Garth George: Wealth seriously out of kilter

I wasn't a bit surprised to read in a Sunday newspaper a couple of weeks ago that the rampant increase in the cost of living means that middle-class, two-income families are increasingly worse off than single-income families were a generation ago - and it is threatening many with serious financial embarrassment.

But it's not just inflation that is bringing increased financial problems for the vast majority of New Zealanders who make up the middle classes - it is also a serious imbalance in our rates of taxation, grossly favouring the rich.

New Zealand today has one of the worst rates of income inequality compared with other developed or wealthy countries. In two decades, it has gone from being one of the most equal to becoming one of the most unequal countries in the developed world.

Inequality has increased here faster than in any other Organisation for Economic Co-operation and Development (OECD) country. Most of the increase has been the result of larger rises in overall incomes for the top 20 per cent of income earners; and incomes for the bottom 20 per cent have decreased over the two decades from the mid-1980s.

To make things worse, wealth is even more unevenly distributed than income and the level of wealth inequality is twice that of income inequality.

The most recent statistics available show wealth inequalities have increased to the extent that the top 10 per cent of the population accounts for 51.8 per cent of the country's net worth, while the bottom 50 per cent of people owns just 5.2 per cent.

There are more than half-a-million people living in households with "negative wealth" - that is, they have more debt than income - and 50 per cent of New Zealand income earners cannot afford to save. They make up a large chunk of the middle class, which has become the meat in the sandwich of our skewed economic system.

It is the middle classes - those of us on middle incomes - who bear the brunt of the rich getting richer and the poor getting poorer, among them 200,000 children living in poverty.

It is we who face the worst effects of the increase in prices for goods and services that contribute to the increased wealth of the rich; and it is we who have to fork out in taxes the money to provide charity to the poor.

This situation was made worse in the National-led Government's Budget last year, which gave substantial tax breaks to the wealthy and bugger-all to the rest of us.

There is absolutely no reason the rich should not pay their fair share of taxation - even a bit more, perhaps - including a capital gains tax, except that it would alienate a large block of electors who vote National.

That's what it comes down to - politics and the pursuit of power. And the irony is that this is a fallacy. Who else but National would the wealthy vote for? Labour? The Greens? New Zealand First?

That's impossible to imagine because all of those parties would have no compunction in evening up the spread of taxation that now favours the rich. Labour has a capital gains tax as part of its policy.

The Sunday newspaper report quoted Federation of Family Budgeting Services chief executive Raewyn Fox as saying she had seen a large increase in the number of people who might be considered "well off" coming in for advice on how to handle their money.

She said easy access to credit (another ploy of the rich) was a trap that too many people fell into, without giving thought to the future and something tipping the balance and leaving them in a financially dangerous position.

You can take this as gospel: it will only get worse.

garth.george@hotmail.com