By Geoff Simmons*
The Tax Working Group (TWG) reported back last week, and the debate has already divided into two camps. Roughly half of New Zealanders, about the same number that vote National, will write this whole thing off as a tax grab. A typical left-wing exercise in the politics of envy, all part of their eternal plan to “eat the rich”. The other half will support it for the opposite reason.
There is a way for Finance Minister Grant Robertson to ensure this work generates a useful debate, rather than fading away into the usual political slagging match.
Robertson should announce that all revenue generated – at least from any capital tax – will be used to reduce income taxes. In other words, it will be revenue neutral. This is the only way to ensure that both the left and the right engage in the debate in a thoughtful way.
For now, let’s not even talk about raising more revenue. Let’s talk about how we collect the tax money we need in the way that is best for our society, economy and environment. We can talk about whether our tax system is ready for the future changes that are to come (such as increased automation).
So far, Robertson has been quiet about this. The Tax Working Group did set out options for revenue neutral options that money raised could be spent on. However, they stopped short of saying this exercise should be revenue neutral overall. That vagueness is probably understandable, as such a stance would be political in nature.
Tax is too important to our country to be stuck in this left vs right game of political football. Everyone in the centre agrees we need to collect a certain amount of revenue for health, education and our burgeoning superannuation bill. Despite all the rhetoric, neither of the major parties is planning to take government spending far away from the roughly 30% of GDP it sits at currently.
So if we generally agree that the amount of tax collected is about right, we need to shift the debate to how we collect it, and who we collect it from. Currently the gap between rich and poor is growing, and the tax treatment of capital, especially housing and land, is at the centre of that. It is also a cause of our poor economic performance as all our investment money has funnelled to the lowest tax option: housing. And finally, the parlous state of our environment should be no surprise when we have some of the lowest levels of environmental taxation in the OECD.
How we collect tax can impact all of these issues. House prices, poverty, businesses, jobs, the state of our air and rivers.
If we narrow the conversation to these issues, it should be clear to all that our current system is failing, and needs an overhaul. Robertson can have the debate about higher taxes another time.
*Geoff Simmons is an economist and The Opportunities Party's Leader. This opinion piece is also published on The Opportunities Party's website.