Tax working group disappoints

Written By: - Date published: 8:27 am, December 2nd, 2009 - 2 comments
Categories: tax - Tags:

I’ve had quite high hopes for the Tax Working Group. I thought it would be a genuine, ground-up review of the tax system with no assumptions that would start with basic questions (1. what do we want the tax system to do?). However, I’ve been reading through the papers from the Tax Working Group conference yesterday and I’m disappointed.

All the analysis is from one narrow stream of economic thought, the increasingly passe neoliberal/Chicago School that is obsessed with efficiency over fairness*. It is a reductive ideology that sees economic growth as an end in itself, not a means to increased human welfare (happiness). And if you scratch the surface a bit you discover its all really about one thing – the proponents are well-off and they don’t like having to pay taxes to support the system that enables them to be wealthy.

What does that mean in practice? Well, all the papers, every one of them that I’ve read, assumes that the goal of tax reform must to be reduce the upper income tax rates, which amounts to nothing more than a redistribution of wealth to the wealthy – and the wealthier you are, the bigger your tax cut. The idea that increased taxation on land and property (which will fall on people of all incomes whether in lower property values or higher rents) should be used to reduce income tax for those on low incomes or even to reduce income tax equally for everyone is not even considered. It has simply not crossed their minds by the looks of it.

In fact, the argument that comes out against increasing GST is that there would have to be ‘compensation’ to people on low incomes. See what that means? Reducing income tax for Rob Fyfe and other wealthy people is assumed to be a laudable goal justifying introducing new tax but reducing income tax for Jonathan Smith or any other Kiwi on a lower income is seen as an argument against introducing a new tax.

Like I said, I had high hopes for the Tax Working Group. I agree that we should shift taxation off work and onto land and property. Unfortunately, it looks like the right-wingers can’t help themselves and are intent on making this a money grab for the rich as well.

The Greens and Labour have been disappointingly quiet about the issue of who gets any income tax cuts arising from new property and/or land taxes. I fear a lot of this just goes over people’s heads – that would seem to be the case with the way the media hasn’t questioned the assumption that income taxes come off the top. In fact, outside of this site, I’ve only seen one person with a proposal that wouldn’t amount to a wealth grab by the well-off. That’s Gareth Morgan’s negative tax/guaranteed minimum income proposal but I’ll talk about that next post.

*(there are many factors that can’t, in theory, be simultaneously optimised in economics – fairness and efficiency, for example. But economic theory (especially right-wing economic theory) has a masterful ability to forget that it’s dealing with real people. Any economic system that strives so hard for efficiency that is not sufficiently fair to satisfy most people will not survive, politics intervenes and people demand the system be made fairer  – eg. attaching the welfare state to the capitalist economic model – or the entire system is overthrown)

2 comments on “Tax working group disappoints ”

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  1. ben 1
    2 December 2009 at 5:12 pm

    Marty, do ever beat a different drum? Is there any circumstance in which a group of economists tasked with thinking about efficiency and who put forward standard insights from the mainstream economic literature on how to move toward that objective would not be accused by you of neoliberalism? I’m sorry but if it’s not faulty empirics from you it’s the “neoliberal” line again and again. There are all kinds of personal insults out there you can use. The world is your oyster. You could even try some (proper) analysis.

  2. George.com 2
    3 December 2009 at 9:50 pm

    Most dissappointing was the opportunity lost to have forward looking taxes that dealt not just with current matters, but future ones as well. No where could I find analysis that looked an consumption and pollution taxes, save for some argument to raise GST in order to cut top tax rates and some congestion charges. Rather than look hard at shifting some of the tax base from labour on to pollution and consumption, we got a rehash of the 1980s. Still, given that Brash was running the show I couldn’t have expected anything else. An opportunity lost and half a million dollars wasted.