Sorry - I would rather see money 'squandered' than losing value doing nothing or worse still retrenchment policies leading to reduction of services, devaluing opportunities even further.
The first point is that billionaires sometimes choose to squander their own wealth. The rest of us have no wealth to squander, but through taxation wealth can be aggregated to be appropriated to support society through supporting and enhancing social services and investments, meeting the challenges that our society faces in terms of population increase, whether by greater than replacement birthrates in our country and/or by immigration, and responding to climate change/natural disasters and global challenges such as the impact of commodity trading following COVID pandemic in 2020 and the wars in Ukraine and Gaza, and changing dynamic of security in the Pacific. Basically, keeping our country in business.
At present New Zealand has retracted its economy as per the Coalition agreements of December 2023 following the election. The effects in terms of business closure and projects that have been stalled or completely shut down (e.g. IREX) and loss of expert advice following the firing of 15,000 public servants and fast-track redirection of government department priorities is now very evident (September 2024).
The input by government into the country’s economy in terms of services to support society and capital investment in new projects (for example the $4b Lake Onslow project) or directly owning and managing (for example our health and education systems/businesses, prisons, police, transport etc) and welfare system requires money. Investments made by Government have the cascading effect of keeping the construction industry in business (the skilled workers, apprenticeships and bolstering the value of the project work already done), research, administration and other private inputs active, delivering outward benefits of wages, and contracts providing income to be saved, invested and spent in our economy. Included in this is the value of appropriate support from government for those who are not earning or who are super-annuitants in the form of payments (transfers) to enable all citizens to participate and contribute to the economy, particularly ensuring those with the responsibility of raising children can provide for their children (noting children are citizens of our society, they are our future).
The Government's main sources of revenue come from tax, levies, fees, investment income and from the sales of goods and services (GST). Levies such as Road User Charges, public transport fares are a very regressive form of gaining revenue as it impacts those with the least income and wealth and the most need to use those public services. If they can’t afford to pay, they can’t participate in society and their input, and the value of their capabilities is lost – this loss can be monetised.
The government is in a better position than private parties to borrow (yes, go into debt) not to squander money, but to undertake new projects or continue investment in activities essential to society. Lack of investment is equivalent to going backwards and facing higher debt upstream e.g. infrastructure, climate change resilience. Poor infrastructure investment and management led to the Campylobacter outbreak in Havelock North in 2016, which disrupted business, cost lives and created long term health damage for many forcing the upgrading of water systems in that locality and realigning of functional responsibilities for these systems. Money to be allocated to three waters has now been devolved to local councils’ balance sheets which is having the effect of leading to small higher interest ineffective investments and has not solved the dispute of property ownership, the main cause of resistance to the three waters proposals. We are no nearer to upgrading and conserving and valuing our water appropriately and have created a lag effect in investment which costs all of society in the long run.
Where investment in society is withdrawn it leads to loss of opportunity for individuals, lowering of life expectancy in some sectors of society and poor quality of life for a sizable proportion of the population. Which in turn impacts on growth and business confidence.
Analyses that include the social impact of policy decisions and the loss of quality of life and opportunity for the individuals affected are due. An example of applying a broad long-term view of societal impacts, costs, and benefits applied is provided in New Zealand’s First Emissions Reduction Plan (July 2022).
Increasing government revenue should not be by regressive taxation such as road tolls or beneficiary sanctions or lowering taxes in small increments for middle- and low-income earners, but by broadening the tax base as suggested in the April 2023 Treasury and Inland Revenue research reports.
The high-wealth individuals research project by Inland Revenue was presented to the public in April 2023, ‘Tax and the economic income of the wealthy’
High-wealth individuals research project (ird.govt.nz)
High-Wealth Individuals Research Project Report - April 2023 (ird.govt.nz)
The study finds that high-wealth individuals usually get their income from returns on investments. Around 80 percent of their economic income is capital gains, and much of it is earned through trusts or companies. The report shows that when personal, company and trustee taxes are included, the median family in the high-wealth group paid 8.9% of their economic income in tax.
Concurrently released was the research project by The Treasury into progressivity of our taxation system, effective average tax rates and the distribution of wealth. New research into effective average tax rates and the distribution of wealth | The Treasury New Zealand
These significant reports suggest creating a more progressive tax system in New Zealand requires determining appropriate mechanisms to recover tax from high-wealth individuals. That tax recovered will not be squandered but will boost the capability of the government to deliver on current and future challenges for the benefit of New Zealand society and our broader global obligations, such as emissions reduction, trade and commerce.
Thanks, Gail! As I said in the post, I agree in principle with a CGT. The reasons you give are good ones. My point was not about what you and I think. It was about what voters would think in 2026. Elections are fought with one-liners, not technical reports. Hipkins alluded to 2 other important themes in his interview: a high-wage economy and the impact of AI. He should talk more about those matters.
Thanks Grant. I was hopeful about the interview - and i rate Jack Tame - but it told me little. I am simply at a loss to know what Labour actually stands for in 2024 and Hipkins pretty much captures the vacuum that is Labour's policy position on all sorts of areas. The party is light years away from addressing the imbalance of wealth in this country - they have become imbued with idea that simply saying bold things in opposition is enough but when they had the chance to make real change - with the largest mandate any government has had since 1951 - they did little more than tinker round the edges. Ironically Labour could learn something from Seymour - whatever you think of his policies (and I find these disruptive and unhelpful on so many levels and have written about this on my substack) he is consistent. He is not a hypocrite - in that he says one thing but does another. He is (unfortunately) what you see is what you get. Treaty Principles Bill, Charter Schools, Gun legislation etc. No surprises here. All ACT policies and once in power they willing to push them through regardless of what the public think, how unpopular they are and how little they are supported by experts in these respective fields.
Some consistency from Labour is needed. While I used to know what Labour stood for (showing my age here I grew up in Bill Rowling's electorate and my first election was in the time of Norm Kirk and this was a truly transformational government) I can't say I know what they stand for now. While portraits of MJ Savage have become a valuable fashion accessory on the wall of many Labour activists, I suspect he (and the Labour party leaders that followed over the next 40 years) would find Hipkins and the current Labour Party unrecognisable. As sadly do I.
I agree with you, Mark. The problem of what Labour stands for now (in Aus and UK as well) does reflect a lack of historical consistency. I've said before that they should be standing up for prosperity for workers (as they did originally) through decent wages, not just tinkering around the edges with taxes. Hipkins hinted at it, but was diverted onto technicalities of CGT, territory on which he's easily attacked from the right. Luxon was immediately onto him. And, yes, Seymour sticks to his lines. Even if his Treaty Bill gets dumped, he stands to win voters for it. The more venom that the Left spits at him, the more kudos he gains from the right.
The real estate bubble is NZ's equivalent of US gun politics & EU farm subsidies - all are in dire need of reform, but they're too big to fail for wealthy & powerful vested interests with too much to lose.
Chippy or whoever succeeds him could take a leaf from Helen Clark's 1999 pledge card: "No tax increases for 95% or NZers". He could also gather a meeting with the signatories of this letter:
As for AI, if I haven't already mentioned it, it's like many other technologies in that garbage in, garbage out still applies, and is only as good as the guardrails guiding it.
CGT & LVT etc would ideally be ring-fenced towards fixing the housing crisis & dampening house-flipping. And ideally combined with phasing out the Accomodation Supplement (which has ballooned into a corporate welfare system for landlords) & redirecting it to the IRRS.
Really interesting thanks! I guess the effect comes through AI having instant access to facts, being persistent and 'polite'. It never loses its temper and doesn't look like an opponent.
You're not playing devils advocate here Grant, your feeding directly into the followers of this National lead, right-wing troika, who hate anything that smacks of a social program. This is a very poorly written, apologists preparation piece for anything that Hipkins or Labour may present as an alternative approach to a fairer taxation system. Very dissappointing
3 billion dollars on new roads during an accelerating climate crisis isn't squandering? Give me a break! So like taxes and public servants, spending is now an evil. Guess what! National’s regressive policies are being funded just as Labour’s progressive policies were. .
New investigative series from RNZ:
https://www.rnz.co.nz/news/rich
I can copy the section on inequality in my recent book, if it's of any interest...
Sorry - I would rather see money 'squandered' than losing value doing nothing or worse still retrenchment policies leading to reduction of services, devaluing opportunities even further.
Show us the plan then.
The first point is that billionaires sometimes choose to squander their own wealth. The rest of us have no wealth to squander, but through taxation wealth can be aggregated to be appropriated to support society through supporting and enhancing social services and investments, meeting the challenges that our society faces in terms of population increase, whether by greater than replacement birthrates in our country and/or by immigration, and responding to climate change/natural disasters and global challenges such as the impact of commodity trading following COVID pandemic in 2020 and the wars in Ukraine and Gaza, and changing dynamic of security in the Pacific. Basically, keeping our country in business.
At present New Zealand has retracted its economy as per the Coalition agreements of December 2023 following the election. The effects in terms of business closure and projects that have been stalled or completely shut down (e.g. IREX) and loss of expert advice following the firing of 15,000 public servants and fast-track redirection of government department priorities is now very evident (September 2024).
The input by government into the country’s economy in terms of services to support society and capital investment in new projects (for example the $4b Lake Onslow project) or directly owning and managing (for example our health and education systems/businesses, prisons, police, transport etc) and welfare system requires money. Investments made by Government have the cascading effect of keeping the construction industry in business (the skilled workers, apprenticeships and bolstering the value of the project work already done), research, administration and other private inputs active, delivering outward benefits of wages, and contracts providing income to be saved, invested and spent in our economy. Included in this is the value of appropriate support from government for those who are not earning or who are super-annuitants in the form of payments (transfers) to enable all citizens to participate and contribute to the economy, particularly ensuring those with the responsibility of raising children can provide for their children (noting children are citizens of our society, they are our future).
The Government's main sources of revenue come from tax, levies, fees, investment income and from the sales of goods and services (GST). Levies such as Road User Charges, public transport fares are a very regressive form of gaining revenue as it impacts those with the least income and wealth and the most need to use those public services. If they can’t afford to pay, they can’t participate in society and their input, and the value of their capabilities is lost – this loss can be monetised.
The government is in a better position than private parties to borrow (yes, go into debt) not to squander money, but to undertake new projects or continue investment in activities essential to society. Lack of investment is equivalent to going backwards and facing higher debt upstream e.g. infrastructure, climate change resilience. Poor infrastructure investment and management led to the Campylobacter outbreak in Havelock North in 2016, which disrupted business, cost lives and created long term health damage for many forcing the upgrading of water systems in that locality and realigning of functional responsibilities for these systems. Money to be allocated to three waters has now been devolved to local councils’ balance sheets which is having the effect of leading to small higher interest ineffective investments and has not solved the dispute of property ownership, the main cause of resistance to the three waters proposals. We are no nearer to upgrading and conserving and valuing our water appropriately and have created a lag effect in investment which costs all of society in the long run.
Where investment in society is withdrawn it leads to loss of opportunity for individuals, lowering of life expectancy in some sectors of society and poor quality of life for a sizable proportion of the population. Which in turn impacts on growth and business confidence.
Analyses that include the social impact of policy decisions and the loss of quality of life and opportunity for the individuals affected are due. An example of applying a broad long-term view of societal impacts, costs, and benefits applied is provided in New Zealand’s First Emissions Reduction Plan (July 2022).
Increasing government revenue should not be by regressive taxation such as road tolls or beneficiary sanctions or lowering taxes in small increments for middle- and low-income earners, but by broadening the tax base as suggested in the April 2023 Treasury and Inland Revenue research reports.
The high-wealth individuals research project by Inland Revenue was presented to the public in April 2023, ‘Tax and the economic income of the wealthy’
High-wealth individuals research project (ird.govt.nz)
High-Wealth Individuals Research Project Report - April 2023 (ird.govt.nz)
The study finds that high-wealth individuals usually get their income from returns on investments. Around 80 percent of their economic income is capital gains, and much of it is earned through trusts or companies. The report shows that when personal, company and trustee taxes are included, the median family in the high-wealth group paid 8.9% of their economic income in tax.
Concurrently released was the research project by The Treasury into progressivity of our taxation system, effective average tax rates and the distribution of wealth. New research into effective average tax rates and the distribution of wealth | The Treasury New Zealand
These significant reports suggest creating a more progressive tax system in New Zealand requires determining appropriate mechanisms to recover tax from high-wealth individuals. That tax recovered will not be squandered but will boost the capability of the government to deliver on current and future challenges for the benefit of New Zealand society and our broader global obligations, such as emissions reduction, trade and commerce.
Thanks, Gail! As I said in the post, I agree in principle with a CGT. The reasons you give are good ones. My point was not about what you and I think. It was about what voters would think in 2026. Elections are fought with one-liners, not technical reports. Hipkins alluded to 2 other important themes in his interview: a high-wage economy and the impact of AI. He should talk more about those matters.
Thanks Grant. I was hopeful about the interview - and i rate Jack Tame - but it told me little. I am simply at a loss to know what Labour actually stands for in 2024 and Hipkins pretty much captures the vacuum that is Labour's policy position on all sorts of areas. The party is light years away from addressing the imbalance of wealth in this country - they have become imbued with idea that simply saying bold things in opposition is enough but when they had the chance to make real change - with the largest mandate any government has had since 1951 - they did little more than tinker round the edges. Ironically Labour could learn something from Seymour - whatever you think of his policies (and I find these disruptive and unhelpful on so many levels and have written about this on my substack) he is consistent. He is not a hypocrite - in that he says one thing but does another. He is (unfortunately) what you see is what you get. Treaty Principles Bill, Charter Schools, Gun legislation etc. No surprises here. All ACT policies and once in power they willing to push them through regardless of what the public think, how unpopular they are and how little they are supported by experts in these respective fields.
Some consistency from Labour is needed. While I used to know what Labour stood for (showing my age here I grew up in Bill Rowling's electorate and my first election was in the time of Norm Kirk and this was a truly transformational government) I can't say I know what they stand for now. While portraits of MJ Savage have become a valuable fashion accessory on the wall of many Labour activists, I suspect he (and the Labour party leaders that followed over the next 40 years) would find Hipkins and the current Labour Party unrecognisable. As sadly do I.
I agree with you, Mark. The problem of what Labour stands for now (in Aus and UK as well) does reflect a lack of historical consistency. I've said before that they should be standing up for prosperity for workers (as they did originally) through decent wages, not just tinkering around the edges with taxes. Hipkins hinted at it, but was diverted onto technicalities of CGT, territory on which he's easily attacked from the right. Luxon was immediately onto him. And, yes, Seymour sticks to his lines. Even if his Treaty Bill gets dumped, he stands to win voters for it. The more venom that the Left spits at him, the more kudos he gains from the right.
The real estate bubble is NZ's equivalent of US gun politics & EU farm subsidies - all are in dire need of reform, but they're too big to fail for wealthy & powerful vested interests with too much to lose.
Chippy or whoever succeeds him could take a leaf from Helen Clark's 1999 pledge card: "No tax increases for 95% or NZers". He could also gather a meeting with the signatories of this letter:
https://www.1news.co.nz/2023/05/11/90-wealthy-kiwis-sign-open-letter-asking-to-pay-more-tax/
As for AI, if I haven't already mentioned it, it's like many other technologies in that garbage in, garbage out still applies, and is only as good as the guardrails guiding it.
That's a good idea. But still, taxation isn't an end in itself. What's he want to do with it?
CGT & LVT etc would ideally be ring-fenced towards fixing the housing crisis & dampening house-flipping. And ideally combined with phasing out the Accomodation Supplement (which has ballooned into a corporate welfare system for landlords) & redirecting it to the IRRS.
And while AI can be used for deepfakes by bad actors, it can also be used to counteract falsehoods:
https://psychology.cornell.edu/news/ai-succeeds-combatting-conspiracy-theories
https://www.nature.com/articles/d41586-024-02966-6
https://www.science.org/doi/10.1126/science.adq1814
https://arstechnica.com/science/2024/09/study-conversations-with-ai-chatbots-can-reduce-belief-in-conspiracy-theories/
Really interesting thanks! I guess the effect comes through AI having instant access to facts, being persistent and 'polite'. It never loses its temper and doesn't look like an opponent.
You're not playing devils advocate here Grant, your feeding directly into the followers of this National lead, right-wing troika, who hate anything that smacks of a social program. This is a very poorly written, apologists preparation piece for anything that Hipkins or Labour may present as an alternative approach to a fairer taxation system. Very dissappointing
Labour needs to build a broader and more convincing platform, and it's good to see how much their policies matter to you, Mike.
3 billion dollars on new roads during an accelerating climate crisis isn't squandering? Give me a break! So like taxes and public servants, spending is now an evil. Guess what! National’s regressive policies are being funded just as Labour’s progressive policies were. .
Spending isn't an evil. I'd save that word for other things. But, yes, you could turn the point against National. It's about values and priorities.