In December last year I wrote the following column. Don’t say I didn’t warn you!
The government is holding out the “tease” of possible income tax cuts as part of their election strategy for 2017. They are well aware that many people quite rightly resent the level of taxes they pay and would welcome some tax relief.
They also know that they need to use the cover of a tax cut “for everyone” when what they are actually planning is a massive tax cut for their rich mates and peanuts for the rest of us. The peanuts that most of us may get in the form of an income tax cut will also simply be gobbled up in increased costs for rents, power, indirect taxes and government charges.
The fact that the National Party tax cuts will be a fraud for most people does not mean that the smart political option is to reject them out of hand.
Working people in New Zealand pay too much in tax and the wealthy pay too little. That is simply a fact of political economy that nearly everyone knows to be true.
Workers know they lose at least 20% of their wage income before they get to see it. They then pay 15% in GST on nearly everything they buy. On top of that come fees for education including illegal “donations” being extorted by more and more schools. Government departments charge for things that used to be able to be obtained as of right.
And that doesn’t count the taxes on petrol, car registration, and the so-called sin taxes on cigarettes and alcohol because the middle class disapproves of our “bad” habits.
Taxation probably takes over half of a wage workers income. That probably wouldn’t be too bad if we actually got value for money. For example, countries that have genuinely cost-free access to child care, education, and generous welfare systems usually accept the need for high taxation to pay for it.
In New Zealand, however, we are taxed to death and then when we need help we get denied our entitlements by a brutal system that seems dedicated to stopping people gaining access to help when they or other members in their family have an accident or are unemployed, sick, or are born or become disabled.
The state boasts about reducing people on welfare as a percentage of the working age population that is radically more than would be expected by reductions in official unemployment measures. These politicians then express shock that more and more people are homeless and have to access food banks just to be able to feed themselves.
A party claiming to represent working people should expose the fraud and counterpose a “progressive family tax package” that will promise to reduce taxes on most working people and radically increase taxes on the wealthiest in our society.
I suspect Labour is reluctant to do that because the measures that would achieve that end are simply too “radical”. By “radical” I don’t mean measures that would only be supported by the “lunatic left”. The policies that are necessary would be simple and extremely popular. They would involve a reduction of taxation on low and middle wage incomes and an increase in tax rates on high incomes as well as the imposition of taxes on all other forms of income and wealth accumulation. This would include wealth taxes, death duties and capital gains taxes.
The wealthy treat taxation as a voluntary activity. Avoiding tax is rewarded not punished. Even when banks and big corporations are caught cheating they are allowed to pay a discounted penalty rather than a very punitive one. Every High Net Worth Income Individual should have a personal tax assessor assigned to them to help them calculate their tax liability. This is actually done in the UK and has resulted is a massive boost of payments to the government. I would add that the assessment can be accepted by the wealthy individual or challenged in court. If they lose in court the tax imposed should be increased by another 50%.
All foreign corporations should have assessors assigned and a reasonable tax imposed. If it is challenged in court and they lose a penalty should be imposed on top of the original assessment.
Tax dodges like the interest rate deduction used by foreign vulture funds who load their companies with debt should be eliminated.
One way simple way to prevent tax dodging by corporates would be for the government to be allocated a one-third non-voting shareholding in all companies. With 33% of all benefits, including dividends and capital gains going to the state it would be guaranteed that taxes would be paid fairly.
We could also propose replacing GST with a financial transaction tax which would also be popular.
Every Labour Party report explains at length that wealth has concentrated in New Zealand over recent decades. That is only possible because the wealthy do not pay their fair share. It is also a consequence of a radical weakening of the worker’s movement and their institutions like the unions.
A progressive Labour government would combine fairer tax measures with increases in minimum wages, and measures to allow unions to grow radically from the current pathetic nine percent of the private sector workforce. Wealth redistribution downward would then be possible if we had more tools to fight with.
A shift in tax from labour to wealth, combined with moves to strengthen the power of workers in their daily struggles would be a popular programme for a genuine workers party.
It would be simple for Labour to say to John Key’s promised tax cuts that a future Labour-led government would guarantee every working family up to a certain income threshold would be better off with their tax and family support measures than what was being promised by National.
But to do that there would need to be a determination to tax the accumulated wealth and high incomes that are escaping the attention of the tax man at the moment.
Fear of advancing such a programme reflects not that it would be unpopular, but a fear of the social struggle that would be unleashed by the rich and powerful to subvert and defeat such a party and government.
However, defending the status-quo, with its high taxation of workers income, is a losing strategy.