Congratulations to Labour for finally raising the issue of our tax system saying they are prepared to talk about a capital gains tax. It is also interesting that journalists are talking publicly to a few of the very rich about their wealth and their place in society. Some of the wealthy are saying that we don’t raise enough tax for the Government and many of us would agree but they are concerned that Governments may not spend the extra money wisely. I am not sure there is any answer to this as there will always be aspects of government expenditure that some of us will disagree with.

So maybe now is the time to take a serious look at our total tax system which hopefully will result in some significant changes.

It is clear that for the last 30 years New Zealand has had a tax system which favours the wealthy and the highly paid, is tough on the moderate to lowly paid wage and salary earners, and has caused our country to have an increasing rate of income and wealth inequality. This has led to increasing levels of social and economic ills, higher levels of personal selfishness and lower levels of society cohesiveness. Added to which, much spare capital from those who have it, has been invested in unproductive areas like housing - not new housing that we desperately need but simply the purchase of existing houses which, because of the existing climate, increase in value leading to untaxed capital gain.

Also it is clear that many areas of public service such as health, education, welfare and justice, are severely underfunded; an overall increase in the total tax take is required. I can remember the time when health was largely free and all tertiary education was also free.

Compared with many countries we are lightly taxed: our tax system is not comprehensive excluding many areas which other countries tax. It is also not vertically fair with the wealthy and highly paid contributing a smaller proportion of their total income than the rest, and is it not horizontally fair ie the actual source of income determining the amount of tax paid. And finally much of our tax system is regressive ie those who have less pay a higher proportion of tax than those with more. GST is a good example of this.

What can be done about this? The Green Party and Te Pati Maori have already looked at some further ideas such as a wealth tax. Let’s hope that Labour will also broaden their thoughts.

The list of what many other countries tax but we don’t, is quite long but contains things we need to seriously consider, and some of which we used to tax. These are taxes on capital gains, wealth in general, housing (through capital gains or “risk free rate of return”), estate or death duties, land and charities.

On top of this our top rates (marginal) of tax in general are lower ie less progressive than many other countries. Our top personal tax rate should be at least 45%. (mine was 66% at one stage but didn’t include GST). And company, trust and PIE investments tax rates should significantly increase.

These issues listed above must be considered if we want a fairer, more civilized society with lower income and wealth inequality and increased wellbeing.

The major argument against the things listed above is that the wealthy and highly paid will leave the country and that our productivity will drop as there will be less money available for investment. The research and evidence suggest that neither is true. The number who will do this is relatively low, and I have got to ask “do we want these rich selfish p….. to stay anyway?” As for productivity the economic history of New Zealand shows clearly that productivity was better in periods of higher taxation.

Let’s hope that we can have proper debate about these issues resulting in changes which will make New Zealand a better place for everyone.

Peter Malcolm

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