Paying to rebuild Christchurch: A small temporary earthquake levy
Published: February 25, 2011
by Russel Norman
While the horror of Christchurch’s second earthquake continues to unfold, those of us not immediately involved in the
recovery can begin to plan for the rebuilding of a city and the livelihoods of those who live there.
The question that immediately comes to mind is how are we going to pay for the recovery and reconstruction?
The Earthquake Commission (EQC) and private insurance will cover most of the cost to private property. Everything
else—the hospitals, the roads, the rail, the sewage—will likely be borne by central government. More borrowing by
central government is being contemplated.
As a practical, principled response to the Christchurch earthquake, the Green Party is putting forward for discussion
the idea of a small temporary earthquake levy on all income earners over $48,000.
The levy would work like the one being introduced in Australia to pay the A$7.2 billion fix-it bill after their floods.
To make it fair, the levy would fall on those most able to pay it. Those earning between $48,000 and $70,000 a year
could pay up to an additional one per cent income tax, while those earning over $70,000 could pay up to an additional
two per cent income tax to help pay for the reconstruction of Christchurch. (People earning less than $48,000 and all
those living in the Christchurch region would be exempt from paying the levy.)
A levy at those levels would raise an additional $921 million per year and be directly tagged for disaster relief and
reconstruction. The levy could last for a defined time period such as a year, or end with the reconstruction of
Christchurch, whatever comes first.
Here are a number of different levy scenarios with estimates of the amounts they raise:
Income bandScenario 1 ($M)Scenario 2 ($M)Scenario 3 ($M)
$48,000-70,000 (@0.5%) $118 (@1.0%) $236 (@1.0%) $236
$70,000+ (@1.0%) $343 (@1.5%) $514 (@2.0%) $685
Total yearly revenue$461$750$921
The additional tax to pay for individuals would look like:
Income (pa)Scenario 1 ($/week)Scenario 2 ($/week)Scenario 3 ($/week)
$50,000 $4.80 $9.61 $9.61
$60,000 $5.77 $11.54 S11.54
$70,000 $13.46 $13.46 S13.46
$80,000 $15.38 $23.08 $30.77
There are those who argue against such a levy. Australia’s flood levy has been attacked by the Right who argue that
further government cutbacks are the best way to find the necessary funds to pay for their flood damage. And a new,
albeit tiny, tax raise for upper-income earners goes against the Key Government’s current pathway towards a flat tax
structure. And of course we have already paid into the EQC kitty over many years.
However, we don’t believe these arguments against a small temporary levy are convincing. The public sector is already
being cut and further cutbacks won’t help the jobs situation. A tax rise may go against National Party ideology but it
is only temporary for a national emergency situation. And the size of the damage bill appears to be greater than current
reserves and re-insurance.
With this small temporary earthquake levy we don’t wish to politicise the argument. We don’t wish to re-litigate the
argument around National’s tax changes, nor do we think the Right should use the opportunity to promote their agenda of
asset sales to pay for the damage. We need a pragmatic response to the situation we’re in. We can return to the
arguments about tax rates and privatisation later.
A small temporary earthquake levy does appear to offer a fair way for all of us to do our bit to contribute to
Christchurch’s recovery without adding to Government debt. We welcome your feedback.
ENDS