A Vision for Tax in New Zealand

A Socially Just Vision of Taxation that also reduces Inequality in New Zealand

Who we are and why are we doing this

We are Income Equality Aotearoa New Zealand Inc –Closing the Gap. We have some 3000 supporters from around the country. Research clearly shows that significant inequality is bad for any country in terms of health, economics and many other social issues, and that inequality is much worse in New Zealand that it was some 30 years ago. The tax system has a significant effect on inequality and so our system should be modified to help reduce inequality in New Zealand. The current system is also unfair( rates of tax and not all income is taxed) and inconsistent ( capital gains tax).

  1. Overall Vision

    A tax structure which incorporates all incomes, wealth, and
    businesses, is fair to all, is socially responsible and helps to reduce inequality.

  2. The Moral Principles

    that should under-pin the economics of our society

    • fair to all
    • beneficial to all
    • look after the disadvantaged
    • reduce inequality
    • recognition of the importance of families and children
    • recognition of the economic imperatives for New Zealand
    • have all New Zealanders accept the need for taxes and their responsibility to pay their dues ie taxation is not theft and must not be reduced at all costs
  3. Why Tax?

    Taxation is the subscription that we all pay to enjoy the benefits of living as a member of a fair and properly functioning society by supportingthose functions that can only be provided by a democratically elected government. Specifically we tax

    • To fund Government expenditure on infrastructure ie national roads, and railways etc
    • To fund Government expenditure on public amenities ie
      • health
      • education
      • police
      • justice
      • defence
      • welfare ie looking after the disadvantaged
      • pensions
      • government
      • public broadcasting inc TV
      • foreign aid
      • regulations to protect people and the environment
      • research and development
      • economic development

      And others

      NB there are arguments as to whether Governments should pay for all of each of the above but to cope with poverty Governments should pay
      for all of these to a level that nobody is disadvantaged. Whether the government or business should be responsible for all or in part of the
      above should be driven by economic efficiency

      • Tax structures do have an effect on inequality and inequality is currently too great in New Zealand
  4. Who pays the Tax?

    All according to their ability to pay and there must be systems in place to ensure that all pay the tax they owe. NB Taxation should not strangle individual initiative, innovation and ambition although there are plenty of unsubstantiated myths about the effects of particular levels of tax that do have the undesired consequences mentioned&elipsis;

  5. What can be Taxed?

    There is no question that the tax base has been broadened recently but in historical terms it is much less broad than it used to be. It is important to state that broadening the tax base is likely to stop loopholes. So what can be taxed :

    • All income
      • wages/salaries/transfers(benefits, pensions etc) income from trusts
      • “rents’ on property, money etc
      • any realised capital gain (after costs/inflation adjustments
      • gifts
      • inheritances
    • Consumption ie GST, and other special taxes such as fuel etc
    • “negative externalities” tobacco, alcohol, gambling ie things that are
    • Wealth—argued by Piketty as one of the best ways of reducing
    • “Land” this to include all natural resources ie land , water, minerals
    • Business profits and capital gains
    • Financial transactions
  6. Tax Structure

    • Personal—add all ” income” from all sources including transfers. Some perceived as having a negative effect on society inequality airwaves etc Georgian “Land Tax” sources may have to contribute only a percentage eg capital gain, inheritance income etc. The alternative would be to have different tax rates. We believe this to be more complex than the former. Any one-off of incomes could be spread over a number of years—a progressive tax on this with zero tax on the lowest rising to a maximum marginal rate on “income” of some upper figure.
    • Families add all “income” together as for personal tax above—then split into separate incomes according to the number of members, adults and children (these up to a limit of ay 3) in the immediate family and then tax as per personal above The separate incomes for the children to be some fraction of that for the adults
    • Consumption taxes. Where these affect everybody they need to be kept as low as possible because of the greater effects on the poor. Perhaps there should exceptions eg certain foods
    • Negative externalities as decided by parliament eg tobacco on health grounds
    • Wealth. A certain percentage of peoples wealth should go into “income”
    • Land.—see above. Basically you charge people for the use of these resources
    • Business. Tax profits at a uniform rate as low as possible with appropriate exemptions (costs, R & D, support for economically struggling regions etc) as more profitable businesses create jobs
    • Financial transaction tax (small) the so-called“Robin Hood” or Tobin Tax .