Sunday, May 22, 2011
Revenue and Debt
Before National came into government Labour had been working with government surpluses and at the start of the recession we had less government debt than most other countries. The biggest threats to our economy at that time were our private debt, largely due to inflated land and property prices, and the looming leaky building debacle.
National immediately removed an important income stream by providing those on high incomes with enormous tax cuts and our upper income earners are now taxed much lower than those in Australia. It has been claimed that 5% of our tax payers contribute 31% of the tax take and that this is unfair. The reality is that New Zealand is becoming one of the most inequitable countries in the OECD and most tax payers have barely enough to survive. Referring to our average income is misleading as the few wealthy pull up the figures dramatically and while the average is around $50,000 per annum the median is about $39,000. For the majority of New Zealanders earning around $39,000 or less they are barely earning enough for basic necessities and to tax them further would be verging on criminal.
There have been ongoing revelations about how our most successful industries are paying little in tax. Australian banks, which dominate our banking industry, were found to be avoiding huge amounts of tax and an attempt to claw this back is an ongoing battle. The dairy industry is supposed to be our strongest yet in 2009 the average farmer paid less in tax than a pensioner ($1500 per annum), hardly enough to manage the external costs of environmental damage caused by irrigation and poor effluent management. The booming salaries of our CEOs and top public servants is also an indication of the amount of extra fat in our economy that could be trimmed for all our benefits. The Fonterra CEO had a whopping 41% increase to his salary and was rewarded with around $250,000 a year in tax cuts and the Education Ministry was severely hit by cuts yet still managed to give their CEO a 6.25% pay increase while teacher aids struggled to get over 1%.
Labour and National refuse to go near the huge untaxed profits generated by the sale of property or land. A capital gains tax would bring in huge amounts of revenue and pull property values down to realistic levels. The lack of investment in productive sectors has largely been because of our hugely inflated land and property values compared to other countries.
If the National Government are serious about raising revenue and paying off debt than they need to turn their gun sights away from struggling low income earners, who have already paid their share many times over, and look at where the real fat in our economy exists.