In today’s Herald, Geof Nightingale, tax partner and member of National’s Tax Working Group, joins the argument for greater inequality in New Zealand. He quotes the OECD report saying that
The OECD reckons it’s vital Governments review their tax and transfer systems and increase the top tax rate so well-off individuals contribute their fair share. It also stresses the need to improve tax compliance and eliminate tax loopholes. At first glance, it would seem that New Zealand is heading the other way when in Budget 2010 we rebalanced our tax system by reducing personal tax rates and increasing GST.
Nightingale prefers the argument of the Tax Working Group that
The OECD recognises the dangers of rising tax rates and benefit levels, noting they can produce disincentives (to work, to save or even to remain in New Zealand) and damage economic growth. The Tax Working Group saw the danger signs a while back when tasked with examining New Zealand’s tax policy. As a result it recommended reducing personal tax rates, but increasing GST and taxes on property. The theory being, reducing personal tax rates increases the incentives for people to enter the workforce and increasing tax on consumption would encourage savings.
I saw Nightingale’s presentation to the Tax Working Group conference – it can be viewed here. I found two of the slides particularly interesting. One was headed “Equality measures” – it showed the changes recommended by the Working Groups left 23% of children in poverty after lowering of taxes at the upper end – no change. Also the scale showing the benefit to those at the top end topped out at $120,000 income – a lot less than Nightingale would be earning.
Nightingale is right about one thing – Generation Inequality is not happy. His special pleading won’t change that.
It is ironical that in the same edition of the Herald that gives space to Nightingale, Garth George writes his last column as the editors decided that “his column does not fit in with their future plans for the opinion pages.” Here’s what Garth thinks is important:
Meanwhile, let’s take a look at what I consider to be the most serious and vexing problem facing New Zealand – and the Western World – now and in the immediate future: income inequality and unemployment.
In their book The Spirit Level, British epidemiologists Richard Wilkinson and Kate Pickett reveal that among the world’s wealthiest countries, it is the more unequal ones that do worse, according to almost every quality of life indicator. The fundamental findings, which are backed by sound social science research, is that inequality damages community life and the relationships that hold nations together. They show that many social problems are more common in societies with larger income differences.
And the sad thing is New Zealand is among the most unequal of the “rich” countries. We have poorer health, higher teenage birth rates, more people in prison, more mental illness, more obesity, more drug abuse, lower levels of child well-being, huge personal debt, and less social mobility than the more equal rich countries.
In a newspaper article, Britain’s Archbishop of York, Dr John Sentamu, wrote: “Evidence-based research confirms what many have always believed: that inequality is divisive. It weakens the bonds of caring, kindness and trust between us . “If we are not to see a generation of young people damaged by long-term unemployment, and a society becoming increasingly anti-social, we need resolute action to tackle these insidious and corrosive [economic and social issues]. If we want a happier and less divided society, then an important step would be to reduce the income differences between rich and poor.”
As we enter the second decade of the third millennium, let us all think on these things.
Blessings for the New Year.
Good on you Garth – I’m with you. Let’s hope the Herald editors’ plans do not involve more Nightingale-type opinions.