A taxing question
I understand young ’Chippy’ our erstwhile, yet still hopeful future PM (who grabbed Ms Ardern’s hospital pass in 2023) is currently wintering at the British Labour Party annual conference and rubbing shoulders with PM ‘Sir’ Keir Starmer in some vain attempt to ‘grow a set’ and get some pointers regarding, among other things, a fairer taxation regime for the future of Aotearoa. My immediate reaction would be to dismiss this worthless trip in futility as nothing more than a distracting junket, at the taxpayers expense, that will net nothing of worth to improve the lives and outcomes of ordinary PAYE employees. It may be cynical of me but the idea that this man Starmer, a knighted stalwart of the establishment, would possibly have anything credible to listen to when it comes to supporting anything other than the status quo to be ludicrous!
The right honourable Sir Keir Starmer Labour Leader and Prime Minister of the UK, if he is to be believed, recently discovered a £22billion shortfall in the books and as his remedy to help fix this has prioritised the removal of winter energy subsidies to pensioners. It seems that for the poor, in Britain at least, just when they thought things were looking up Starmer has put the boot in so they all know their place! As an ex-pat Anglophobe this has been a very sobering and unsettling development since I was quite expecting Willis to use the knife on this subsidy in Aotearoa. Now that she’s seen a newly appointed Labour PM wielding this knife, what to say she won’t be similarly emboldened in the future?
Our country is a low wage economy and the inescapable truth is that for many of us a benign welfare state is the only safety net we have to pick up the burden that our wages are unable to support. Since the late 80’s and early 90’s we have experienced the largest differential in wage inequality within the OECD.
The deregulation of the labour market by the 1991 employments contract act under Bill Birch saw the halving of union membership and between 1981 and 2002 wages fell by one quarter of national income. According to a policy study by The Policy Observatory of Auckland University of Technology the introduction of the neoliberalism reforms of 1984 became the central driver redirecting wealth to the already rich and providing nothing to improve productivity. The deregulation of financing and housing in 1984 saw an exponential move of GDP in NZ away from productive enterprises and into finance and by 1990’s the failure to introduce a CGT saw disposable capital being ploughed into the property market further exacerbating an already overheated house market and dampening investment in productive enterprises. As a result rising house prices became completely disconnected from average family incomes.
Since the late 80’s there has been no incentive for employers to offer higher wages, a deregulated mostly non union workforce along with record high net immigration of 1.5% per annum have allowed them to avoid paying higher wages, offering better conditions of service or training New Zealanders for work they are well capable of doing.
In almost every facet of employment conditions everything has been stacked against the average wage earner. Wages have not kept pace with inflation, conditions of service have been casualised, short term employment of less than, or a year contract are commonplace and the gap between rich and poor has exploded. When it comes to being made redundant we have some of the lowest rates of governmental support. In Aotearoa in 2013 a worker could expect 55% income support from the government in their first year, that was 4th from bottom of 33 countries in the OECD. The OECD median was 77% whist Germany paid 88% and Canada 81%
There is a widening divide in New Zealand being enflamed by the likes of The Tax Payer Union and The ACT Party between middle income Kiwis and the low waged. As a middle income earner on a relatively well paying salary or wage the highest personal tax burden falls on this demographic, and unless one owns a small business there is virtually no way to avoid paying the tax burden the state requires. Little wonder then when offered a lie of large tax cuts (which the liar Luxon still continues to quote) that many squeezed middle income earners took the bait.
The low waged pay tax as well, but much less because of their circumstances and arguably too much ( after all every additional benefit aid a low waged household accrues comes directly from taxation!) the real defaulters are big businesses the rich and those with assets accruing capital gains.
“New Zealand is virtually the only developed country that does not systematically tax capital gains, and no one has ever satisfactorily explained why we remain a holdout”. Max Rashbrooke
“If it is accepted that any system of taxation should embody the principle of treating equally those who have equal capacity to pay then it is difficult to justify the exemption of capital gains from all forms of taxation while income from effort is taxed in full.” The Ross Committee tax revue report from 57 years ago
“a dollar is a dollar, regardless of whether you got it from hard work, or from occasionally speculating on property. Taxing money from the first source, but not the second, is unfair.” Simon Percival
“The government is still giving tax breaks to religious groups. And it’s not just your little neighbourhood chapel getting a free ride. It’s charitable businesses like Sanitarium, that iconic wheat-pusher owned by the Seventh Day Adventists who rake in hundreds of millions in revenue and don’t pay a cent in income tax. Aren’t we a secular society?” Alice Sneddon
“Meanwhile, a long-questioned tax loophole relating to companies masquerading as charities, and therefore exempt from paying tax, could be closed by the government.” Stuart Sowman-Lund
No one likes to pay tax. But there must be no alternative. One can’t just decide to opt out or shirk responsibility by blaming others life choices or fecklessness. The tragedy of recent legislation by Brook Van Velden is that by removing fair pay agreements we all become further trapped in this low wage economic cycle where more and more of us become dependent on state assistance, involving a higher rax demand to pay for it.
If we value our workforce then employment security, fair conditions of service and a living wage for every worker is the starting point. Productivity never increases under the threat of the big stick. It increases by an empowered workforce. Those extra wages are not going to be pumped into the share market or into buying a second or third house, they’re going to be used to buy consumer goods and other luxury items that under this awful regime they are unable to afford.
Part of the price we pay for living in a society is that we get to share stuff that individually we couldn’t build or pay for ourselves. Every time one uses a road, walks along a pavement, goes to a library, a blood clinic, Doctors surgery, hospital, visits a park, uses a school, enjoys the great outdoors, climbs aboard an aeroplane….etc our taxes have been used in part or to fully fund these benefits.
Never ever be fooled by a government that tells you they are going to reduce your personal income tax! To sign up for this promise is to admit that you’re fine with people dying through preventable illness. You’re O.K. that Dr Reti has lied through his back teeth about the so called shortfall and that he’s canned the Otago hospital development. It’s alright that we now have no new ferries for our main arterial route between the north and South Island’s. That you’re fine now you’ve been made redundant that $14billion of your taxes have been borrowed to fund tax cuts you’ll never see. It’s right that $1billion of your taxes have been paid in default fees to South Korea. You’re totally happy that $1.9billion in tax dollars has been rewarded to house speculators who already pay no CGT!! Whilst I’m at it for all those who bought the racist scumbuggery over 3 waters, I’m sure you’ll be fine with the astronomical rate rises to pay for an alternative scheme. David Seymour has just taken $153million out of state education taxes to fund his private ‘charity’ status charter schools, but he can’t find one extra dollar to help fund special needs kids, great stuff David, way to go.
I’ve been angered by a couple of rich listers who have opined that they’re happy to pay extra tax, but they don’t like how they (taxes) are often squandered! Really? On what?
I would never want to see one tax dollar spent on armed forces, or on integrated schools, never mind charter!
But mostly what I do mind is people who can afford to pay more in taxes avoiding their fair burden. We are not all born equal, nor even with equal opportunities, but if we choose to live within a democratic nation, we should ALL PAY OUR FAIR SHARE.
Footnote much of the stats in this were derived from the following web site, any errors or omissions are entirely my fault
What a brilliantly lit fuse this piece of writing is, Mike. Bravo. I’m fervently hoping I will be able to memorize it word for word in order to quote it verbatim!! There is so much common sense in what you say here it beggars belief that anyone with half an ounce of decency could argue otherwise. We knew they were lying about their tax cut nirvana. So did the media but said nothing. We knew they would be petty, punitive, nasty and incompetent. They always are. And yet here we are fighting harder than we have had to for decades for the crumbs we know have always failed to trickle down, thanks to the beguiled, the narcissistic, and the truly stupid. Even if we can kick them to the curb next election the damage these fools have unleashed with take another decade to mend. For a party that bangs on about better results in maths exams it’s ironic that none of them can add up worth a damn.
An admirable analysis of an idiotic neoliberal ideological nightmarish government. But speaking with the overview of a Canadian immigrant who has been in this country since 1965, I cannot help thinking that Kiwis en masse are really dumb and sheep-like...otherwise why would they vote for poseurs like Luxon and Seymour, who had no proven political track record!!!