Anti-CGT assault masks real support for increasing fairness
Following an initial onslaught of opposition to a capital gains tax, the coming weeks will see the less vocal majority
assert their support for moves to increase fairness, the Equality Network says.
The network of organisations committed to reducing inequality notes polling by UMR that shows two thirds of New
Zealanders support a capital gains tax that excludes the family home.
“Reducing tax for low and middle income earners and taxing the gains from capital income for the wealthy are welcome
steps towards more fairness and greater equality in this country,” says Equality Network Steering Group member Paul
Barber, in response to in the final report of the Taw Working Group (TWG) released on 21st February.
“There is a strong emphasis in the TWG report on reducing inequality and imbalances in the system and the report
acknowledges that tax plays a critical role in reducing inequality. A fairer tax system will help to rebalance our
communities and ensure that all people contribute fairly to the wellbeing of our country, according to their income and
wealth.”
“While the TWG recommendations are positive steps in the right direction, more needs to be done to create a coherent
system to reduce inequality, including better interface between the tax and benefit systems and a higher tax rate on the
highest incomes.”
“The lack of effective tax on wealth remains the largest gap in the tax system and is deeply unfair,” says Paul Barber.
“The currently largely un-taxed gains from capital income enjoyed by a relatively small proportion of our country need
to be brought into the tax system to help lift the incomes of those who are struggling. The wealthiest 20% of our
population are the ones who are being asked to pay their fair share of tax. “
“The New Zealand tax system is a complete oddity among the other wealthy nations like Canada, United Kingdom, and
European Union countries, because we have no meaningful wealth or capital gains taxes,” he says. This is making our
system unfair and inefficient, as well as threatening the sustainability and integrity of the tax system, says the TWG
in its report.
“Tax reductions to those on lower incomes will give some much-needed extra cash to help reduce the level of poverty in
this country, especially for households with children. Lowering tax rates for people on lower and middle incomes is
effective but the TWG report is also makes it clear that the most effective way to help the lowest income earners is
through direct transfers i.e. increased welfare benefits and other income support. The EN calls on the government to
heed this advice and take action to increase welfare support for those who are missing out.”
“The links between the tax system and welfare, including secondary employment tax rates and abatement rates for
benefits, thresholds for access to Working For Families tax credits and other assistance, have a huge effect for
hundreds of thousands of people living in poverty in this country. It is disappointing that the TWG has not done more
work on this issue. The report of the Welfare Expert Advisory Group that was completed this month will hopefully contain
proposals for urgent change in this area.”
“The EN continues to urge the government to introduce a higher tax rate on the highest incomes. Cutting tax rates for
the lowest income earners will also give tax cuts to all other income earners. Under the scenarios included in the TWG
report, someone earning over $100,000 per year would receive a tax windfall of up to $595 per year, the same as someone
on $22,500.”
“The increased revenue from better taxing high incomes and wealth would ensure that the government has more revenue to
meet the urgent health and social needs in our communities, such as better housing, health and education, and deliver
wellbeing for all.”
International research over recent decades has shown that higher levels of income inequality such as we have had in New
Zealand since the mid-1980s are a causative factor in health and social problems including mental illness and
imprisonment rates, as well as weakening cohesiveness of society, such as the level of trust, and inhibiting inclusive
economic growth.
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About the Equality Network
The Equality Network is a non-partisan network of organisations working to improve the well-being of all New Zealanders by reducing income inequality. The aim of the Network is to
enhance and support member organisations as they work for a fairer New Zealand. There are currently 40 groups
participating in the network. See our website www.equalitynetwork.org.nz for more details.