Brian Turner is the spokesperson for EcuAction (Ecumenical Action) Canterbury https://www.facebook.com/JusticePeaceCreation/ If you want to join the national campaign for a fairer tax system, please contact Brian at bhturner41@gmail.com Ed.

It's refreshing to see widespread recognition that our tax system is seriously unfair and needs to change.

The Government sees this unfairness in the imbalance between tax on property compared to more productive investment but this is avoiding a much more fundamental issue: that those on the lowest incomes pay much higher proportions of their income in tax than the wealthy and super-wealthy. The Sheriff of Nottingham would be proud of how much tax we take from the poor to support the lifestyles of the rich.

At the heart of this iniquity is GST (goods and services tax). We all pay GST when we buy things so it sounds fair. But a person in the lowest income decile pays 14% of their net income in GST, because they have to spend all their income, while those in the highest income decile pay less than 5% of their income on GST because they are able to save and invest part of their income rather than spend it.

Income tax has similar distortions. IRD (Inland Revenue Department) regularly reports that New Zealanders with net wealth over $50 million are declaring incomes of less than $70,000. In other words, they are not even in the top income tax bracket! Taking income tax and GST together, workers on the minimum wage are paying close to 30% of their income in tax while the wealthy and super-wealthy pay small change.

Robin Hood - Where Are You?

This unfairness is hard-baked into our tax system. Wage and salary earners pay tax on every dollar they earn and every dollar they spend. They can't avoid tax. It's taken out of their pay before they get it and is deducted by retailers when they buy anything. But for the wealthy and super-wealthy, tax is almost voluntary as they find myriad ways to avoid or reduce their tax responsibilities. In 2022 Statistics New Zealand told us:

"While the median net worth of the wealthiest 20% of New Zealand households increased by $313,000 in the last three years to $2.02 million for the year ended June 2021, median net worth of the bottom 20% of households increased by $3,000 during the same period to $11,000"

A $313,000 increase compared to a $3,000 increase! How unfair is that? It's no surprise the wealthiest 5% now own 39.2% of household wealth while the poorest half of our society, who pay the highest rates of tax, have less than 7% (ibid.). Meanwhile at the top of the wealth pyramid is an embarrassing stratospheric flagpole for the top 1% who own no less than 15.8% of our household wealth.

Tax Policy Is A Key Reason For This Growing Inequality

Aotearoa New Zealand cannot afford to carry those on high incomes. We can no longer allow a small number of people to become fabulously wealthy and avoid paying taxes the rest of us can't escape. I'm the spokesperson for a small Christchurch-based interfaith Ecumenical Action group which has been working on a proposal which is fairer to everyone.

The first point to make is that our "low-rate, broad base" tax system is what has got us into this iniquitous mess. We need a change to tax policy so everyone contributes equitably and all can live lives of dignity and self-respect. At this point commentators and "tax experts" will tell us the nett effect of the higher tax rates paid by low-income earners is balanced somewhat through Government payments like Working for Families or the Accommodation Supplement.

But this is a dependency model based on State charity rather than fair taxation and secondly it conveniently lets the wealthy and super-wealthy off the hook when their staggering increases in unearned wealth are barely brushed by the tax system. It's important for the self-respect of all of us, and the country as a whole, that we move from this charity model to a justice model for taxation.

Replace GST With Three Fairer Taxes On Rich

So, what are we proposing? In a nutshell we are proposing to abolish GST and raise the $26 billion needed to replace it with three taxes which will shift responsibility to the wealthy and super-wealthy. The three taxes are a comprehensive Financial Transactions Tax (FTT), a Wealth Tax and a Capital Acquisitions Tax.

The FTT would put a small percentage tax (0.1%) on all money transfers through banks and financial institutions. For the average person this would amount to about $2 per week (alongside a saving of hundreds in removing GST) but would bring in large amounts from unproductive activity such as currency speculation - we have the 10th most traded currency in the world. Dozens of countries have various kinds of FTT. It's difficult to calculate the income from this but a conservative estimate would be a minimum of $15 billion annually.

The Wealth Tax would apply to the top 5% (representing 39.2% of household wealth; Statistics New Zealand, ibid.) who would pay a small percentage tax each year based on their wealth. Wealth taxes are common in countries around the world and help in a small way to reduce inequality. Our proposal would bring in around $10 billion each year. The Capital Acquisitions Tax would be paid when receiving a cash windfall such as through an inheritance but it would only apply to inheritances of over a million dollars.

When one looks through the countries which already have FTTs, Wealth Taxes and Capital Acquisitions Tax what becomes apparent is just how much of an outlier we are in terms of how much we tax people on low incomes compared to those whose wealth increases spectacularly year by year. Our tax proposal takes us in the direction of greater fairness. It also promotes dignity and self-respect for everyone.