Shane Te Pou: Tax cuts are coming, who should get them?

A tax-free bracket or a lift to the lower tax thresholds would give everyone a boost, writes Shane Te Pou.

Opinion

Opinion

Hospitals, schools, roads, new homes - none of it comes for free. If we’re going to have tax cuts, they’ve got to be targeted at lower incomes, and enable the Government to fund public services.

The Government’s got to pay for the tens of thousands of doctors, nurses, teachers, police, and others it employs (yes, even the policy advisers and comms people who support the “frontline”). On top of that, the Government needs to fork out for Working for Families, benefits, super, Kiwisaver, Best Start, and the Winter Energy Payment to lift families’ incomes.

It all adds up to about $25,000 per person - $125 billion – a year. And despite their best efforts to find waste, National’s ideas for spending cuts amount to a fraction of 1 per cent of that.

The long and short of it is tax is the price we pay to live in a country with public services that we all use, and income support for those who need a helping hand.

So, why do National and Act break out in a sweat whenever the idea comes up that the wealthiest Kiwis should pay a fairer share of that cost?

It’s not like they’re short of a few bob. The IRD report on the wealthiest 311 New Zealand families found they were worth an average of $276 million and made $22m a year – mostly in untaxed capital gains.

If the ultra-wealthy paid as much of their income in tax as ordinary Kiwis, we would have billions more to pay for more nurses, for upgrading our schools, and for fixing our roads.

But the mere idea sends National and Act into a rage. This week, the parties spent half their questions in Question Time demanding the Government rule out a wealth tax – which it has already done.

Not only are they obsessed with ensuring the wealthy don’t pay more tax, but the Opposition also want to cut their taxes further.

National’s tax package gives the most to those on the highest incomes, with landlords in particular set to get billions in tax breaks. Now, I’m a landlord but you can’t tell me I should be first in line for a tax cut. Not when there’s kaumatua struggling to afford food.

Every dollar that goes in tax cuts to someone well off is a dollar that can’t go towards better public services or a tax cut for those who would actually get some benefit from it.

Now, don’t get me wrong, I do think it’s time for an adjustment to tax rates – but it’s got to be at the bottom, where the cost of living is biting hard. A tax-free bracket or a lift to the lower tax thresholds would give everyone a boost and would be most meaningful to those with the least.

But the money for that doesn’t come out of thin air. We need to look at taxing those at the top more so we can tax everyone else less.

“Socialism!” someone is already writing in the comments. Yeah, well, it seems to work in Australia and the UK. They both have tax-free zones and higher top tax rates than we do in Aotearoa, as well as capital gains tax. And no one’s calling them socialist utopias.

Chris Hipkins and Grant Robertson are releasing the Budget in a couple of weeks. That would seem like a good time to pass a law phasing in a tax switch from low incomes to high over the next few years. Let National try to campaign on repealing that plan so landlords can get a tax cut.

That seems to be off the table for the Budget, but Labour are giving all the signs they are planning something for the election to rebalance the tax system.

It’s shaping up to be one of the big dividing lines between the evenly matched major parties this October: do you want a government that takes the burden off low- and middle-income whānau and asks those with the most to contribute a bit more? Or do you want a government that protects the untaxed wealth of the top end of town, and makes tax breaks for landlords the priority?

The rich are already casting their votes, in the form of millions in donations to National and Act. How will you cast yours come election day?

Shane Te Pou (Ngāi Tūhoe) is a commentator, blogger and former Labour Party activist.