The income and wealth inequality lobby group, “Closing the Gap” thinks the Labour proposal a great start says Peter Malcolm, a spokesperson for the group. But they need to be aware of what many of the rich do and of what do we really need as a country.

Over half the ultra-wealthy people who own $50 million or more declare less than $70,000 a year in income which means they wouldn’t be affected at all by this new tax rate

Right now the richest 1% in New Zealand have $141 billion hoarded in trusts to avoid paying taxes.

The proposal of a Labour government to raise the tax rate on income of over $180,000 has already seen some rich individuals and their accountants discussing how to avoid this new tax. These folk see taxation as a cost to be avoided wherever possible.

And this new tax bracket will only raise an extra half a billion. Comparisons with Scandinavian countries suggest to provide a decent service in areas such as welfare, education and health we need an extra $30 billion and the rich and the wealthy have it in plenty and could afford it. We need, in fact to go further with the tax system. Even higher top tax rates, a decent capital gains tax, wealth taxes, land taxes are some of the options available.

Not withstanding this, some wealthy individuals are already acknowledging that this additional tax is a start. These folk are acknowledging that their success as surgeons, property developers, farmers, retailers or investors is dependant on a fully functional education and legal framework, a health system that is even handed and a welfare system that prevents the poor living in ghettos.

These people see it in their interests as Kiwis to ensure government services are well funded and provide equitable access to all. They see their personal financial success as only being possible due to government providing an over arching framework in which they have trained, invested or established businesses.

We would hope that those who are currently talking to their accountants about avoiding this new tax bracket have a fresh look at their responsibility as citizens.

And furthermore we hope their accountants are reminding their clients of the cost of creating trusts and companies in the hope of reducing their tax liabilities. Hopefully accountants will also be reminding those who do not accept the new rate of tax that the Inland Revenue Department have rules to unwind structures created to avoid tax says Malcolm

It’s a good start, but it’s only the beginning he says.

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