John key says Labour's tax package will make high-income earners "not welcome in New Zealand". Where might they be more welcome than here?

In this morning’s news, the Prime Minister is quoted talking about Labour’s tax package, to be formally released on Thursday. He said:

“The answer from Labour is that if you are a top personal [income] taxpayer, your tax is going up, you're certainly paying more in capital gains tax and frankly, you're not welcome in New Zealand.”

All indications from Labour are that yes, top earners will be asked to pay a little more income tax, and those earning capital income will, for the first time in a long while, be asked to pay some tax on those earnings.

But what of Key’s last, dramatic claim, that these new elements would make top earners “not welcome in New Zealand?” How does he get to that? Certainly the news article had no facts to back up Key’s claim. In the past, however, he has talked vaguely about “tax competitiveness” to justify these predictions of doom.

Here are some pertinent facts about tax competitiveness for high-earners:

The table above gives statistics for three types of income commonly earned by high-income people: wage income; capital income; and dividend income. It shows that New Zealand taxes all three of those forms of income more lightly than do any of the other countries on the list.

Australia, Canada, Ireland, Britain, and the US all tax high wages, capital gains, and dividends more heavily that New Zealand does. Many of these differences between New Zealand and the rest are not even close – New Zealand’s taxes are substantially lower.

If John Key is determined to measure a person’s welcome in New Zealand only through tax rates, then the conclusion is clear. High income earners are more “welcome” here than in any of the country Mr Key aspires us to be like. Labour’s reported tinkering with the income tax scales and probable capital gains tax are not going to change these rankings.

John Key is wrong, even according to his own measure.

The CGT discussion so far has been a bit surreal. Labour starts a debate about tax policy, traditionally a strong area for National and ACT. In response, National becomes a fact-free zone and ACT retreats into an internecine war over the appropriate degree of their race-baiting.

Why are they both unwilling or unable to engage on taxes? I do not know, but I am interested to find out.