Labour MP Barbara Edmonds said. 

“For months, New Zealand families were promised $250 extra a week – in reality, this is going to a tiny percentage of the population,” Labour Leader Chris Hipkins said. 

“While the minimum wage worker gets their 30 cents an hour in tax cuts, their hopes of buying a home has been ripped away. Saving money has become harder with the loss of half-price public transport, free prescriptions, and the first home grant.”

“Not an accident” says Greens

“While their Fiscal Strategy says they are committed to a more productive economy, they have made decisions to entrench a tax system that does the opposite. Once again, they’ve cherry-picked statements from the IMF and OECD, ignoring both of their recent pleas to tax capital gains,” Green Party co-leader Chlöe Swarbrick said.

“When the Government says their aim is growth, we must ask the question of who pays for that growth and who pockets the gains. They’ve handed $2.9 billion in tax cuts to landlords, which our Reserve Bank says will only serve to make housing more expensive and arguably removes the incentive for new builds.

“A year ago, the IRD told us the wealthiest 311 families pay less than half the effective tax rate of the average New Zealander and hold more wealth than the bottom two and a half million New Zealanders. That’s not an accident.”