Rodney Hide: Don't tax water, trade it

There are more townies who want clean waterways than farmers having to foot the bill. Photo / File

Farmers are right to be worried about Labour's plan to tax water.

The power to tax is the power to destroy and such a tax has the potential to tip a farm from profitability to bust.

Every farmer's financial circumstance is different and even a modest tax could prove devastating for farmers just starting out, carrying big debt and not having factored in the prospect.

It's of further concern that Labour leader Jacinda Ardern announced her water tax not at a farmer's conference but at an Environmental Defence Society Conference.

She promised her Government would take the money from farmers to clean up the nation's waterways. She no doubt figures there are more townies wanting clean waterways than farmers having to foot the bill. The vote/loss calculation will be in her favour.

Of even more concern is a complete lack of any detail of how much the tax will be, how it will be applied, and what Labour is expecting to raise.

It's hard to imagine a party heading into election promising, say, to tax cars without declaring what the tax will be or how much is expected to be taken.

The bare-bones announcement shows just how little farmers count in an election. They still drive the economy but matter little in politics.

But even a small tax should be worrying. All taxes start out small. The principle is established and then the tax is ramped up. Whenever government is a bit short, up goes the tax.

Of course, water should not be free. It's a scarce and valuable resource. It's also nonsense that its use is often subsidised. That's bad both from an economic and an environmental viewpoint.

Rather than applying a blunt and damaging tax, it'd be better to allow tradeable water rights.

It's not without precedent. A system operated excellently for the most valuable water in the country in central Otago for well over 100 years.

The Resource Management Act abolished these old rights in favour of government control and regulation. It was a huge loss.

Today's system doesn't provide any certainty and doesn't confront users with the cost of their use.

It would be better to convert all existing water rights to perpetual rights and allow them to trade. That would get farmers onside - and it would price a valuable resource. It'd also keep environmentalists happy, if done right.

The only ones missing out would be politicians and bureaucrats who would not have the tax dollars to spend.

And there's the issue: taxes are good for Wellington and bad for everyone else.