Andrew: I did try to warn you!

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In December last year I wrote the following column. Don’t say I didn’t warn you!

andrew-little-labour-leader

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.

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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.

 

13 COMMENTS

  1. We don’t get much success or improvement for all the taxes we pay.

    Roads take forever to build. Zillions are squandered on feasibility studies and other expensive delays. Research results are rarely implemented. Infrastructure is degrading – disastrously when speaking of water catchment, waste water treatment, power generation and distribution. And the conversion of this country’s work force into one resilient enough to tackle the work of the twenty-first century is barely happening – overloaded with the inevitable ticks and leeches clipping the tickets on the way.

    So it has to be asked, before we ‘tax the rich’ – what’s the point? Taxation as it is now is simply NOT achieving the communal goods it ‘promises’.

    And which party will be reducing GST to the Aussie level of 10%? Labour’s hellspawn child – will they tame it? Or ever-greedy National? (Watch my lips? Hell, no! I’m watching those Artful Dodger paws groping toward my wallet, thanks.) Or the So Naice and Twee Greens? Cue for cynical amusement.

    Death and taxes – we get it, but let’s have a LOT more say on the matter and manner of our taxes. Otherwise both we the plebs AND the rich will have sent our dosh down the gurgler again.

  2. Well, well, well, this would be considered truly “loony left” and “radical” and “interventionist” by big and not so big business, and their loyal political mercenaries on the right of centre.

    The MSM would be engaged to slam this down from the very early beginnings.

    But let us perhaps just start with something more humble, a return to a mare staged progressive tax system, where high income earners pay a higher rate than the ridiculously low “maximum income tax rate” of 33 percent.

    The minimum wage could be lifted to something near the so called living wage, and a change to the Employment Relations Act can bring back more power to workers by allowing them to organise better, to push for collective bargaining and so forth.

    Labour does not even seem to dare go there at this stage, they need to get bolder, for sure, and try harder to get the message out, and tell MSM journos straight into their faces, come on, do you want a fair and empowered society, or become USA Light here?

  3. What did they decide after losing the last election? Throw out capital gains tax, throw out GST free fresh fruit and veges, throw out some other policies, now they stand there, almost naked, accused again by the Nats, for having no policies, yes, fewer policies than ACT, as it was said loudly in Parliament last week.

    • Maybe this time they’ll also expose the fraud in immigration policy as well – which is there to serve a number of ticket clipping consultants, recruitment and labour supply companies and quite a few shoddy private tertiary education providers. As one lawyer put it – a constant “flushing of the pool” where the policy’s victims get the blame and lose everything, whilst the perpetrators get to do it all again. Trading in people generally these days is just so bloody classy it seems.
      Thankfully Andrew Little is on Morning Report as I type trying to battle the orthodoxy

  4. NZ is a very small country that is very far away from significant markets. The policy platform you propose would absolutely achieve the outcome you’re looking for – significantly reduced inequality – but it would do this by making everyone poor.

    What the far left don’t realise is that those who own the intellectual property can move to places that pay lower wages, lower taxes and lower logistical costs. Forcing too much risk without enough reward will just make people pack their bags and live elsewhere.

    Good riddance you say!? The problem is we will take the capital, the IP and yes the jobs as well. So don’t be stupid, focus on equality of opportunity and keep taxes about where they are and you won’t kill the goose that lays the golden eggs. Do otherwise and you’ll be blamed for making everyone poorer.

    • “What the far left don’t realise is that those who own the intellectual property can move to places that pay lower wages, lower taxes and lower logistical costs.”

      That is why international cooperation is needed, to stop this exploitation of low tax, low wage, low environmental and human rights countries and their populace. What you propose is more of the same, no option either, in my view, as we continue to plunder and burn the planet and its resources.

      Yes, economists, some of them, and some politicians, love to go on about all those millions they supposedly “lifted out of poverty”. But when looking at the planet, there are endless large cities with endless slums, there is poverty everywhere, and exploitation and destruction, some resulting in revolts, wars and oppression and what else is the consequence.

      Perhaps people may start talking with each other again, and respect nature and the environment a bit more, when we get less cheaply made gadgets flood our market, making so many wander around like zombies, gazing at small screens almost 24/7, and lose touch with reality.

      I would not want to go the Cuban way, but even they managed to maintain at least a good health care system and education system, while living the humble lives, few here would dare survive one day in the bush in New Zealand, pampered and so dependent on “civilisation” like you seem to cherish it.

    • “What the far left don’t realise is that those who own the intellectual property can move to places that pay lower wages, lower taxes and lower logistical costs. Forcing too much risk without enough reward will just make people pack their bags and live elsewhere.”

      This is a manufactured argument by the far right, used to hold states to ransom – “don’t tax us, or we’ll run away and you’ll be left with nothing!”. If they run away, people will find ways to fill the gaps. Cuba is a good example. And New Zealand couldn’t be anywhere near as extreme as that. Just think, would you stay with a romantic partner that threatened you in such a way? “I can do whatever I want; if you penalise me, I’ll leave you!” it would be absurd to advise the abused to do nothing in such circumstances – dangerous for their health, and also the abuser only learns that he can get away with it.

      “So don’t be stupid, focus on equality of opportunity and keep taxes about where they are and you won’t kill the goose that lays the golden eggs. Do otherwise and you’ll be blamed for making everyone poorer.”

      Factory farming taught you nothing, eh? The geese that lay the golden eggs are the geese themselves, not those who pinch the eggs from the geese, hawk them at the market, pocket the proceeds, starve the geese and also threaten them with a visit to the slaughterhouse if they don’t lay bigger, faster, better.

  5. Read this on a comment site ( the guardian ) re: upcoming UK elections – seemed to ring true for NZ.
    ‘ Mr. Wallace,
    I honestly beieve there are increasing numbers of people who are sick and tired of the Austerity scam, (Making cuts all over the place, collecting more taxes despite the myth, and having nothing in the public services to show for it, just a lot of people abroad rolling in UK taxpayer’s money, owning our public services and running them on the cheap, no mention of the profits made by these sales of national assets or where they went). They are probably getting sick of the way the Tories just take the electorate for granted, and they are probably fed up the arrogant bullshit the Tories keep peddling. If May loses this election, then good!’

  6. Gareth Morgan’s proposal to tax property more and wages less scared Paul Henry more than anything he heard from Labour or the Green party in a long time. That tells it more than clearly – progressive income tax might have been the way to even things out back in the 50s, but not in recent decades. Go after property instead of wages, and stand by for real outrage from the powers that should not be.

    • Property is how the money get laundered.

      Go after the transaction taxes for the super rich and those outside of mainstream economy, and you will get to tax the John Keys of the world and the .01% who seem to be able to turn companies like Dick Smith from $100m to $400m companies in 1 year, and pocket the $400m difference and then somehow the company goes bankrupt shortly after leaving the small share holders, employees and customers losing their jobs, guarantees, deposits, and savings..

      A transaction tax designed to clean up the tax world, would make the ex Business roundtable, banks and asset strippers, money launderers, crap their pants the most…

  7. For a health system that can help me, for a society that will keep me I’ll pay taxes, no problem! That’s what I call the social contract.
    I don’t want a tax cut that will impoverish me later when the services are cut and/or privatized for profit.

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