Should the ultra-wealthy pay more tax?
It’s a debate that has continued for decades, even centuries. From Ancient Athens to the present day, the idea has been a constant when it comes to addressing inequality.
Over the years, New Zealand has experimented with various taxes on wealth, such as estate duties, gift duties, and stamp duties on property sales, but most were eventually abolished. The absence of a general wealth tax, capital gains tax or inheritance tax has been a recurring topic of debate.
Yet, no New Zealand government has been bold enough to impose one.
It’s a staple of the Green Party’s proposed “Green Budget”, which promises moves to make sure everyone has a warm home, decent kai, and the care and support for a good life.
If fully implemented, it would mean free early childhood education, free dental care, and free GP visits.
Greens co-leader Chlöe Swarbrick told The Front Page that the plan was not as radical as it might seem.
“If we were advocating or fighting for free compulsory education or free hospitals these days, we’d be called ‘wasteful spending’. We’d be called Marxists and all the rest ...
“The reality is that we’ve done really big things in the past. In the 1930s and 40s, after world wars, the Great Depression, we came together as a country and decided to build a nation, which looked at the foundations of public healthcare, public education and public housing.
“Right now, we’re in a situation where the top 1% in this country hold 23% of all of the country’s wealth, and IRD research from 2023 told us that the top 311 households pay an effective tax rate less than half that of the average New Zealander. It’s not fair.”
Nobel Prize-winning economists have recently called for a global tax on the ultra-rich, arguing that even a modest 2% wealth tax on billionaires could raise substantial revenue internationally.
Le Monde reported that, relative to their pay, billionaires from Bernard Arnault to Elon Musk have lower tax rates than the average taxpayer. Meanwhile, an OECD report has argued that wealth taxes could disincentivise entrepreneurship, harming innovation and long-term growth.
The Green’s budget was criticised by National when it was released, with Finance Minister Nicola Willis saying in a statement that it showed the party’s desire to live in a “ludicrous la-la land”.
“The idea that raiding New Zealanders’ incomes will somehow make the country better off is offensive to every New Zealander struggling with the cost of living crisis that Labour and the Greens created. This is truly magical thinking,” she said.
Labour leader Chris Hipkins has not yet ruled in or out any part of the Greens budget, but said that he agrees with parts but not all of it.
“There are many elements of it on the surface I would look at and say, ‘look, I agree with that on the surface of it’, but I think putting them all together in such a huge spend-up like that is unrealistic,” he said at the time.
Hipkins previously said that he stopped work on a potential wealth or capital gains tax for Budget 2023 while Prime Minister, stating in July 2023 that the party didn’t have the mandate for one.
A common criticism of a wealth tax is that it will cause high net worth individuals to exit New Zealand, and take their investments and businesses offshore to tax havens.
Briscoe Group majority shareholder and managing director Rod Duke has argued it would cause money to leave New Zealand.
“Look, money seems to navigate to the place that’s easiest to make extra money and so if New Zealand were to introduce an additional or a modified tax system that was prohibitive and made investment more difficult or less lucrative, then the money would disappear,” Duke said.
Asked about the threat of wealthy citizens leaving New Zealand to avoid a tax, Swabrick said that research showed 30 out of over 230,000 millionaires and billionaires left Norway in 2022 as a result of an increased wealth tax, saying that ultimately was a “drop in the bucket”.
The Green Party proposes a wealth tax that would affect the top 3% in this country. Anyone with an individual net worth of more than $2 million (or $4m for a couple), minus mortgages or debt, would pay a 2.5% tax above that $2m net worth.
“Look, I’m not gonna pretend that it is easy to change the tax system,” Swarbrick said. “Of course it’s not. But ease should not be the reason that we do something.
“Fairness, equity, and the fundamental principles and values that we have as New Zealanders. That is that we care about each other and the planet that we live on should be the driving force behind why we do things.
“Some of the hardest-working New Zealanders that I have met are single mothers working multiple jobs, paying double the effective tax rate of the multi, multi-millionaires and billionaires in this country. Any politician who wants to claim to be fighting for hard-working New Zealanders should be fighting for those who make their income from work, not from wealth accumulation.”
In New York City, a “tax the rich” message helped Zohran Mamdani win the Democratic mayoral primary. Swarbrick reckons there are things to be learned from his win.
“I will be completely transparent about the fact that, back when I was at university, I was enamoured by the idea of libertarianism, which is actually the ideology encapsulated best but the Act Party right now, because I was like, yeah, of course, we’ll just get to run around, live our own lives, don’t interrupt other people doing their own thing.
“But the more I thought about it, and I read a second book, I started to realise that social freedom is illusory. It’s not real if you don’t have access to the material basics to be able to participate in society, to survive, let alone to thrive.”
Listen to the full episode to hear more about the future of the Green Party, taxing the rich, and how the public is reacting.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.