Disappointment at Labour approach to tax – Closing the Gap

The announcement by Labour yesterday regarding no changes to the income tax regime was greeted with disappointment by Closing the Gap said spokesperson Peter Malcolm. After earlier commitments by Jacinda Adern to do something about inequality and poverty, this new position on income tax seems an about face. To do something significant about inequality requires increases in income for those at the bottom and decreases for those at the top ie a more steeply progressive tax regime.

Graham Robertson, a Canterbury-based philanthropist, and former farmer, and current President of Income Equality Aotearoa NZ Inc., says he agrees that tax levels on higher incomes need to be raised, and wealthy people like himself who can afford it, need to contribute more.

“Many of my friends and colleagues, particularly those who are comfortably off, are offended by the shortfall in government funding for children living in poverty and I am too. The task is too big for the voluntary agencies to plug the gaps.”

Robertson says that tax levels on the wealthy should be raised, and a tax on wealth, including capital taxes, should be implemented immediately. “The mark of a successful economy is the way in which the poor are treated and NZ is not a good place for our poor, especially if they are homeless. We must face up to the fact that we who are better off should pay more tax.”

He says that in a more equitable society, everyone, including wealthy people, is better off. “It is well documented by the authors of The Spirit Level (Wilkinson and Pickett) and other academics that all people in a more equal society are better off; including the rich. In other words the rich are better to trade some of their wealth, through increased taxes, in order to create greater levels of equality. “

According to Associate Professor Lisa Mariott, School of Accounting and Commercial Law at Victoria University of Wellington, New Zealand needs to change the way it taxes people to be in line with best practice. She says our top tax rate is considerably lower compared to those in other countries.

“Our top tax rate currently sits at 33 per cent compared to UK and Australia where the rate is 45 per cent. Raising the top tax rate would mean more resources to reinvest in social services – so all New Zealanders can prosper.”

She says that now is a good time for New Zealand to consider a wealth tax. “In relation to taxing wealth, NZ is quite unique in not having any form of wealth tax.” She says that in New Zealand, just 1 per cent of the population holds a whopping 20 per cent of the wealth, while the bottom 50 per cent hold less than 1 per cent. “By taxing wealth we can create a more equitable New Zealand.”

The Equality Network, a non-partisan organisation of 37 members, united by the vision of a more equal Aotearoa New Zealand, (Closing the Gap is a member) is asking for politicians to consider immediate changes to the tax system including increasing the top rate of tax and introducing a tax on wealth.

Equality Network member Oxfam’s recent publication, the Commitment to Reducing Inequality Index, looks at the tax structure, the impact of tax on inequality, and potential tax revenue available of 152 countries.

Paula Feehan, Advocacy and Campaigns Director at Oxfam, says that in New Zealand ranks low globally in terms of the progressivity of its tax policy (and 30th out of 35 OECD countries).

“The index demonstrate that Governments have considerable powers to reduce the gap between rich and poor, and that only by addressing this gap can we end extreme poverty,” says Feehan.

She says that by changing our tax system through increasing the top tax rate and by creating a tax on wealth we can help to create a more equal country.

“New Zealand must do more to build a fairer, more progressive tax system to tackle inequality. We think most New Zealanders want to see at end to extreme inequality, and want an economy that works for everybody, not just the lucky few. What we’re saying is that the Government can – and must – act to create a fairer society and to end extreme poverty.”
More information on Oxfam’s report can be found at https://www.oxfam.org.nz/reports