Analysis by Keith Rankin.
Role: Economic historian.
Keith Rankin, 21 October 2026 – On the Multi-Party Debate on 13 October (TVNZ), the first question asked by Tova O’Brien was to Qiulae Wong, about the policy for a Citizens Income (aka Universal Basic Income; UBI). In particular, Ms O’Brien asked whether it was appropriate for high earners such as millionaires to receive this payment, which is proposed to be $373 per week. Ms Wong partially fluffed her lines, by not saying that, for a millionaire, much of the weekly $373 tax credit would be offset by higher income tax on higher income earners.
A better-designed UBI would have people currently on the top marginal rate of income tax not receiving any income above what they receive already. The point is that these people already receive a weekly UBI of $402, courtesy of an average income tax rate which is significantly lower than their 39% marginal rate of income tax.
(If Christopher Luxon looked carefully, he would see that, by his concept of ‘beneficiary’, high earners such as himself are already beneficiaries. All taxpayers in just about every jurisdiction receive tax concessions, through the graduations of the tax scale. It is not a ‘bad’ thing to be a beneficiary; by definition it is ‘good’. If he receives any interest or company dividends, then he is a beneficiary.)
Opportunity’s proposed income tax scale should be controversial, but is rarely mentioned in debates or interviews. Opportunity proposes to eliminate the 10.5% and 17.5% lower rates of tax; and replace the 30% rate with a 28% rate, and the 33% rate with a 34% rate. They would also bring down the current $78,100 threshold to $50,000 and raise the current $180,000 threshold for the 39% top rate to $200,000.
It is not clear why they wish to do this tinkering with the income tax scale. And there are some important problems with the way that Opportunity combines its income tax scale with its Citizens Income. More about that below.
Nobody ever seems to ask Opportunity spokespersons about their income tax policy; critics and supporters alike seem to be only interested in their ‘wealth tax’ policy.
A simple Basic Universal Income (BUI), aka Negative Income Tax
The simplest way to initiate desperately overdue income tax reform is to drop the 10.5% and 17.5% lower rates of income tax, and replace them with a BUI of $150 per week; a negative income tax – or, in technical language, a refundable tax credit. (This amount is too low to be called a Universal Basic Income.)
(Or, we could be a little more ambitious, and remove the 10.5%, 17.5% and 30% lower rates of income tax, and offset them with a BUI of $195 per week.)
With this BUI negative income tax proposal, everyone earning $53,500 or more, would experience zero change; only the labelling of their benefit would change. Likewise beneficiaries would experience zero change, because the first $150 of their benefit would be relabelled, as their basic universal income. (However beneficiaries could never suffer a loss of this $150 BUI benefit component, whatever restrictions or conditions or reductions might be imposed on their benefit.)
That’s it, in a nutshell. A full monetisation of the benefits arising from those tax rates at the lower end of the scale.
Would there be a fiscal cost? Yes, but not a big fiscal cost.
And there would be two types of significant fiscal advantage. The first type would be a substantial reduction in the case workload of MSD (Ministry of Social Development), both in having fewer future cases, and in cases generally becoming less complex to administer.
The second type of advantage would be an equitable stimulus. This would represent the fiscal stimulus generally associated with tax cuts, though the beneficiaries of this stimulus would be those low income people who presently ‘fall through the cracks’; for example, students who don’t qualify for a student allowance, and domestic partners (eg spouses) who presently have minimal income of their own but don’t qualify for income assistance because their household ‘breadwinners’ are employed or self-employed. This would be a much more efficient stimulatory tax cut than the types of tax cuts we are used to; this would channel the money towards the poorer rather than the richer individuals in society.
Such a BUI of $150 per week could never be claimed as a ‘licence to loaf’; the amount is too low. A low universal income would facilitate labour supply rather than inhibit it. Jobseekers would not be completely out-of-pocket, nor subject to cruel conditions to retain their benefits; they would be able to focus on job-seeking – or training – instead of benefit compliance.
Further, almost all of this stimulatory negative income tax would be spent. So it would quickly generate new fiscal revenue, first as GST (goods and services tax) and then as income tax.
If Opportunity was offering this BUI as a first stage of tax reform, I reckon they would be at 20% plus in this week’s political polls. It’s a policy which is almost impossible to criticise. And, using the neoliberal framing of the BUI as a tax credit rather than a welfare benefit, there would be no new beneficiaries created by the policy. (We note that former National and Act leader Don Brash favoured something along these lines – probably closer to the $195 option rather than the $150 option – in 2020 when he spoke at a TOP political meeting in Grey Lynn. Brash is not a ‘communist’!)
I recommend that Opportunity actively promotes this option as an immediate transitional step – it’s now too late for them to make it a coalition ‘bottom line’ – on their way to further tax-benefit reform. As it stands now, the BUI represents an important missed opportunity.
This BUI not only represents an equitable and affordable tax-cut stimulus – less radical than what Labour was promising in 1935 – but also represents a new policy lever. Future fiscal stimulus – when required – could be easily achieved by raising the BUI amount a little. That would be far more equitable – and efficient as a non-inflationary stimulus – than any of the tax cuts that have been implemented in New Zealand in our lifetimes.
(And a BUI is liberal, especially in its NIT framing. This is not a left-wing policy; it is a policy that favours stimulus through private rather than public spending. This policy remains agnostic with regard to public-sector spending. The BUI is ‘distribution’ – a small social dividend – rather than ‘redistribution’.)
Combining a $150 BUI with Opportunity’s proposed income tax scale
A non-beneficiary today receiving zero income would be $150 per week better off.
A non-beneficiary receiving $15,600 before tax would be $97.50 better off. Currently, these are people largely dependent on a student-loan living allowance or on a domestic partner.
A person earning $50,000 – ie a fulltime minimum wage, and also the threshold for Opportunity’s 34% tax – would be $28 per week better off.
A person earning $78,100 – ie threshold income for the present 33% tax rate – would be $2 per week worse off. A person earning $180,000 – ie threshold income for the present 39% tax rate – would be $21.59 per week worse off. A person earning $1,000,000 – ie threshold income for an income millionaire – would be $2.36 per week worse off. This negative income tax policy would not be providing high income earners with additional disposable income.
My recommendation is that Opportunity immediately recognises the virtue of a $150 weekly BUI. If asked by Tova O’Brien or Paddy Gower why a millionaire should get this, Qiulae Wong would be able to say that the millionaire would actually face a weekly tax increase of two dollars!
She could then go on to say that the remainder of the Citizens Income – $373-$150 equals $223 – would be a longer term project, a UBI, to be financed through a wealth tax fund which the millionaires should be sustaining.
Creating a Universal Basic Income
If we are to ‘go all the way’ and create a UBI in New Zealand, the easiest way to do that would be to eliminate the 10.5%, 17.5%, 30%, and 33% concessionary marginal rates of income tax. That would yield a weekly UBI of $402.36, to be funded principally (but not only) by the removal of those concessionary tax rates, leaving a flat rate of income tax of 39%.
A UBI – payable to all tax-residents aged over 18 – would be sufficient to fully replace most categories of social security benefit, and to substantially replace the remaining categories. The remaining categories could easily be handled by Inland Revenue, which already pays out tax credits. This would mean that the Work and Income branch of the Ministry of Social Development (MSD) could be abolished; something attractive to neoliberals but not to those neoconservatives who favour the state exerting some control over poor people’s lives.
We note that, in a world which is substantially productivity-enhanced by artificial intelligence (AI), a UBI is essential to ensuring the economic sustainability of that world. While the argument for a UBI applies to the full range of productive societies, the present presence of AI raises the urgency of the public discussion. Nobody can honestly contemplate the advocacy of AI as a productivity-enhancing tool without advocating at minimum a BUI.
Note re the age of entitlement to a UBI, and proposals to extend the franchise to 16-year-olds
We note that there are various age-definitions for an adult. Presently 16-year-olds can leave school, and can get married. But most other criteria for adulthood focus on age 18.
If we do enfranchise 16- and 17-year-olds in the near future, this will raise questions about things like the drinking age and the age for military service; and the upper age limit for family tax credits presently paid on behalf of children.
Advocacy for a BUI or a UBI would need to factor in whether these should be payable to people aged 16 and 17; if so, clearly instead of present family tax credit payments such as ‘working-for-families’.
My general preference is to leave the ages as they are at present, with the focus on age 18. This keeps the whole ‘negative income tax’ issue more simple to negotiate. But it could mean that 16- and 17-year-old workers could only receive a BUI if they were no longer at secondary school and not ‘earning’ a family tax credit for their parent.
I favour restricting a BUI or UBI to people who have (or ‘would have’) completed five years at secondary school. Thus, anyone who entered Year 9 at secondary school in 2022 could become eligible for a UBI from 1 December 2026. Though there might be exceptional reasons for commencing payments at a slightly younger age.
Citizens’ Income excludes Denizens
The Opportunity Party’s Citizen’s Income would exclude many New Zealand tax residents. Indeed the use of the word ‘citizen’ becomes problematic in that it has different definitions in different contexts.
The present New Zealand labour force is unusual – in both domestic history and contemporary political geography – in that so many workers are either recent permanent residents or on temporary work visas.
A policy to raise income taxes – by removing the lower steps on the tax scale, as both Opportunity and myself require – could have substantial unintended consequences if the offsetting tax credit (BUI, UBI, CI) is not payable to these two ‘non-citizen’ categories of New Zealand taxpayers. Some people who Opportunity would exclude from a Citizens’ Income are eligible to vote in next month’s general election. These people – plus the many denizen tax-residents who drive our buses and work as nurses – could face substantial uncompensated tax increases.
The straightforward solution is to tax all tax-residents on the same basis (with the partial exception of persons aged under 18, as noted above). Even if there is a heightened fiscal cost, there is a greater benefit in having a workforce which is not some form of denizen underclass, unable to contribute as consumers, and unable to contribute to global wellbeing through their remittances to their countries of origin.
There’s also a logical problem. Imagine a world in which all countries have an income tax scale which offers at least a Basic Universal Income. Then, all workers – all economic citizens – in the world should have access to some level of BUI; but in practice people who are citizens of one country but denizens of another would miss out. My view is that the BUI should be paid by their country of tax-residency rather than their country of formal citizenship. (We note that there are something like 500,000 denizens of Australia who are citizens only of New Zealand.)
Finally
A Universal Income is also a Negative Income Tax, becoming a tax credit for those with incomes at the lower end of the income scale, and a tax concession for those higher up the income scale. A Basic Universal Income is an insufficient ‘social dividend’ in that it cannot be an adequate income to live on (except for a few ascetics) without other private or public means of support. This would seem to be the minimum social-income guarantee in any liberal society.
A Universal basic Income is generally understood as a universal income sufficient to support individual subsistence; it is a UI which meets an ‘adequacy’ criterion, just as New Zealand Superannuation – a UBI for seniors – has to meet such a criterion.
It is possible to criticise a UBI on the grounds that it disincentivises ‘working for a living’; although there are good arguments that its incentives for economic contribution to society outweigh its disincentives. It is not possible to criticise a BUI using this ‘labour-supply’ argument, however; it’s simply too basic. A BUI is a complement to paid work, not a substitute. (So is a UBI, I would argue, though this argument is less clearcut; New Zealand Superannuation is clearly a complement to labour force participation.)
A liberal Opportunity Party should have both BUI and UBI ‘on its books’; the BUI for immediate implementation, and the UBI as an aspiration in conjunction with additional streams of public revenue. (We note that, in a society with increasing productivity, a BUI can be expected to morph into a UBI.)
And Opportunity should be clear that by ‘Citizen’ they neither mean ‘passport-holder’ nor only persons who have been in the country for at least five years. Think of the denizens whose labour contributes so much to New Zealand.
About the writer:
Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.