Comprehensive tax reform is the latest missile being hurled, in the wake of last week’s report from the Inland Revenue Department on the High Wealth Individuals Research Project.
It found the super wealthy pay, on average, less than half the rate of tax paid by middle income earners. On average those in a group of 311 of the country’s wealthiest citizens paid an effective tax rate of just 8.9% on their income from all sources, including capital gains on investments.
In comparison, someone on a salary of $80,000 with no other income, paid 22% tax on that excluding goods and services tax (GST).
While many of us may have expected there would be some disparity, it was shocking to hear the level of tax paid by New Zealand rich listers was on a par with the rates for the wealthiest United States families.
Such debates are not our strong suit at any time, but particularly unlikely in election years.
Political parties take sides according to where they perceive they will garner most votes and which will allow them to avoid ruffling the feathers of their biggest donors and supporters.
National portrays Labour as an irresponsible big spender with its mitts on too much of our personal income, while Labour decries tax cuts as inflationary, and reduced tax take leading to essential service cuts. Smaller parties may have bold views on reforms now, but how much sway they might hold in coalition horse trading is not clear.
While many commentators consider the wealth research project highlights the need to revisit some form of capital gains tax (CGT), Prime Minister Chris Hipkins seems desperate not to frighten the horses on that issue.
In 2019, after the Tax Working Party headed by Sir Michael Cullen recommended a CGT, following years of Labour campaigning on the issue, then Prime Minister Jacinda Ardern ruled it out for as long as she was leader.
She said that was not because she did not believe in such a tax, but "because I don’t believe New Zealand does".
What was difficult to tell then is how much of the supposed opposition to a CGT was orchestrated by those with the most to lose, and how much of that was scaremongering.
Whether this new report changes that is anybody’s guess, but the slanging matches over a CGT are in full swing already.
Mr Parker emphasises New Zealanders’ desire to see the tax system as fair. He sees the soon-to-be-introduced series of tax principles, which would require tax policy officials to regularly report on the operation of the tax system using those principles as contributing to greater fairness.
That will only be the case if, when anomalies appear, any government has the gumption to deal with them.
Despite its pussyfooting around comprehensive tax reform, Labour is facing increasing pressure to do something about the "stealth tax".
It is bracket creep, the way wage earners end up being pushed into the next tax bracket, paying a higher proportion of their wage at a higher tax level when their wage increase may be equal to or less than inflation.
Such bracket creep is always with us, but worse in inflationary times, and a regular indexing system seems fair.
National says it would adjust the brackets. Labour’s view on this may be softening after it previously dismissed this as inflationary.
Mr Hipkins concedes adjustments may be needed eventually, without spelling out when. By moving on this, Labour could be seen to be doing something while sidestepping anything bold on taxing the wealthy.
