Why being rich is now a taxing conundrum

Consider these two unexpected propositions: a leading contender for the Republican nomination for President of the United States of America is ambushed by a competing conservative candidate for putting profits before people; and one of the richest men in America, a quintessential capitalist, is demanding that the nation's top earners pay higher taxes.

Newt Gingrich, who triumphed at the weekend in the South Carolina primary, thumping frontrunner Mitt Romney, raised the ire of many of his fellow Republicans by endorsing a 30-minute attack video put out by his supporters. In it Mr Romney is criticised for his role as a management consultant in restructuring businesses and putting people out of work. Putting people out of work on a large scale apparently destroys communities, suggests the attack. Fancy that.

Ahead of the weekend's reversal Mr Romney was also being blindsided by members of his own party for refusing to release his tax returns. In an extraordinary turn of events, being super-rich and not paying sufficient taxes in the party of the super-rich, for whom even the merest suggestion of tax increases is akin to a violation of the constitution, is becoming a political liability.

Mr Gingrich has tapped into a vein of the zeitgeist that he may come to regret.

Certainly, many of his colleagues are already incandescent over his attack, handing as it does, a stick to the Democrats with which to beat their own party.

It's a fault line recently mined by others. Take one of the richest and most successful businessmen in the United States, Warren Buffett. In 2010, Mr Buffett paid only 11% on adjusted gross income of almost $US63 million ($NZ77 million). His office staff paid percentages in the 30s.

His view is that the rich must pay higher taxes and there should be higher government spending on the rest of the population to help solve the United States' economic problems. "We have to get serious about shared sacrifice," he says.

A closet socialist?

Not a bit of it.

"Capitalism has unleashed more human potential than any other system in history." But, he says, "We need a tax system that essentially takes very good care of the people who really aren't as well adjusted to the market system but are nevertheless doing useful things in society."

The connecting buzzword between the two men here is "inequality".

Where previously this might have been peremptorily dismissed on the Right with a slap out of the "politics of envy" arsenal, suddenly it matters. It has dawned, on some politicians at least, that it has consequences. Never mind the politics of envy: what about the politics of anger, or the politics of despair?

Today in the US, the top 1% earn 21% of all pre-tax income; 35 years ago, it was about 9%. Over a similar period, the top 1% earning families have seen income gains of 278%, while the middle 60% of the working population has achieved less than a 40% increase.

What's it got to do with us?

A report late last year from the OECD indicated that the gap between rich and poor has widened further in New Zealand - and in Sweden - than in any other developed countries in the past 25 years.

"This study dispels the assumption that the benefits of economic growth will automatically trickle down to the disadvantaged," OECD secretary-general Angel Gurria said in addressing the report.

She is not the only one to make similar observations about this fabled foundation of the neo-liberal consensus. In New Zealand, as in the United States, the rich have been getting richer and the poor poorer.

The country needs to have a serious discussion about the matter. This might start with a detailed conversation about, for instance, the ramifications of poverty, presuming that we haven't all been cowed into not talking about the matter because it's "controversial".

This is what documentary maker Bryan Bruce was attempting to do - initiate a conversation - when he made his programme Inside Child Poverty, aired in the week before November's general election.

Such is the pervasiveness of inane reality TV-pap masquerading as documentary, that it was perhaps the shock of experiencing anew what was once commonplace, in a more vigorous and challenging broadcasting era, that knocked various powers-that-be off their perches. A programme that dared to look at a serious social and economic issue without a freak of nature, a sex addict or a grossly obese person in sight.

New Zealand on Air, which funded the programme, apparently prompted by the umbrage expressed by National Party office holders, including a member of its own board - deputy chair Stephen McElrea, who also happens to be John Key's electorate chairman - came over all concerned about the possibility of having its political neutrality brought into question over the timing of the programme. That, as it well knew, was down to the broadcaster, TV3.

It was a spectacular own goal, the upshot of which is that many people now perceive the management of New Zealand on Air to be potentially prone to political pressure, including from its own board.

What chance a hard-hitting New Zealand on Air-funded documentary on "inequality" any time soon?

Simon Cunliffe is deputy editor (news) at the Otago Daily Times.



Add a Comment

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter