Green co-leaders James Shaw and Marama Davidson at their tax policy announcement. Photo / Alex Burton
OPINION:
“Poverty is a political choice,” Greens co-leader James Shaw declared at a meeting on June 11, “and we choose to end it.”
Shaw went on to announce a tax and benefits policy package he says will bring relief to 95 per cent of taxpayers and introduce a much-improved welfare system. And there will be a wealth tax that leaves middle New Zealand – and the family homes of almost everyone – untouched.
The impact of these reforms would be enormous, if they were introduced. So why aren’t expert economists shouting from the rooftops about them? It’s a far more significant plan than anything produced by any party in a very long time.
If Shaw is talking through a hole in his head, let’s hear it. But if he and his party really have found a way to end poverty and make most of us better off, while not impoverishing anyone else, they should tell us that too.
And perhaps even more importantly, what do the other political parties have to say?
“I won’t be lectured to about economics by the Green Party,” said National Party leader Christopher Luxon, practically spitting into the reporter’s microphone.
David Seymour, from Act, laughed.
Prime Minister Chris Hipkins said Labour would have its own tax policy in due course, which prompted several commentators to predict he will rule out the Greens’ plan, because, you know, cue screaming, it includes a wealth tax.
Why such a non-response? Could it really be true that none of them has anything of substance to say about a costed plan to end poverty?
Or is their silence merely because there is nothing they can say? Because to talk about it would be to acknowledge that the plan makes sense, and that’s the thing they fear the most?
So there they are, like wolves padding quietly around the edges of the field, waiting to tear the little Green lambs apart because they’re so innocent, they couldn’t possibly understand economics.
You’d think every political party would want to end poverty. It was such a hot topic in the 2017 election, National Party leader Bill English and Labour’s Jacinda Ardern tried to outbid each other in the televised debates.
“We’ll lift 50,000 children out of poverty!” said one. “We’ll do 100,000!” said the other. “No, we will!” said the first.
Since then, Labour has established official and mandatory reporting measures for poverty, which is a significant achievement because the advisers said it couldn’t be done. And as Shaw noted, 30,000 children have been lifted above the poverty line set by those measures. That’s good too.
But not good enough. As he also noted, that still leaves 45,000 children below the line. That’s one in 10. Among Māori, one in five. What about them?
So what did James Shaw announce on June 11? What is this plan the other parties are so determined to pretend is irrelevant?
The centrepiece is an “Income Guarantee” (IG). Everyone, whether in or out of work and including tertiary students, will receive at least $385 a week, after tax.
It’s not a universal basic income: You don’t get it if you’re employed for more than that amount. And it’s really not a lot. It’s a bottom line: It ensures everyone will have at least $20,000 a year to live on. That’s about the same as half the couples’ rate of superannuation.
The IG comes hand in hand with a complete shake-up of Working for Families (WFF). Labour was going to do this, but events got in the way.
WFF is complex and discriminatory, because it excludes those not in work. The Greens propose a simple system: a single payment of up to $215 per week for a first child and $135 for each other child, with the amounts steadily abating for family incomes over $60,000.
There’s also a payment of $140 per week for every family with a child aged under 3 and a further payment of $135 per week if you’re a single parent and out of work or studying.
There are tax changes. The first $10,000 of your income will be tax-free, which translates into a tax cut of between $16 and $26 a week for every individual earning under $125,000.
In other words, it not only helps the “squeezed middle” National and Labour are squabbling over, it defines “middle” so generously, it includes 3.7 million taxpayers.
If you’re earning over $180,000, on the other hand, you’ll pay a new marginal top rate of 45 per cent.
There’s a new corporate tax, which is actually an old one. The Greens want to shift it back to what it was in 2008, when National came to power: 33 per cent. This is not evil. It’s merely a bit fairer.
Let’s remember these are not tough times for everyone. Supermarkets are doing so well out of inflation they’re making more than $1 million in profits a day. Airlines are so thrilled about our desperate post-Covid need to fly, they’ve jacked their prices up to extraordinary levels.
As for the banks, they’re just loving all this inflation, disaster recovery, business uncertainty and a “soft” property market. The very things that are stressful for the rest of us are making them record profits to beat their own record profits from last year and the one before.
The Greens also propose to reform ACC into an Agency for Comprehensive Care, covering illness as well as injury, and offer more support for people with disabilities.
But what about that wealth tax? If you own assets, including property, worth more than $2m, you’ll pay 2.5 per cent a year.
It’s per individual, not per couple. It applies to assets after mortgages and other debts are deducted. It’s a marginal tax. And you can defer payment.
This means a couple would not pay the wealth tax on their family home, unless it was worth more than $4m and they had no mortgage. Even then, they would pay the tax only on the value over $4m. If they couldn’t afford it, they could wait ‘til they sold the house.
It’s very hard to see how any of this would be unreasonably tough on anyone.
There is also a trust tax, of 1.5 per cent, to discourage people from hiding their wealth. This aligns with what should be the governing principle of any fair tax system: all income is taxed equitably. There’s no injustice in that.
The Greens’ policy isn’t perfect. Some of the settings may be too high, or too low. Overseas, there is debate about the relative merits of a straight wealth tax compared with other forms of taxing wealth. But it deserves debate.
As Shaw argued, among all the countries in the world “with similar economies to ours”, New Zealand is the only one that does not tax wealth in some way, whether it’s through “a capital gains tax, a wealth tax, stamp duty, an estate tax, an inheritance tax, any form of land tax or some combination of these”.
It’s not only doable, it’s normal.
So, again, why the silence of the other parties? This policy sets a kind of benchmark. If the others believe they can do better, bring it on.
There’s an idea in this country that has our political discourse in a kind of headlock. It’s that what’s good for the very wealthy is good for everyone.
But the Greens say their policy will make 95 per cent of all taxpayers better off. Are we supposed to ignore that because the wealthiest 5 per cent keep insisting their interests are aligned with everyone else’s?
Shaw began his speech by talking about the fire at Loafers Lodge in Wellington, which claimed five lives in May. He called it “symptomatic of one of the greatest political and policy failures of the last generation”.
This isn’t an abstract debate. Ending poverty and breaking that headlock should be front and centre in this election.
Simon Wilson is a senior writer covering politics, the climate crisis, transport, housing, urban design and social issues, with a focus on Auckland. He joined the Herald in 2018.
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