Joe Ascroft: Fuel tax will hurt the poor more as a share of their income

Fuel tax increases are regressive. If National proposed tax reform where, as a share of income, the wealthy paid less and the poor paid more, Labour would be in revolt. And rightly so.

New Zealanders expect fairness in their tax system. We don't suffocate the rich, but we certainly expect our tax system to be fair. Poorer communities and families shouldn't be disproportionately punished by the tax system.

Yet, that appears to be the result of Phil Twyford's new regional and national fuel taxes.

Twyford's argument, reported by Simon Wilson in the Herald today, is that fuel taxes are easier on the poor, because poor people don't spend as much on fuel in dollar terms.
But looking at these same figures as a proportion of people's actual earnings tells a different story.

Twyford's own figures show low income households will spend a higher proportion of their income on fuel tax than wealthier households. In fact, on this measure, the poorest 10 per cent of income earners are four times worse off than the wealthiest 10 per cent of income earners.

That's highly regressive.

This evidence backs up what we knew all along.

Low income families are forced to live in the outer suburbs, with longer commutes to work and school. They tend to have older cars, which are less fuel efficient, making their commutes even more expensive.

The new fuel taxes will hurt those families in the pocket every time they fill up.

Even if you don't drive to work, the new fuel tax will hurt you. Buses obviously use fuel. Higher costs for bus companies will have to be passed on to commuters, so fares will likely increase due to the tax. It's not good enough to argue that low income households are untouched because they use public transport – those costs will increase as well.

The cost of living will increase in other areas too. Anything that needs to be shipped around the country will face higher transport costs, which will be priced in at the check-out. Families will face a higher cost of living as food, clothing and other essentials are made more expensive.

Low income families tend to spend a higher proportion of their income on these essentials, so the regressive, unfair effect of fuel tax applies twice. That's unacceptable when many families struggle to make ends meet already.

Despite all the misery fuel tax hikes will impose, politicians will tell you we still need them. In Auckland, that's simply not true.

While fuel tax revenue is being used to fund public transport, the council would be able to fund these projects if the mayor had met a promise he made on the campaign trail at the last election.

In 2016, Phil Goff promised to find efficiency savings by between 3 and 6 per cent at Auckland Council. Analysis from the Auckland Ratepayers' Alliance performed earlier this year showed that if he simply met that promise with 4 per cent efficiency savings, the council would have the financial room to fund infrastructure.

Instead, the most vulnerable are being hit by a tax they simply can't afford.

• Joe Ascroft is an economist at the New Zealand Taxpayers' Union.