There is now an urgent need to redistribute wealth to benefit more New Zealanders says Peter Malcolm spokes person for
Income Equality Aotearoa NZ Inc “Closing the Gap”. This needs to happen to resolve the enduring inequalities in this
country which have now been exacerbated by Covid 19. One important way is to make our personal income tax rates, much
more steeply progressive.
The extent of our inequality has been highlighted by recent publicity over the number of salaries over $250,00 per annum
within the Auckland City Council corridors of power (Ref: TV One News Campaign groups ‘rich list’ claims seven Auckland Council staff paid more than Prime Minister, May 3
2020) and suggestions that large well off and well established corporations should not have received the wage subsidy (Ref: Newshub Coronavirus; Government’s COVID-19 wage subsidies, tax cuts are ‘wasteful’ – Sir Roger Douglas, 05/05/2020) .
It is clear that top income earners and businesses are better equipped to withstand economic and social disruption.
We must build a fairer society; the ‘winner takes all ‘ emphasis on large salaries for the top echelon while large
numbers of workers struggle to make ends meet is not what fair-minded New Zealanders want.
“Many poorly paid essential workers have kept the country running over the past five weeks of COVID-19 lockdown. They
include supermarket workers earning only between $16 and $20 an hour, roughly $32,000 to $45,000 a year. They pay 17.5 %
income tax on that yet our top personal income tax rate is not even double that, at 33% tax on earning over $70,000 a
year” says Malcolm
Our top tax is relatively low compared to other economies, for example its 45% in Australia for amounts over $A180,000.
Some years ago ours used to be over 60% and in Britain it was over 90%.
Economists have pointed out that high incomes and creation of wealth have a substantial luck component. It is not
plausible that people reach that level of income simply by working especially hard or saving much more than their
neighbours (Ref:Taxes and Inequality, L Burman, Tax Law Review, Vol 66, 2013).
The New Zealand tax system is one of the few means we have to address extremes of high incomes, but it is considered
weak at reducing inequalities. (Ref: New Zealand’s tax system: weak at reducing inequalities, CTU Monthly Economic Bulletin, No. 203 (September 2018).
Because it mostly affects high-income households, an increase in the highest tax rate typically leads to a reduction in
inequality. Analysts in New Zealand have identified lifting the highest income tax rate and using the proceeds to lower
one of the two lowest tax rates would achieve the greatest improvement to welfare and reduction in inequality. (Ref:
Treasury paper by Creedy, and an article by John Creedy & Norman Gemmell & Nicolas Hérault & Penny Mok, 2020 ), and how raising tax for high-income earners would reduce inequality, and improve social welfare in
New Zealand, “The Conversation”, 24 September 2019).