Predictably, the ideological vanguardists at Treasury are rolling out the flat tax argument again. For some unknown reason Radio NZ hasn’t published the Treasury papers they obtained under the OIA but the idea this time seems to be to use the money raised from higher GST, capital gains tax, land tax, changes to tax treatment of investment properties, and/or increases to the bottom income levels to pay for eliminating the higher tax rates.
Make no mistake, this is just a wealth grab by the rich from low to middle income New Zealanders. A flat tax would only cut income tax for the rich and would have to be paid for with higher GST for the poor a or higher bottom income tax.
The whole thing is premised on Treasury’s voodoo economic models, which hold that if you take food out of the mouths of a thousand working class children so some rich guy can buy a yacht then somehow you’ll get the incentives right and we’ll all end up with yachts.
It’s patently aburd.
Nearly the only countries that have adopted flat tax are the former communist states, who got suckered into adopting Jeffery Sachs’ ‘cowboy capitalism’ wholesale. Sure they grew alright in immediate the post-communist era, as you would expect with their markets opening to the wealthier West.
But now they’re buggered. The Baltic republics, often held up as shining examples by flat tax advocates are now economic disaster zones because their growth was built on a few wealthy speculators and the bulk of the population remained poor. Estonia’s GDP shrank 16.1% a year last quarter, Latvia’s 17.3%, Lithuania’s 20.4%*. Why would we want to copy them?
The fact of the matter is that every single country that is above us in the oft-cited OECD rankings does not have a flat tax. In fact, many of the most economically successful countries (Norway, Sweden, France, Germany, Australia, the UK etc) have more progressive tax systems with higher top rates than we do.
If we want to be more economically successful, shouldn’t we imitate successful countries rather than basket-cases?
Of course, the Right’s agenda has never really been about making the economy grow faster. It’s all about taking from the poor to line the pockets of the rich, and with the New Zealand Treasury we have a highly ideological and activist proponent of that agenda right at the heart of our Government. That’s something the Left is going to have to sort out next time we’re in power.