Christie: The Truth and the Tax Debate

They say there is nothing more certain than death and taxes, but bringing the latter of these matters to the fore in an election campaign is often political suicide. The Greens do it on a regular basis, as a shout-out to their own voters, but the main parties generally know to leave it well alone during the run up to an election. That is why it is so surprising to see taxation as a headline issue in Labour’s current campaign. By telling us what they are not going to do before this election, they are, perhaps unwittingly, telling us what we can look forward to if they are re-elected. And the resignation of the Revenue Minister in a fit of pique because he could not get his way on wealth and capital gains taxes is a sure sign that these policies are on the agenda; and, if Labour wins again, they will be implemented sooner rather than later.

It is a sign of how far left the Labour party has strayed. Once the party of the working man, they are now talking about introducing envy taxes, imposed on those who have worked hard and built up an asset base, many of whom are traditional Labour voters. This Government has given up on the idea of hard graft, and has given in to the idea of ‘entitlement’. The redistribution of other people’s wealth seems to be their modus operandi these days.

Agriculture Minister Damien O’Connor thinks we need to increase taxation to help pay for the cyclone clean-up. Yet this didn’t happen in 2011 when the city of Christchurch needed rebuilding after the earthquakes. Why? Because we had a government then that was fiscally responsible, and they found other ways to pay for the rebuild of the city – even though we were in the middle of the GFC at the time.

Truth is, the government does not need to collect more tax from hardworking people. That attitude, common among socialists, is a disaster waiting to happen. It will drive down productivity, drive away the wealthy people, including business owners, and dampen the economy generally. In the end it will have the opposite effect from what the government expects. But there was never a form of taxation that a socialist didn’t like – right?

I have rambled on about wealth taxes before, but they really are inequitable. In a nutshell, the tax is applied to the aggregated total of your asset base, regardless of whether or not your assets are income producing – and if they are, you are most likely already paying tax on that income, in one form or another. And here is the gut punch: wealth taxes are paid every year. Unlike capital gains tax, this is not a one-off tax. As the value of your assets goes up, so do your wealth tax liabilities. For some, paying the wealth taxes will be no problem. For others, it will be a real struggle. And for both, it will be inequitable, and nothing more than an envy tax; and there really is no justification for that, in a small country that has always punched above its weight… but has a big neighbour next door that awaits the wealthy with open arms. How can any government be so stupid?

But we have had six years of ‘stupid’, so this is hardly a surprise.

There are lots of ways in which the government can pay for the cyclone recovery, that do not involve introducing new taxes. Here are just a few. 

• Firstly, cut out wasteful spending. Some examples:the Ministry of Pacific Peoples spending $40,000 on a leaving bash for its CEO;
• $500,000 on a slide in Parliament grounds;
• another $500,000 on a totem pole outside Parliament;
• And then there is this:

Click to view

These examples, of course, are a drop in the bucket of wasteful spending by this Labour Government. Millions of dollars have been spent on consultants for an Auckland bike bridge that never went ahead, and consultant fees for light rail to the airport that has not laid a single millimetre of track. And there are many more examples of obscene wasteful spending by this government: too numerous to mention.

However, we are ignoring the rather large elephants in the corner of the room, which include:

• the number of people collecting benefits that are capable of working but do not work (amounting to approximately nine per cent of the workforce);
• Maori and iwi corporations, some of which make millions in profits but pay no tax.

Why are we looking for wealth taxes when all of these measures, or even only some of them, would yield the additional tax that we need? And, let’s face it – none of these spending cuts are exactly revolutionary. Getting people off the couch, or asking wealthy corporations to pay at least some tax on their earnings, is not unreasonable. After all, all non-Maori corporations are required to pay tax. Why are Maori businesses exempt?

And the next question would be: are wealthy Maori going to be required to pay wealth (or capital gains) tax? Because if not, then we have yet another example of a two-tier society, where one racial group is favoured over another, the unfavoured group being much larger than the favoured. But that would be nothing new, would it?

The government pointedly ignores the fact that large swathes of lower-income earners who have families pay no tax at all. The argument in favour of wealth taxes is based on the premise that the wealthy pay less tax than middle income earners, on a percentage basis. That may be true, but in dollar terms, those with higher incomes pay the vast majority of the tax take.

Let’s take a simple example. The research done for David Parker shows that the ‘wealthy’ pay only 9.5 per cent of their income in taxation, compared to 22 per cent paid by middle income earners. That may be true. But it also means that a taxpayer with an annual income of $1,000,000 pays approximately $95,000 in tax per annum, whereas a taxpayer earning $100,000 pays about $22,000. Trust a socialist to manipulate the numbers, and then have the lickspittle media publish the wrong message. Lies, damned lies and statistics rule again.

Taxation revenue has already increased by approximately 50 per cent since the government took office, and we are well aware that most of their election promises remain unstarted or abandoned. However, their wanton wastefulness with other people’s money may have put them in a position where they do need ‘more tax’. I don’t see why the wealthy should pay for that.

Very soon the government will be forced to open their books, thanks to PREFU, and we will get a better idea of the state of the economy. Already, predictions are that the situation will be dire. Forcing people with money to pay for the government’s abandonment of fiscal discipline is not the answer to the problem. The government, as Margaret Thatcher famously said, has run out of other people’s money, as socialists often do. Wealthy people should not have to pay for that either.

Christie, considers to be a Kiwi through and through and believes the only way ahead in life is through education and hard work. This article was first published HERE