Govt's Groundhog Day sees nine more weeks of tax confusion (2024)

Comment: Every year on February 2, a dozen men in tuxedos and top hats approach the burrow of a groundhog in Gobbler’s Knob, Pennsylvania and entice the beaver-like rodent to emerge and predict the weather.

If the groundhog, named Punxsutawney Phil, sees its own shadow when it is summoned, legend says it heralds another six weeks of winter-like conditions. If it does not, then spring has arrived.

March 27 was something of a Groundhog Day for the public’s knowledge of the Government’s tax plans. Things were looking up in the days ahead of the release of the Budget Policy Statement.

Earlier in the year, Finance Minister Nicola Willis had said the document would confirm the Government’s intended Budget operating allowances and just a week before the big day she had committed to delivering the same quantum of tax relief as promised at the election, after Prime Minister Christopher Luxon had cast doubt about this at his post-Cabinet press conference the day prior.

But when Willis emerged from the Treasury burrow, she must have seen her own shadow – or that of coalition partners Winston Peters and David Seymour –looming over her. The public was left in the dark about the shape of the Budget due May 30 and the minister even walked back her earlier assurance about the size of the coming tax cuts.

New Zealand’s Groundhog Day heralded another nine weeks of tax confusion.

This disappointing forecast was not the only way last Wednesday resembled Groundhog Day.

While New Zealand readers may not be familiar with the holiday as actually practised in the United States, they will be more familiar with the 1993 film starring Bill Murray. In it, Murray plays a weatherman reporting on the celebrations in Pennsylvania, but finds himself trapped in a time loop repeating the same day over and over again.

The public will be forgiven for thinking they too are trapped in the same storyline, with Willis’ resurrected refusal to state clearly that they will receive the tax cuts they were promised.

The tax cut pledge was the centrepiece of National’s election campaign. More than 300,000 voters accessed the party’s calculator over the course of the contest to see how much they’d get back from the tax package.

While Willis hedged on how the cuts might ultimately be paid for, she said she would resign if they didn’t materialise.

“If we didn’t deliver tax reduction, yes, I would resign, because we are making a commitment to the New Zealand people, and we intend to keep it,” she said in September.

Although a couple of changes to the package were made during coalition negotiations, the income tax adjustments in particular were left alone. In fact, both coalition agreements bind the new Government to implementing the tax cuts as promised.

Then, in a post-Cabinet press conference on March 18, Luxon began to bizarrely hedge on the shape and scale of the cuts.

“Can you commit to the same quantum of tax relief for every New Zealander, as you promised in your tax plan – so will it be the same amount?” he was asked.

“Again, all of that’s going to be revealed when we reveal the Budget at the end of May, but what I’d just say to you is we are deeply committed to delivering tax relief, as I’ve said before, to low- and middle-income working New Zealanders. And we think it’s very necessary and we think it’s entirely appropriate that they’re supported in a cost-of-living crisis, and it will be good,” he replied.

This will have been a surprise to middle- and low-income families who have seen little benefit to their wallets from the Government’s 100-day plan. When asked about the cost-of-living crisis – with inflation still near 5 percent – the Government has repeatedly pointed to these incoming cuts as the key tool to alleviate Kiwi households in financial pain. Now, suddenly, the Prime Minister himself wouldn’t say he was going to keep his election promise?

The next day, Luxon and Willis did some damage control, reassuring the public that the tax cuts would be delivered as promised.

“We remain committed to delivering personal income tax reduction from July, to the level of tax reduction that New Zealanders were expecting in our campaign,” Willis told reporters.

With that explicit assurance, those struggling households will have breathed a sigh of relief. Until they woke up on Wednesday to find it was still Groundhog Day, with Willis and Luxon once again refusing to commit to that same level of tax cuts.

“Will the quantum of the tax cuts be the same as what National campaigned on?” Willis was asked.

“You’ll see on Budget Day,” she replied.

Now the public is once again doused in uncertainty. Even if ministers do come out to make reassuring noises in the days or weeks ahead, who would believe them when they’ve already flip-flopped three times on this issue?

The Government may think the talk of fiscal holes and public servant staff cuts is a beltway issue that the average Kiwi doesn’t care about.

On those issues, they may be right. But on the specifics of the tax cuts that were the core of National’s campaign? On numbers that we know hundreds of thousands of people directly engaged with via the tax calculator?

Those are not abstract or complicated concepts. They are the Government’s main guarantee of cold hard cash for everyday New Zealanders. The rollercoaster of uncertainty is damaging the image the Government is trying to project of responsible economic managers and of politicians who deliver in a way the previous government didn’t.

In Pennsylvania, at some stage in the early 20th Century, the Groundhog Day tradition of hunting and eating the furry creature dropped by the wayside in favour of the quaint weather forecasting.

Willis may not be so lucky. If the public doesn’t get what they were promised, there will be calls for a scalp – and with her commitment to resign, she’s likely to be first in line.