Any party not urgently addressing social and infrastructure deficits, and getting the money to do that, does not deserve your vote
Opinion: There is something about election time that seems to make serious discussion on important matters of political policy very difficult. This dysfunction is unfortunate for those of us who care that we face some big problems – cost of living, equity, existential.
You might think that, when we are selecting political leaders to deal with this, we should do better than bickering and point scoring. The problems are not only big, they are complex. More than that they require people, not just the “experts”, to understand them and the actions being selected in response. They need active and positive consent, not just acquiescence.
READ MORE:
* Raw Politics: Life, death and Labour ruling out taxes
* Dissenters Robertson and Parker ought to resign as ministers
* How to make NZ’s tax system fairer
One such matter is tax. Major party discussion on this has become bizarrely focused on who will reduce which tax. This at a time when there is widespread acceptance that we face huge infrastructure deficits in everything from housing to hospitals, transport to training, flood protection to food security. When the big problem is how can we afford to face these deficits, we talk about how we can escape paying.
The truth is we cannot escape. There is no credible scenario in which all of our current demand for government spending, plus the spending needed to address the multiple deficits, will be met by the private sector. Even if private interests were willing, ready and able to do this, it is easy to see that someone will have to provide the revenue to reward them for it.
Any voter should be deeply suspicious of a tax policy that is not fully integrated into policy on current spending and infrastructure deficits
That money will not substantively come from “the market” unless there is a lot more spare cash hidden in household mattresses than anyone suspects. Some that do have spare cash are already paying for specific infrastructure they require to maintain their lifestyle and would pay for their use of others such as toll roads. But most households are not in this position and have to look to government.
This is all just the arithmetic of an unequal society.
To raise this money for government to use we need taxes. There is much economic analysis and theory about which taxes are more efficient, and about the distributive or equity impacts of each. There is no simple and universal truth about this. The impact of any tax depends on the nature and structure of economic activities over time, the management of the process, and the numbers involved – among other factors. Any advocate of, or indeed opponent of, one tax over another in all situations is probably a charlatan.
Taxes on wealth in various forms are declared off limits by several political parties. There are different versions of these – land, capital gains, asset, inheritance. We are an outlier tax haven on all these matters. There are pros and cons of each but rather than get caught up in detail we need first to have a view on whether we are going to tax wealth at all. Obviously I think we should. Wealth inequity, it seems pretty clear, has risen. There are people with wealth who could well contribute much more. If we do not use this then that only leaves two avenues.
First is incomes. Many people do not have income to tax. Among those who do have incomes we have seen significant increases in inequity. There is scope to increase income taxes on higher incomes. Yes there will be avoidance and evasion. It will not be perfect. But without such increases we are down to only one avenue. Simple sense would say that we must use this – with acceptance of that we can get down to the detail of what works best and fairest.
To say no, or to reduce the overall income tax burden, merely avoids our ability to solve our big problems. I include company/business tax in this because income is just that, and where you capture it is more about efficiency or equity than total collect. Again that’s a detail a sensible approach could work out once agreed it should go up rather than down.
That leaves spending. There is no other avenue. Again there are details on this to debate but first you need a view on whether more or less should be collected this way. We currently have a very broad and quite high tax on spending. You might choose to reduce that, but it is not without cost to do so. That revenue has to come from somewhere else. I have not seen many advocating higher tax on spending but there is scope for selective “luxury” or socially adverse activity spending tax. I would not get too excited about the collect from these compared with the current broad base.
All this is really pretty simple. You will hear people advocating lower rates (usually on incomes, but also on wealth and spending) on the basis that such rates will increase economic activity and with that greater total revenue. There is a theory to that effect but evidence is quite contradictory and essentially depends on a range of other aspects of economic activity. You can draw a model showing it happening, but reality is stubborn.
I’m not opposed to cutting GST, for example, either on some or all items. It is not a solution for a higher cost of living but it could help many poorer families. But you have to see the whole picture. To finance that you need to make the other increases elsewhere. Any voter should be deeply suspicious of a tax policy that is not fully integrated into policy on current spending and infrastructure deficits.
One issue is that tax is not the reason people suffer various forms of poverty. Lack of wealth, income and control of resources are major reasons, coupled with limited access to appropriate infrastructure of health, energy, housing, education etc. That is where the real issue lies, and that just again highlights the deficits we are apparently trying to avoid dealing with. It's not the tax that is the problem.
Any party not facing the facts of social and infrastructure deficits, the urgent need to address them, and getting the money to do that, does not deserve your time or your vote.
