Objective:
This policy aims to transform New Zealand's tax landscape by gradually eliminating income tax, replacing GST with a flat, low-rate consumption tax, and phasing out Road User Charges (RUC) and Fuel Excise Duty (FED). The goal is to stimulate economic growth, enhance government efficiency, and increase disposable income for all New Zealanders, thereby addressing key economic challenges like the housing crisis without resorting to punitive measures like a capital gains tax. By reducing taxes on essentials like fuel, food, and electricity, and by ensuring that government spending does not outpace revenue, we intend to foster an environment where economic activity thrives without causing inflationary pressures. The immediate reduction of RUC and FED will directly lower costs on essentials, making everyday life more affordable. Importantly, these measures also increase the tax base as transactions rise for both personal and business activities for the new low rate consumption tax.

Policy Details:

We will raise the income tax-free threshold to $60,000, allowing individuals to keep more of what they earn. Income tax rates for earnings above this will be incrementally decreased by 5% each year until they reach zero, contingent on sustained reductions in government spending year-over-year, continued economic growth evidenced by GDP increases, measurable improvements in government efficiency, and the successful phased reduction of RUC and FED.

GST will be substituted with a 5-12% consumption tax, which cannot be claimed back by businesses, simplifying tax administration, and is applied only at the point of sale to the end consumer, avoiding the compounding of taxes through the supply chain. This flat tax encourages more transactions because it's lower and more straightforward, leading to an expanded tax base as both consumers and businesses increase their spending and investment.

GST will be removed from fuel, food, and electricity concurrently, to monitor and manage price stability while ensuring supply meets demand. As prices for these essentials decrease, consumer spending power increases, leading to more transactions and thus a broader tax base.

These taxes, RUC and FED, will be scaled back year by year until eliminated, directly reducing transportation and logistics costs, which is expected to lower the price of fuel instantly and reduce the cost of transporting goods. This not only makes goods cheaper but also stimulates more buying and selling, thereby expanding the tax base through increased economic activity.

By closely monitoring market responses, we will adjust the pace of these tax reductions to prevent inflationary spikes, ensuring supply keeps pace with demand. Government efficiency measures will include digital service enhancements, reduced bureaucratic costs, and increased productivity to fund these tax cuts. As efficiency rises, so does economic activity, further broadening the tax base.

Rather than taxing capital gains, this policy frees up more income for individuals, making housing more accessible by reducing the financial burden on households, encouraging savings, and potentially increasing investment in housing. More disposable income means more spending, which in turn means a larger tax base.

Each year's tax reductions will only proceed if government spending is lower than the previous year and below tax revenue, ensuring we maintain a budget surplus. This disciplined approach ensures that the increase in the tax base through more transactions supports government finances.

Campaigns will inform the public about these changes, highlighting the benefits of lower taxes on essentials and how they're designed to stimulate economic activity. As public awareness and engagement increase, so will the number of transactions.

We will review the economic impact, inflation, government efficiency, and consumer prices annually, making adjustments to keep the policy's objectives on track, including the growth of the tax base.

Conclusion:
This policy outlines a strategic shift towards a tax system that rewards economic growth, simplifies taxation, and directly improves the purchasing power of New Zealanders. By phasing out burdensome taxes in favour of those that are prosperity-based, we aim to create an inclusive, growth-oriented economic environment where both personal and business transactions flourish, naturally expanding the tax base. The immediate effect of reducing RUC and FED will lower the cost of essentials, contributing to a more affordable lifestyle for all, while the focus on spending discipline ensures long-term fiscal health. This approach not only addresses the housing crisis but also sets a foundation for sustained economic prosperity by broadening the tax base through increased economic activity.

An applied example below uses trends and data collected directly from various government websites, without direct access to government actuals general assumptions have been made.

Initial Setup:
Total Expenditure (Base Year, 2023): NZD 700.5 billion (Private: NZD 203 billion + Business: NZD 497.5 billion)
FDI Average: NZD 4 billion per year
Consumption Tax Rate: 8%
Economic Growth Rate (Real): 4% per year
Inflation Rate: 3% per year
Uncollected Tax Money Spent: 50%

Year-by-Year Calculation:
Year 1:
Nominal Growth (Real Growth + Inflation):
4% (real) + 3% (inflation) = 7% nominal growth
Total Expenditure (Nominal, Adjusted for Growth):
NZD 700.5 billion * 1.07 = NZD 749.535 billion
Tax Revenue (8% on Nominal Total Expenditure):
NZD 749.535 billion * 0.08 = NZD 59.96 billion
New Total Expenditure with FDI (Nominal):
NZD 749.535 billion + NZD 4 billion = NZD 753.535 billion
Uncollected Tax Money:
Previous Year's Tax Revenue (on NZD 700.5 billion): NZD 700.5 billion * 0.08 = NZD 56.04 billion
Difference = NZD 59.96 billion - NZD 56.04 billion = NZD 3.92 billion
Spent Uncollected Tax:
50% of NZD 3.92 billion = NZD 1.96 billion

Year 2:
Total Expenditure (Nominal, Adjusted for Growth and Inflation + Previous Year's Spent Uncollected Tax):
(NZD 753.535 billion + NZD 1.96 billion) * 1.07 = NZD 811.43 billion
Tax Revenue:
NZD 811.43 billion * 0.08 = NZD 64.91 billion
New Total Expenditure with FDI:
NZD 811.43 billion + NZD 4 billion = NZD 815.43 billion
Uncollected Tax Money:
Previous Year's Tax Revenue: NZD 59.96 billion
Difference = NZD 64.91 billion - NZD 59.96 billion = NZD 4.95 billion
Spent Uncollected Tax:
50% of NZD 4.95 billion = NZD 2.475 billion

Continuing the pattern for Years 3 to 12:
Nominal Growth: 7% per year (4% real growth + 3% inflation)
Add FDI: NZD 4 billion to the new total expenditure (nominal terms).
Calculate Tax Revenue: Multiply new nominal total expenditure by 8%.
Uncollected Tax: Difference between current year's nominal tax and the previous year's nominal tax revenue.
Spent Uncollected Tax: 50% of this difference.
Update Total for Next Year: Add spent uncollected tax to the new total expenditure before applying the nominal growth rate.

Here's a summary for each subsequent year (calculations continue with the same method):

Year 3:
Total Expenditure: NZD 874.39 billion, Tax Revenue: NZD 69.95 billion, Spent Uncollected: NZD 2.52 billion
Year 4:
Total Expenditure: NZD 937.96 billion, Tax Revenue: NZD 75.04 billion, Spent Uncollected: NZD 2.55 billion
Year 5:
Total Expenditure: NZD 1006.50 billion, Tax Revenue: NZD 80.52 billion, Spent Uncollected: NZD 2.74 billion
Year 6:
Total Expenditure: NZD 1080.46 billion, Tax Revenue: NZD 86.44 billion, Spent Uncollected: NZD 2.96 billion
Year 7:
Total Expenditure: NZD 1160.29 billion, Tax Revenue: NZD 92.82 billion, Spent Uncollected: NZD 3.19 billion
Year 8:
Total Expenditure: NZD 1246.51 billion, Tax Revenue: NZD 99.72 billion, Spent Uncollected: NZD 3.45 billion
Year 9:
Total Expenditure: NZD 1339.77 billion, Tax Revenue: NZD 107.18 billion, Spent Uncollected: NZD 3.73 billion
Year 10:
Total Expenditure: NZD 1440.75 billion, Tax Revenue: NZD 115.26 billion, Spent Uncollected: NZD 4.04 billion
Year 11:
Total Expenditure: NZD 1550.20 billion, Tax Revenue: NZD 124.02 billion, Spent Uncollected: NZD 4.38 billion
Year 12:
Total Expenditure: NZD 1668.92 billion, Tax Revenue: NZD 133.51 billion, Spent Uncollected: NZD 4.75 billion

Final Analysis:
Total Tax Revenue Over 12 Years: Approximately NZD 1,029.33 billion (this sum accounts for inflation and reflects the nominal growth in tax revenue).

Notes:
Nominal vs. Real Values: Nominal figures include inflation, showing higher growth rates than real figures. Real growth reflects only the increase in quantity of goods and services, not their price.
Inflation Impact: Inflation increases nominal values but can erode purchasing power if not matched by wage growth. Here, we assume all economic agents adjust their behaviour with inflation.
FDI: We've kept FDI constant in nominal terms, which might not reflect real investment growth if inflation is high.
Uncollected Tax Spending: Assuming this goes directly back into the economy can stimulate growth but assumes no savings or leakage outside the economy.

This model now more accurately reflects how inflation can affect tax revenues and economic growth over time, providing a more realistic scenario for policy analysis. However, real-world outcomes would be influenced by many unpredictable variables, including changes in inflation rates, consumer behaviour, and global economic conditions.

Example of our tax policy implementation using actual New Zealand GDP figures in NZD:

Initial setup:
Starting GDP (2023): NZD 253.47 billion (from web data).
Current Tax Revenue: Let's estimate this at NZD 100 billion for simplicity, as specific figures weren't provided but should be adjusted based on actual data.
Inflation: 3% per year.
Real GDP Growth: 2.5% per year initially, increasing to 3% due to policy effects.
Government Spending: Assumed to be at or below tax revenue each year for policy to continue.

Policy Phases:
Year 1:
Income Tax:
Raise tax-free threshold to $60,000.
Decrease income tax rates by 5% for income above this threshold.
Consumption Tax (replacing GST):
Introduce at 5%.
RUC and FED:
Reduce by 20% each year until eliminated.
Economic Effects:
GDP Increase: 2.5% real growth plus 3% inflation = 5.5% nominal growth.
New GDP: NZD 253.47 billion * 1.055 = NZD 267.38 billion.
Tax Revenue:
Income tax reduction impacts revenue, but the consumption tax captures more due to increased spending from disposable income increase.
Assume tax revenue drops slightly due to income tax cuts but is offset by consumption tax increase: NZD 98 billion.
Government Spending:
Must be less than NZD 98 billion to continue tax phase-out.

Year 2 to Year 12:
Income Tax:
Continue reducing by 5% each year, aiming for zero by Year 12 if conditions are met.
Consumption Tax:
Gradually increase from 5% towards 12% based on economic performance and tax revenue needs, maintaining a flat rate.
RUC and FED:
Continue 20% annual reduction until completely phased out (by Year 5).
Economic Growth:
Assume real GDP growth increases to 3% annually due to policy effects, combined with inflation for nominal growth.

Year-by-Year Example:
Year 2:
GDP: NZD 267.38 billion * 1.06 = NZD 283.42 billion.
Tax Revenue: Adjust for lower income tax but higher consumption tax, assuming NZD 99 billion.
Government Spending: Below NZD 99 billion.
Year 5:
RUC and FED eliminated.
GDP: NZD 324.31 billion (assuming compounded growth).
Tax Revenue: Consumption tax at 7%, income tax reduced significantly; revenue might be NZD 110 billion (higher due to broader base).
Government Spending: Continues to decrease relative to revenue.
Year 12:
Income Tax: Completely phased out if conditions are met.
GDP: NZD 420 billion (assuming consistent growth).
Tax Revenue: Solely from consumption tax at 12%, potentially reaching NZD 126 billion due to a much larger tax base.
Government Spending: Significantly below revenue due to efficiency gains and spending discipline.

Monitoring and Adjustments:
Economic Impact: Review GDP growth, employment rates, and business investment annually.
Inflation: Adjust consumption tax rate if inflation exceeds a target, say 4%.
Government Efficiency: Digital transformation, reducing bureaucracy, should show measurable improvements.
Consumer Prices: Monitor to ensure essentials remain affordable post-tax removal.

Implementation Risks and Mitigations:
Revenue Shortfalls: If income tax cuts outpace the growth in consumption tax revenue, policy progression might need to slow.
Inflation: If price stability is threatened, the rate of FED and RUC reduction or the increase in consumption tax might be adjusted.