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A Taxing Question

Entry 1264, on 2011-01-27 at 16:12:05 (Rating 4, Politics)

The Labour opposition has recently said they will cut taxes for the lowest paid people in New Zealand if/when they are voted into government next. Obviously the National-lead government has ridiculed the idea but I think they might have underestimated it.

There seems to be agreement amongst political commentators that many people are becoming disillusioned with how the richest are becoming even richer while the rest suffer. At the same time it has become apparent to many that business leaders aren't quite the heroes that they are often portrayed as.

The disastrous oil spill caused by BP's incompetence and it's subsequent further incompetence in handling the problem showed that many top executives are no more deserving of respect and huge salaries than anyone else.

And then there was the biggest disaster of all which was primarily caused by corporate leaders' greed and incompetence: the global financial crisis itself. People naturally object to these leaders being paid huge salaries when their actions have lead to everyone else being paid less. Sure, it's hard to control how much they are paid but at least they can be taxed a bit more so that they do end up making some reasonable contribution to society even if it is only through paying tax.

New Zealand has also been affected in similar ways. Many would suggest the Pike River mine disaster was caused by poor safety standards implemented by its management. Then there are the continual finance company collapses, sometimes accompanied by government rescues. How can society justify paying the useless executives involved the salaries they get? Again I say let's just take their undeserved pay back by taxing them.

The counter-argument that we shouldn't help out the poorest by taxing the richest just doesn't work. The rich can afford it and if more tax means they move somewhere else then they probably aren't the sort of people we want here anyway. In fact, even if we didn't need the extra tax it would be a good idea to tax the rich more. If they decided to get a job in another country because they were too miserable to help out those who haven't learnt to rip off the system quite as well as they have then the didn't deserve to live here in the first place.

I actually thought that we didn't tax the first $5000 of income anyway, in fact for some reason I thought the limit was $12000. Maybe that used to be a rule but was removed a while back during New Zealand's economic miracle in the 1990s (I'm being sarcastic because the "miracle" was actually a disaster).

But even moving away from those questions we should get back to an even more basic discussion of the subject. That is, ignoring all other factors, should we be taxing the poor less? There is merit in that idea surely because most people don't really want an underclass living below or on the poverty line.

Another discussion should be around the idea of taxing others more. Forget about ideological and philosophical objections. Would it be best for our society as a whole if we did that? Would we have a more equal society (instead of having one of the greatest disparities between rich and poor in the world, as revealed in a recent study)? Would we have less families who can't afford the basics they should have in a relatively rich modern western country? Might we lose some rich, greedy senior executives?

If we agree reducing taxes for the poor is a good thing then we should find a way to make it happen. If we also agree that taxing the rich more is good then there's an easy answer to the problem of funding those cuts. I heard that it would take a top tax rate of over 40% for people making over NZ$150,000 to allow the tax cuts for the poorest to go ahead. What's the problem with that? I'm not sure how accurate those numbers are but I guess they are a reasonable estimate. It's even more reasonable when you consider the rich have just been given a huge handout through the current government's "tax reforms" (which actually aren't reforms at all).

So this policy might be quite successful in increasing Labour's support. It's unlikely to be enough to give them a victory because they are currently a long way behind, but even if it just gives the center-right (plus the Maori Party) coalition a scare at the next election then that will be good enough. They have got things far too easy at the moment and that is leading to them considering more unreasonable ideological policies which is the last thing the country needs.

I think we should all forget the ideology and let's just see if we can find a way to return to having a more equitable and fair society in New Zealand.

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