A commenter asked an interesting question yesterday:
of the countries that are wealthier than us, how many have aligned their top income, corporate, and trust tax rates? And which countries are they?
Well, I did some looking and here are the countries with higher GDP per person than us and their top tax rates:
(sources income, corporate, seems most countries don’t have a seperate trust rate. When comparing rates between countries, you need to bear in mind that many countries have state taxes and/or pay social security tax additionally to income tax)
So… none of them have aligned their top tax rates. Why not, if it is such a great idea? Why, if we want to catch Australia, would we adopt an idea that the Aussies and everyone else have rejected? The fact that not a single one of the countries that is richer than us has aligned its top tax rates destroys the argument that alignment is both good and necessary, which has until now been held up as an undoubtable truth by the Right and accepted as such by the media.
Look, tax avoidance is a problem, but not a huge one. Not one you go throwing out your entire tax system over. The solution isn’t to let the tax avoiders win by giving them all a big tax cut and leaving the rest of us to bear the burden. We should just close the loopholes that let the bludgers pretend their personal income is trust or business income. They are ripping the rest of us off and we shouldn’t allow it. If people were using loopholes to get benefits they shouldn’t, would we change the rules to make it OK? Why have different standards for the well-off?
You have to remember that this clamour for reducing the top tax rate by 8% to align it with the corporate rate is all part of a campaign by the wealthy to reduce their taxes that has been going on for decades.
Of course, they always dress it up as good for the economy. Back in the 1980s they promised us tax cuts for the rich, paid for by asset sales and slashing public services for the poor and the middle class, would lead to more spending creating jobs. But we found out that trickle down economics doesn’t work.
Now, they say that people will only work hard if tax rates are lower and it alignment will eliminate the false economy of tax avoidance. Even if small changes in tax rates change behaviour (and I don’t think they do), most people won’t be getting a tax cut anyway – only 22% of people earn enough to pay tax in the top two brackets. All lowering the 33% and 38% income tax rates to 30% will do is put a few tax accountants out of work and make the rich much much richer.
John Key stands to pay $26,000 a year less on his PM’s salary alone. The CEO of Telecom would make a whooping $400,000. It will be the poor and the middle class bearing the cost, again, this time through higher rents and GST.
We are being sold a con once more by the monied elite. Will we buy it?