Voters beware, if the government levies little or no taxes it will have no money. And if the government has no money it can provide no services.
Jamie Whyte’s announcement that ACT will push for a top tax rate of 24% and work towards a flat tax of 17.5% is like a red rag to a bull to the Alliance Party. New Zealand has been there, done that, in the 1980’s. It didn’t work. New Zealand is still counting the cost – entrenched unemployment, low wages, high housing costs, intergenerational poverty and inequality.
Flat tax is, quite simply, the enemy. It is unfair and unjust. It drastically reduces government income to spend on services that benefit everyone.
The government has been selling public assets to balance the books even with the 33% top tax rate we have now, which is almost double the flat tax rate ACT is suggesting. Like the family silver, public assets can only be sold once. And asset sales are unlikely to come near producing the $70 billion or so the government needs annually to pay for the services New Zealanders expect.
The big ticket items for the government are health, education, and superannuation. Any party intending to cut tax rates for the very wealthy needs to spell out exactly what that will mean. Long lists for elective surgery, cuts to superannuation for the elderly, life saving drugs taken off the free list because they are too expensive?
French economist Thomas Picketty advocated recently for a top tax rate of 80% for income over (US) $500,000. It is hard to disagree with him. Nobody needs, or works hard enough to justify, more than $500,000 a year ($9615 a week, $240 an hour) to live on, when there are many who live on $240 a week, or less.
Progressive taxation ensures everyone contributes according to their means. Progressive taxation is the only way to guarantee we all have access to the services needed to make New Zealand a great place to live. People want New Zealand to be clean, safe, have good infrastructure, a place where people are friendly and helpful. They want to know that if catastrophe strikes they will receive help.
In short, progressive taxation provides the government with the revenue to make New Zealand the way we like it and helps level the playing field so that nobody takes too much but nobody is left with too little. It is a very, very necessary evil. Learn to like it, or at least to learn to live with it.