The main reason for tax in New Zealand is for the redistribution of wealth.
It may be that hundreds of years ago the main reason for tax was to pay for the armies and navies to defend the realm. But one can hardly claim that is the case today.
One can also look at the huge number of important things that governments must do in this modern world, hence the large number of ministries, but above all of this I place the redistribution of wealth as taxation’s No1 function.
Our current system struggles to do this largely because it is a skewed system. It is skewed away from the wealthy and towards the middle class.
The money raised by this system is barely enough to meet the needs of the existing government ministries; there is little or none left over to meet the needs of wealth redistribution.
At its simplest, a wealth redistribution tax system would target the very rich and redistribute that money to the very poor.
The money taken from 100 very rich would enhance the lives of 1000 very poor.
Then, the money from 1000 very rich would enhance the lives of 10,000 very poor; the money from 10,000 very rich would enhance the lives of 100,000 very poor.
If a million dollars was taken from the 100 very rich that would result in a tax increase of $100,000,000; if it were taken from 1000 very rich it would gather in $1,000,000,000.
If it were taken from 10,000 it would take in $10,000,000,000. That is $10billion. Over 20 years this would result in a tax haul of $200b.
How would that money be spent? Decent housing would be a priority. Housing that is well built and warm. Schools that are predominantly serving the needs of the poor would be massively supported in their struggle to educate the poor.
Health would be another priority. The government could establish medical centres throughout the country, especially in hard-to-reach and hard-to-staff areas. The doctors and nurses that served there would be massively rewarded.
Then there is employment. The government could guarantee employment by starting work creation schemes, something like the old PEP schemes.
Or they could subsidise relocation expenses when people were prepared to shift to take up a job. Or they could even keep the current red, orange and green system but double the pay of anyone on the green light. They could of course simply abolish all benefits and pay everyone a living wage.
The point is none of these is written in concrete. There are a huge number of possibilities; we just need to make up our minds to do something about the problem of poverty in our land.
What, then, is the problem? If the solution is reasonably straight forward in terms of obtaining the revenue, and if the outcomes are only limited by one’s imagination, then what is the problem?
The problem is that the super rich don’t like to be taxed at all, let alone taxed more than anyone else.
Look at what happened in the recent tax refund. Who got the larger refund — a person earning $30,000 a year or a person earning $3million a year? I’ll let you work that one out.
The people who should be paying more in tax would rather spend millions on accountants, lawyers, lobbyists and political activists rather than pay tax. They also have at their disposal a very pliant media who they can use to persuade those just underneath them on the social ladder that this is a threat to them; that the government is targeting them and that they have to get up and fight against the government.
In other words, the super rich do not have to enter into this fight themselves; they just have to convince the middle class to do it for them. With a little judicious funding and media manipulation they have a more than fair chance of convincing the nation that taxing the very rich is a very bad idea.
The proof of this lies all about us. Super rich individuals evade tax whenever and wherever they can.
That is why the top 1% of the world own over 50% of the world’s wealth.
Here in New Zealand, however, it is still a manageable problem. We simply need a government determined to do something about the problem and determined to obtain the revenue to implement its plans.
— Bill Verrall is a Fiordland writer.
