How Will the 2020 General Election Affect Your Small Business?

I used to think that what politicians did, didn’t really affect the day to day running of my small business.  I’m not so sure now.

It does make a difference and we should pay attention to the proposed policies on the table.  Here’s a 101 thinking on the different parties and policies, courtesy of their websites. We’ve only taken a look at the top 4 polling parties right now and ordered in terms of current polling.

Labour

Labour has been implementing a raft of COVID-19 policies since April, of which the top ones are:

  • Wage subsidies
  • Government loans at 0% interest
  • Tax policies such as loss carrybacks, changes to loss continuity rules and increasing the deductibility of capital purchases up to $5,000.
  • Underwriting the Business Finance Scheme
    All pretty sensible stuff and fairly widely accepted as positive for the business community.

New policies up for the next term:

  • Increase of the minimum wage to $20
  • Introduction of a minimum of 10 days of sick pay
  • Introduction of an extra-statutory day – Matariki.
  • Free apprenticeships
  • Increases on the top tax rate to 39% which will affect people earning over $180,000 per annum.
  • Extra help for our exporters
  • Invest in 11,000 green jobs

This is a mixed bag for small business owners.  Increasing staff costs is never popular with small business owners – the only solace for them is to put their prices up and hopefully, there will be more money in the economy from the increased wages.  The increase in the top tax rate is a relatively mild move and will only annoy 2% of the population!  Extra export support and support for apprenticeships is positive.

National

National are proposing a more general approach:

  • Cut taxes.
  • They are proposing increasing the tax brackets which, on average, will put an extra $3,000 in the average Kiwi’s pocket.  This will help business owners in terms of their own tax bill and should also pump a bit more money into the economy.
    It’s debatable whether the extra money is better off in the pockets of Kiwis or the government in terms of economic impact.  Both will be spent.  However, in terms of my pocket, it’s pretty clear where most people would prefer the money to be.

There is also a detailed policy document which is too long to summarise but some of the key points are:

  • Increase the deductibility of assets to $150,000
    This is a dramatic increase from the current $5,000 and means that business should invest more in their business – this is a good thing for us, assuming we have the confidence to make this kind of investment.
  • Offer cash incentives to hire people ($10,000) and up to $30,000 to start a new business if you’ve lost your job  – JobStart & Business Start
  • Cut red tape
  • Change provisional tax brackets and GST thresholds

National is following its traditional approach of tax & red tape cutting.

Act

Not surprisingly, Act is appealing to its core with the following:

  • Re-introducing 90-day trials and proposing no wage increases for the next 3 years.
  • Scrapping the Zero Carbon Act (which was notable for its cross-party support) and RMA
  • Massive tax cuts ‘to balance the books’
  • A focus on some kind of border protection agency which would allow for a more open border

They have an easy to read [5 point plan].

There’s nothing too scary for small business owners.

Greens

In contrast, from a small business point of view, the Greens might be more challenging.  They have policies around farming which would undoubtedly impact this sector.

  • Water charging
  • Reduction of fertiliser use
  • Regenerative farming processes
  • Additionally, in sharp contrast to Act, they would introduce a far more progressive tax policy
  • A wealth tax on assets over $1 million
  • Higher tax rates for amounts over $100,000 per annum, with a top rate of 42%

The focus for the Greens is the environment and income equality.

Overall, it probably comes down to your personal beliefs.

Do tax cuts stimulate or deflate? Does a progressive tax system discourage high performers or make for a fairer society? How do we count the cost of a degraded environment? Does ‘red tape’ protect our assets or tie up valuable resources in endless bureaucracy?

Who do we like the look of?

Whatever you believe, make sure you vote on the 19th October!

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