Phil O’Reilly’s article in today’s DomPost headed “The rich get richer but so do the poor ” is appalling. Responding to the OECD report on inequality, he is following in the footsteps of Alasdair Thompson. BusinessNZ are still dinosaur employers from the Victorian age.
There’s a “bit of a debate” about inequality, says O’Reilly. No, there’s a huge debate and it’s growing. That is why the OECD is concerned.
In his hymn to capitalism (which is doing so well at the moment), O’Reilly says:
The sloganeers would have us increase taxes on higher income people to combat “inequality”.
Except it’s not the sloganeers, it’s the OECD. Here’s what the Director-General says in his opening speech.
Reforming tax and benefit policies are also measures that can promote a better distribution of income. Tax-benefit systems have become less effective at redistributing incomes over the past decades. The main reason for this declining redistribution is on the benefit side: levels were cut and eligibility rules tightened to contain social spending, and transfers to the lowest income groups failed to keep pace with earnings growth.
Over the last two decades, there was a move away from highly progressive income tax rates and net wealth taxes in many countries. As top earners now have a greater capacity to pay taxes than before, some governments are re-examining their tax systems to ensure that wealthier individuals contribute their fair share of the tax burden.
This aim can be achieved in several different ways. They include not only the possibility of raising marginal tax rates on the rich but also improving tax compliance (and in this areas we have been helping governments eliminate bank secrecy and fiscal havens), eliminating tax deductions, and reassessing the role of taxes on all forms of property and wealth.
Of course the real reason for O’Reilly’s diatribe is that the main reason the OECD identifies for increasing inequality is the growing gap between wages and salaries.
The single most important driver has been greater inequality in wages and salaries. This is no surprise: earnings from work make up about three-quarters of total household incomes among the working-age population in most OECD countries.
In Britain, the Telegraph reports that Chief Executive pay has gone up 1200% in 25 years.