Greens' moral crusade masquerading as an economic plan
Change my mind
This week, the Greens hopped down off their soapboxes, put pen to paper, and authored their very own alternative budget for New Zealand. It must be said it is very similar to their 2024 alternative budget and is exactly what the politically engaged would expect from the Greens. But there are some new policies and its impacts are likely to come as a surprise to some of their passive supporters who just like their green vibes.
Okay. Let’s strip away the political gloss and assess the Green Party’s 2025 budget for what it is: a document heavy on ideology, neo-Marxist buzzwords, and te reo, but dangerously light on pragmatism, economic credibility, and operational realism.
Ultimately, they have admitted in policy documents the terrifying anti-growth, anti-profit, nihilistic vision they have for our country. They have also demonstrated emphatically that they do not remotely live in the real world. It is, in my view, not hyperbole to call them economically illiterate and ideologically extremist.
What this alternative budget does do, is provide a reality check for all the hard working Kiwis who have given the Greens their vote because they are worried about the environment and certain culture wars issues. I say this as someone who has undergone this wake up call some years ago. This budget tells the public servants, the nurses, teachers, administrative staff etc that they are actually better off under the current Government.
Please note: I intended to write a review of the Greens’ Budget in terms of both revenue and expenditure, but my ramblings on the tax portion of the document are so extensive that I will do expenditure separately.
The Details
On their website, the Greens introduce their budget with the following:
As was promised in te Tiriti o Waitangi, Aotearoa can be a place where everyone has what they need.
This budget imagines the future we could create together if we put people at the heart of decision-making. The challenges of climate change and wealth inequality need shared solutions that give back control to communities – not big corporations.
They then explicitly promise that with their budget Kiwis would get free GP and dental care, early childhood education “for whānau, not profit”, clean energy for our climate, “Hoki whenua mai: returning whenua and recognising the enduring tino rangatiratanga that tangata whenua have”, and “a fair tax system to pay for it”.
The Greens say “a better world is possible, let us show you how”. They just want to drive us all to destitution to achieve it.
Fundamentally, their budget is about lifting government revenue by taxing New Zealanders an extra $88billion over four years. They have no plan for growing the economy. They seek to take from New Zealanders wages so that they can spend more.
The New Zealand Herald reports that for additional capital, the Greens have decided to simply borrow more:
The party also promises significant borrowings for investment not funded by taxation. The borrowings would take net core Crown debt to 53.8% of GDP by the end of the decade. In 2019, Treasury said debt-levels below 50-60% of GDP were prudent for New Zealand and warned that higher debt would make it more challenging to borrow during economic shocks like earthquakes.
Included in the Greens tax grab are following revenue channels:
Inheritance Tax - this would tax any inheritance or gifts at a rate of 33% (after a lifetime threshold of $1million is reached).
Private Jet Tax - a $5,000 tax per passenger on arrivals and departures.
(Return of ) 10-year Brightline test - this means any profits on a residential property sold within 10 years are taxed as income tax. It appears the exclusion of the family home remains.
(Return of ) Labour’s removal of interest deductibility for residential property. This is the so called “tax cuts for landlords” that departing Labour MP David Parker said “went too far”.
Companies/Corporate Tax changes - currently at 28%, the Greens would raise this to 33%.
Income Tax changes - this lowers the threshold for the 39% tax rate to annual incomes of more than $120,000 and introduces a 45% rate at $180,000.
Mining Royalties changes - they would double these from 2% of revenue to 4%.
Wealth Tax - this would introduce a 2.5% on net assets (eg. property and shares) once the $2million individual threshold is reached.
It is worth remembering that the Green Party only claims these policies will generate nearly $90 billion in new revenue over four years. This is an implausibly optimistic figure. The reality is you can’t just plug in tax rates and expect static revenue. People adapt and restructure in reaction to law changes and shifting systems. Sometimes they just straight up leave. These are not “guaranteed billions”. They are some pretty wild assumptions disguised as policy.
Before launching in to some of my more critical analysis, I will start with what I agree with. First, (caveat: I haven’t delved into the details of this one too deeply) the Private Jet Tax sounds alright. Mostly because my life would have to undergo some serious changes for it ever apply to me! I am also personally not opposed to the Brightline Test returning to 10 years, but then I am not opposed to a Capital Gains Tax in general. In many ways, I am still a leftie at heart (having only shifted my vote to the centre-right at the 2020 election) and I manage to infuriate both Left and Right with my unwillingness to play tribally and support policies simply because my “side” promotes them.
Moving on.
Inheritance Tax
The Inheritance Tax is a Death Tax. After a life of paying taxes, the Greens want to whip your wallet out of your cold dead hands to take a chunk of what you managed to save to leave to your children. Clearly this will encourage all sorts of jiggery-pokery in transferring wealth to children before death instead.
A 33% inheritance tax would be a cultural and economic shock to Kiwis, who have long expected to pass on farms, businesses, and homes to our kids. Politically speaking, this is not just a risky policy; it’s an electoral grenade.
How is it fair for New Zealanders’ income to be taxed when earned, capital gains to be taxed indirectly through inflation or property levies, and then taxed again after death?
This kind of steep Inheritance Tax punishes lifelong saving behaviour and intergenerational planning. Hate to play the Greens at their own game but, culturally, Māori family structures could be disadvantaged by this too. Many Māori land holdings are held communally or via whānau trusts, and may face complex tax burdens if not exempted. I didn’t see any exemptions for this so let me know if I missed them.
In any case, this is a potential legal and cultural minefield. New Zealanders, in general, work, save, invest in homes or businesses, and plan to pass that legacy on to the next generation. The Greens’ Death (ahem) Inheritance Tax undermines that goal by confiscating a third of a lifetime savings if they are passed on. It punishes families who think inter-generationally!
As The Taxpayers’ Union has pointed out, this would be a death sentence for many family farming businesses. Family farms are often valued highly on paper even if they are struggling to generate a modest income. Family estates that include farmland and farming businesses may have to sell up pieces of land, break up businesses, or take on debt just to pay the Greens’ Inheritance Tax. Farming families shouldn’t have to sell parcels of land off because the taxman comes knocking when mum and dad have died. Rural communities who are already sceptical of Wellington are likely to see this as meddling urban elites targeting them.
The $1million threshold might seem high, but a tin shed perched on a postage stamp in central Auckland would fetch more than that at auction. Most residential properties in Auckland would tip families over the threshold.
And if the Greens think they are solving inequality with this tax, they severely underestimate the craftiness of well-paid lawyers. The ultra wealthy who can afford clever litigators are likely to be able to dodge the Inheritance Tax far more easily than the working class siblings who inherit the family home and a bit of savings.
Companies/Corporate Tax
The Greens say that their Inheritance Tax is similar to Ireland’s Capital Acquisitions Tax. It is a pity they were not inspired to mimic Ireland’s Corporate Tax rate which is 12.5%. Instead, they want to raise our already high rate from 28% to 33%. This would place New Zealand at the very top of the developed world for most expensive Companies or Corporate Taxes.
Ireland’s low corporate tax rate has been a cornerstone of its economic policy since the the "Celtic Tiger" boom of the 1990s and 2000s during which the economy experienced rapid growth. It significantly influenced Ireland’s development, especially through foreign direct investment. Major multinationals like Apple, Google, Facebook (Meta), Pfizer, and Intel have established major European headquarters or manufacturing plants in Ireland as a result of this. The Irish Government estimates as of 2024, over 300,000 jobs are linked directly or indirectly to foreign multinationals operating in Ireland.
Contrary to our Greens’ bizarre anti-growth stance, the low rate has ensured that Ireland’s Corporate Tax take has soared due to the sheer volume of profits being declared in Ireland. This has, naturally, allowed the Irish Government to invest more in healthcare, education, and public infrastructure.
It is reasonable to be concerned that a Corporate Tax rate more than 20% higher than Ireland’s would have the opposite effect on the New Zealand economy. A total collapse in foreign direct investment could be one particularly terrifying outcome. Our current Government has been working to get our sluggish FDI going and whacking another 5% on companies would likely be suicide. More businesses would take their headquarters and operations elsewhere, taking large numbers of jobs with them.
Once these retractions occur the overall tax take from corporates has nowhere to grow and instead is likely to rapidly shrink. A higher tax rate does not mean more taxes collected, I’m sorry to say. Total revenue will likely fall with companies leaving or shifting profits offshore. One of the benefits of Ireland’s 12.5% rate is that some companies run their global profits through Ireland as it is cost effective which results in billions for the Irish Government.
Apart from removing any kind of competitive edge whatsoever, another downstream effect of a high corporate tax rate driving business out of the country is that GDP and GNP would take significant hits. Ironically, all of this would leave New Zealand more reliant than ever on our traditional industries like agriculture and primary industries. Not exactly the Greens’ favourite sector. Although, it remains to be seen if even these industries would survive the Greens’ war on profit and growth.
Income Tax
The Greens are advocating for a 39% income tax rate to be applied at income over $120,000 and a 45% rate at $180,000. This is interesting given the foot stomping they have been doing this past week about the Equal Pay Amendment Bill. It seems they only want nurses to be paid more so that they can tax the additional income off them.
As the New Zealand Herald reports:
Thanks to a 2023 pay equity settlement, senior nurses had their pay lifted to between $105,704 and $153,060, meaning many would pay higher rates of income tax under this plan.
Likewise most sergeants and senior sergeants in the New Zealand Police would cop the 39% tax rate (pun intended). As of June 2024, around 20,000 staff in New Zealand's Public Service and selected agencies earned more than $120,000 in total remuneration, they would all be impacted.1 For context, just under half of the public service earn more than $100,000.2 Then there are the nearly 4,000 public servants who are paid more than $180,000 per year and who would qualify for the 45% tax rate. Most of these people are based in ultra-Green Wellington. This tax system presents them with a very real reason to shift their vote - likely to Labour.
In any case, there are a lot of people who probably don’t consider themselves particularly highly paid who are being treated as the wealthy by the Greens and their alternative budget.
Let’s look at how the introduction of higher tax rates would place us internationally. A 45% top tax rate in New Zealand would align us with Australia and the UK in terms of marginal rates. However, the threshold of $180,000 is lower than most countries except the Netherlands and Sweden, both of which tax high incomes at a low threshold but offer more comprehensive services in return. Australia’s 45% tax rate kicks in at AU$180,000 which, based on today’s exchange rate, is equivalent to NZ$196,292.70. In the UK they have a much higher threshold for the 45% rate - £125,140 which is NZ$280,421.85 today.
There are certainly some arguments that can be made for having higher income tax rates; 39% is a comparatively low top tax rate. However, there are plenty of compelling reasons to oppose such a move including:
Brain drain - Highly skilled workers, such as doctors, tech professionals, and executives, might move overseas where after-tax incomes are higher. A steep top marginal rate would undermine our already low competitiveness in attracting talent and exacerbate the exodus to Australia.
Sneaky tax manoeuvring - New Zealand's relatively simple tax system means we have pretty minimal tax avoidance compared to many of our peers. Higher rates would incentivise more widespread use of trusts and more sheltering income in assets or businesses. If high earners restructure their income or reduce their taxable footprint, the burden could shift back onto middle-income earners through bracket creep or broader consumption taxes in the future.
High risk for low reward - only a small percentage of taxpayers earn over $180,000 and while it would raise some additional revenue it is arguably not enough to justify the destruction of political capital and other consequences.
Politics of envy - punishing success is not a hallmark of a high-growth society. These kinds of policies risk being seen as punitive rather good logical economics. Perceptions of hostility to profit and wealth often result in loss of confidence in the economy among business owners and leaders.
Less charity - high-income earners are responsible for a large share of charitable donations and start-up investments and there is a risk that the taxman taking more could reduce willingness or ability to donate. New Zealand doesn’t offer the same kinds of tax incentives for charitable giving that countries like the US and UK do.
Keep it simple, stupid - we are known for our simple and (relatively) efficient tax system and a pretty sharp increase to our top rate could complicate the system by inviting calls for more deductions and tax trickery.
Wealth Tax
The New Zealand Herald reports that:
The wealth tax would be a 2.5% tax on net assets, such as property and shares, over an individual threshold of $2m (or $4m for couples).
The net asset carveout means that someone with a multimillion-dollar home with a large mortgage might not be taxed. If someone owns $2.5m in assets, but owes $1m on their mortgage, their net wealth would be $1.5m and falls short of the threshold.
This kind of tax would represent a major shift in our approach to taxation, which currently does not tax wealth directly (we have a partial Capital Gains Tax in the form of the Brightline, but it isn’t quite the same).
The Greens, and supporters of the introduction of a Wealth Tax, argue that such a tax would make for a fairer and more equal tax system. They point to OECD and IMF economists calling for greater taxation of wealth to address rising inequality. They also enjoy broad support for the idea when it is framed up as a “wealth super-tax for the ultra-rich bastards”. Polling shows exemptions for the family home and higher thresholds make a difference in terms of levels of support.
On the other hand, opponents point to many of the same arguments I raised as reasons to oppose the 45% income tax rate. There is risk that high-net-worth New Zealanders would shift assets offshore, relocate, or restructure ownership. Just a few thousand wealthy families doing so could be seriously impactful on both the expected revenue from the Wealth Tax but also on the wealth of New Zealand. It would be tricky to implement in any case as valuing the various asset types accurately and over time is complex. The way value is calculated for residential property versus farmland or art or shareholdings, for example, is vastly different.
Of most concern to proponents of a Wealth Tax and those who are worried about inequality more generally, should be the very real issue of many New Zealanders being asset rich, but cash poor. Older Kiwis who have retired may have a very limited income (eg. pension) but be living in a valuable mortgage-free home. In real terms, their lifestyle can be practically impoverished, but the Greens would be demanding 2.5% on the value of the property.
Interest Deductibility AKA “Tax Cuts for Landlords”
It is entirely unsurprising that the Greens want to reverse the Government’s reversal of the removal of interest deductibility from residential properties. All opposition parties have banged the drum of “TAX CUTS FOR LANDLORDS” this term of Parliament. They have been very clever and quite dishonest in framing the ability to deduct interest as some kind of perk or tax cut. In actual fact, interest is often the largest cost of owning a rental.
This is my understanding of what it actually is (real economists please step in): When a landlord borrows money to buy a rental property, they pay interest on that mortgage. Prior to Labour’s law reforms in 2021, they could deduct that interest as a business expense from their rental income, reducing their taxable profit. Labour’s law changes removed the ability for this interest to be deducted. Then, the current Government changed the law again to gradually reintroduce interest deductibility in two phases. By tax year 2025/26 it will be fully reinstated.
Response
The Greens have characteristically inspired a vastly polarised response to their alternative budget. All their mates have said it is great while Christopher Luxon dismissed the budget as "madness,” "clown show economics," and an "absolute circus". Finance Minister Nicola Willis labeled it "fiscally deluded” and David Seymour described it as a "Green-with-envy budget". He also suggested Chloe Swarbrick might like to move to Venezuela "where they already have the same policies, and 90% live in poverty".
My favourite reaction came from Winston Peters. As TVNZ reports:
New Zealand First leader Winston Peters brought a printed copy of the Greens' alternative budget through Parliament on his way into the House.
"I've got the manifesto by Chloe Marx and Marama Engels," he said, referring to Green co-leaders Chlöe Swarbrick and Marama Davidson.
He said the budget was "Marxist" and added a sheet to his printout with the communist hammer and sickle symbol, saying that was "what it's all about — unbelievable".
He ruled out forming a coalition with the Green Party.
"I'm not wasting my time with the Green Party's pink, Marxist plan."
He said the country would be "Venezuela" and "Myanmar tomorrow".
The Green Party maintains that their budget offers a transformative vision for New Zealand, aiming to reduce poverty and invest in public services. Whether you agree with their aims or not, it must be said that their approach to taxation paired with an enthusiasm for increased borrowing would spell disaster. We can be charitable and cite noble intentions, but there are significant risks, implementation concerns, and ideological overreach that could have serious consequences for New Zealand’s economy, competitiveness, and social cohesion.
It is bad news for the people National has called the “squeezed middle” because it is our productive classes, not just the rich who would suffer under these policies. As I mentioned, people like nurses, police officers, small business owners, farmers, and self-employed workers likely don’t see themselves as “rich”, but that is how the Greens want to treat them. At a time when NZ already has a brain drain problem, the Greens’ plan would intensify the rapid exit of critical skills.
This so-called alternative budget is more of a campaign manifesto than a governing framework. Its boldness is a credit to the imaginations of the Green Party but falls down when seriously considered in term of implementation. It is especially unworkable in our fragile economic and geopolitical climate. It’s redistribution via clumsy taxation.
It is all fun and games for the increasingly unserious Green Party, but the real loser in this Budget is Chris Hipkins and his Labour Party. Hipkins will now need to rule out every single bit of madness the Greens have proposed or adopt it all as Labour Policy. Just as Luxon has had a jolly old time answering to some of David Seymour’s less popular policies, Hipkins too has to live and die by his potential coalition partners’ plans. And he thought Te Pāti Māori’s policy for Māori to retire a decade earlier than everyone else was bad…
Note: I am not an economist. I am a woman with political experience and lots of opinions. This is my interpretation of the Green Budget (taxation) based on my own reading and observations. I welcome any feedback from the better informed.
https://www.publicservice.govt.nz/research-and-data/workforce-data-remunerationpay/workforce-data
https://www.publicservice.govt.nz/news/latest-public-service-workforce-data-released
“People adapt”. It’s called emigration, money goes where money is loved.
Ani this is great analysis, but you are dingifhing green insanity with your attention. Anyone who has half a brain knows they are lunatics. Don't waste too much time on them I reckon.