Political myths die hard. For decades it has been taken on faith – all evidence to the contrary – that those business-savvy National Party types really, really know how to run the economy, just as surely as those soft-headed Labour Party types stand for more taxes, spending and borrowing. The main myth about the Greens – that they’re naïve idealists with no head for figures – hasn’t changed all that much since their Morris dancing days 30 years ago.
None of those stereotypes have much substance. After all, those allegedly unworldly Greens were the first political party to identify the dangers of global warming and environmental degradation. Yet even now, the Greens don’t get much cred for being so prophetically right about a climate change problem that every other political party has preferred to go la la la about, and change the subject.
This week has been déjà vu all over again. Rather than engage with the content of the Greens tax package this week, their political opponents have tried to dismiss it out of hand. Thankfully, that gambit isn’t working any more.
For example: in the latest IPSOS Issues Monitor survey, the Green Party scored an increase in public confidence on its perceived ability to manage every single concern that the survey measures, including the top five: the cost of living, healthcare, the economy, fuel prices and housing. Since the party’s low point earlier this year, the Greens have also moved upwards again in each of the latest Talbot Mills, Roy Morgan, Taxpayers Union and 1News Verian political polls.
Unpacking the package
In summary, the Greens tax package would
- create a 2.5$ tax on those assets above $10 million, on condition that the family home would be excepted;
- deliver 96 % of New Zealanders a tax cut by exempting the first $10,000 of earnings from tax entirely;
- return the corporate tax rate to 33% for less than 1% of the country’s corporates, such as banks, the supermarket duopoly and energy companies;
- retain a 28% tax rate for the small to medium enterprises (aka SMEs)’s;
- introduce a 0.06 % levy on the liabilities of the four big banks, a step that Australia has already taken;
- introduce a 2.5 percent tax on the net assets of the super-rich above $10 million. Here, there would also be an exemption for the family home;
- Implement a Capital Acquisitions Tax on assets and gifts received worth over $1 million, again with family farms and family homes being exempted;
- Enforce a 5 percent withholding tax rate on the profits the big tech companies send offshore Create a new tax rate for income above $160,000 and finally….
- Reverse Luxon’s landlord tax cut and the related changes National made to the bright line test.
None of these proposals are particularly radical. New taxes? National took four new taxes into the 2023 election. In recent years, parties on the left and right have considered implementing a $10,000 tax free threshold. As for the mooted lift in top corporate tax rates, Australia’s are set only slightly lower at 30%, and with an SME rate of 25%. Given the exceptions cited above neither the (a) 2.5% levy on assets etc and gifts worth more than $1 million or (b) the same 2.5% rate on assets worth over $10 million seem onerous. In sum, they level the playing field, not strip mine it.
The measures are linked. The affordable levies mooted on the likes of banks, supermarkets, energy companies and tech firms would promote income equality by bankrolling that $10,000 tax-free earnings threshold, a move that would particularly benefit people on low incomes. That is desirable because – obviously – the cost of living crisis hits people on low incomes harder. That aside, the package also has the signal advantage of addressing the way that income inequality restricts opportunity, and shrinks the pool of talent.
At the very least, the Greens tax package should frame the way that the other parties address income inequality – if not this, then what? Because as things stand, the current economic settings are doing more to perpetuate the burden of inequality – and child poverty – than alleviate it.
For example: someone really needs to tell Social Development Minister Louis Upston that over 50% of the children experiencing material hardship in New Zealand are living in households where their parents are employed. Meaning : despite what Upston repeatedly says, jobs alone are not a cure for poverty, not in this low wage country. Especially given that her Cabinet colleagues are (a) making only token annual increases to the minimum wage while (b) skewing the rules of wage bargaining in favour of employers.
Of late, political consensus is being heavily encouraged when we’re talking about KiwiSaver and PPPs. You might have thought there would be similarly urgent calls for a cross party consensus on income inequality and – perhaps – on that $10,000 tax free threshold solution. Far from it. ACT’s David Seymour has trashed the Greens proposals as “a culture that opposes success.”
According to Seymour (annual salary $NZ 362,600 plus perks) wealth inequality isn’t a problem in this country “so long as all people have the opportunity to do better,” which begs the question entirely. To anyone but a libertarian, it would be obvious that poverty, inadequate food and housing, a history of family addiction, violence and abuse, and ongoing economic stress would be a blight on talent, and a barrier to opportunity.
Amusingly, one of the rags to riches stories that Seymour recently peddled to the NZ Herald – the billionaire Mowbrays- actually suggests the opposite to what Seymour intended. As Anna Mowbray told Stuff in 2023, the three Mowbray kids started their business venture with (a) each of the children pitching in $10,000 from an inheritance and with (b) their parents being able and willing to take out an additional bridging loan to help get them up and running. Anyone can succeed, right. Because who hasn’t got a $30,000 inheritance nest egg, and the bank of Mum and Dad to help put them on the road to success?
This is not to deny that the Mowbrays – and their Chinese labour force – did not work hard. But let’s not use such myths to pretend that wealth inequality isn’t a barrier, and that inherited privilege doesn’t stack the deck.
Final thoughts…
Disappointing to see Labour also piling on. Labour’s main (only?) gesture in the area of tax reform remains its anaemic capital gains tax proposal. Hipkins has explicitly rejected the Greens wealth and inheritance taxes. A like-minded Simeon Brown told the recent National Party conference that the Greens approach to income inequality was “economic lunacy”:
“Their tax proposals would be a wrecking ball for economic growth. They would discourage investment, drive away talent and capital and make it harder for businesses to grow, create jobs and lift wages.”
Hmm. Surely it is the current economic orthodoxy that has taken a wrecking ball to economic growth and needlessly prolonged the recession, thereby “making it harder for business to grow, create jobs and lift wages.” Those same settings are also “discouraging investment” (in anything but housing) while “driving away talent” overseas.
Maybe someone needs to tell Simeon Brown that the definition of “economic lunacy” is having Nicola Willis do the same thing over and over again, and expecting to get a different outcome.
Footnote: Plato and Socrates had a few things to say about income inequality. As a New York Times columnist recently pointed out:
In his “Laws,” through the character of the Athenian Stranger, Plato contended that in a thriving republic, if anyone acquired more than four times the wealth of the poorest citizens, he should donate the surplus to the city.
Slightly different metric… but that $362,6009 annual salary of Seymour’s is 12 times the annual income ($30, 261) of someone dependent on Solo Parent Support. Why did Plato think this sort of thing might be a problem ?
For Plato, the source of inequality was a disease of the soul that the Greeks called pleonexia — a kind of insatiable greed. In Plato’s “Gorgias,” Socrates likened this condition to a leaky jug: No matter how much water one pours into it, it will demand more. For some, the desire for money extends only so far as is necessary to cover their needs; for others, the desire is infinite. Plato likened those insatiable souls to slaves who are ruled by their desires.
Someone consumed with his unquenchable desires comes to love himself far beyond what he can feel for the rest of humanity. He was, for Plato, “a poor judge of what is just and good and noble,” because he would always treat his desires as more valuable even than the truth. As a consequence, Plato wrote, “it is impossible that those who become very rich to also become good.”
Those old Greeks and their politics of envy. What did they know?