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BusinessApril 7, 2018

Why we need to stop thinking of tax as a burden

(Photo: Getty)
(Photo: Getty)

The rhetoric over the past decade or so has painted tax as a ‘burden’ from which we need ‘relief’. But PSA national secretary Erin Polaczuk argues that tax isn’t a burden nor a necessary evil, but something paid by Kiwis, for Kiwis.

The Spinoff is hosting Tax Heroes – a series covering tax, who pays it and what it means. Click here to read more.

Something is happening in New Zealand. We’re at a turning point, in so many ways. We’ve been given a chance to take a step back and decide what kind of country we want to be. Individualistic and money-driven, or collective and people-driven? As unlikely as it seems, tax is proving to be the canary in the coal mine.

Since the new government came to power late last year, the National government’s reputation as a clever and innovative economic steward of the economy has proven to be complete rubbish. A lie as toxic as the black mould in the walls of Middlemore Hospital. In his piece for The Spinoff, Dr David Galler painted a picture of staff trying to do their very best in impossible conditions, with a government that was unwilling to tackle either the drivers of the community’s needs or the severe underfunding of the health service.

Make no mistake, Middlemore could not be a clearer symbol of what happens when tax is seen as a burden and public spending as a necessary evil. That’s been the rhetoric over the past decade or so. Tax is a ‘burden’ from which we need ‘relief’. It’s a drag on the market economy, which always believes private enterprise does better. Not only is this not true, it’s not a responsible way to run a country.

Then health minister Jonathan Coleman takes a tour around the new infectious disesases Biocontainment unit at Middelmore Hospital in October 2014. (Photo: Getty)

Bill English constantly talked about “investment approaches”, as if New Zealand were some kind of hedge fund where one could contribute as little as possible and see healthy returns. The flaw in that thinking was to see a thriving Pacific country of 4.5 million people as a business. It’s not. It’s a society where our quality of life directly depends on the quality of the public and community services available to us. These services are the ties that bind us together and the net that catches us when we fall. Cutting away at those ties makes the ties weaker, the net smaller. It’s the very opposite of an investment approach.

When the tax pool is smaller, even essential spending becomes a nice-to-have. Maintenance becomes about patching holes, not checking for problems you can’t see. Services go to those in the direst need, rather than supporting the vulnerable before they reach crisis point. Money becomes the driver because it has to be. Social and environmental costs are huge, unquantifiable and have to be ignored lest the enormity of the problems breaks the whole system.

This isn’t the Aotearoa we want, and it isn’t the Aotearoa our members want. They’re working hard to do their best. They’re not on fat salaries with hefty expense accounts. In fact, many struggle to meet their day-to-day living costs, especially in Auckland. They’re largely driven not by money, but by the desire to do good: the DOC rangers looking after our native wildlife, the border control agents keeping our borders secure, and the home and disability support workers looking after our most vulnerable people are all funded by taxes. The PSA has more than 64,000 members working across the public service, the state sector, local government, the community public sector and DHBs. They’re all providing services our country needs. They’re all funded by our taxes.

“The National government’s reputation as a clever and innovative economic steward of the economy has proven to be complete rubbish.” (Photo: Hagen Hopkins/Getty Images)

Before the 2017 election, the PSA put together a book on tax. It seems like a long time ago now, but at that point, we genuinely thought we could be looking at a fourth term for National who could have squeaked into victory with a straight-up bribe in the form of tax cuts. We wanted to turn the conversation around. Tax cuts would have meant little to the vast majority of New Zealanders, but a hell of a lot to the public services that make our country a great place to live in. We needed to talk about that. And fast.

In the foreword, we talked about the two prevailing metaphors around tax. First, tax as a subscription fee we pay to enter a club, which needs upkeep and maintenance for its members to properly enjoy it. Second, tax as a long-term savings account, where we pay money knowing that one day we’ll need to draw from it in the form of healthcare and social support costs.

The problem, though, is that our present situation here in New Zealand isn’t either of those things. If we’re a long-term savings account, we’re one where the promised return on investment isn’t materialising. If we’re a club, then our management has become so obsessed with offering membership discounts that they’ve been overlooking the raw sewage running down the walls.

We kicked off the conversation, and we could not have been more delighted by what happened next. Right-wing commentators might have disagreed – and boy, did they disagree with some of the arguments – but they talked about it. Our members talked about it. Unity Books agreed to stock some copies and we were amazed to see it inching up its bestseller lists. And now, we have a progressive coalition government which has launched the Tax Working Group.

Make no mistake – all these outcomes are good. Tax is by the people, for the people, about the people. We should all be talking about tax. The question now is what happens to that talk and where it takes us.

As I’ve said, successive governments have looked at tax with the wrong values. They thought the “tax burden” should be as small as possible, and the best way to minimise it was a sinking lid on baseline funding for essential public and community services.

Here’s the pivot point. Here’s where Labour and its support partners need to do better. The Tax Working Group cannot recommend a few tweaks at the margins. We need a change in values. It’s happening. New Zealanders want it. Let’s make sure we make this conversation count.

The PSA has three challenges for the government:

  1. The Tax Working Group – so far, so good. The proof now needs to be in the way it carries out its work. It needs to hear from as many New Zealanders from as many diverse groups as possible. This will take a lot of proactive work but it’ll directly impact on the quality of its work. The PSA will support and encourage its members to take part, but others will need to do the same.
  2. We need to genuinely consider raising more tax revenue but from different sources. The easy fix is to raise income tax and GST, but this will hit the same groups it always does – workers. And the lower your income, the harder you’re hit. We need to look at wealth taxes and make sure corporations are paying their fair share.
  3. The Budget Responsibility Rules need to be revised. Pure and simple. It’s going to take a lot of money to undo the results of decades of underinvestment, let alone the good progressive change that this government’s promised. Existing baselines will not be enough
  4. Tax isn’t a burden. It isn’t a necessary evil, unavoidable as death. Tax is something paid by Kiwis, for Kiwis. New Zealand’s ready for a change in values – the recognition that we’re all in this together, he waka eke noa. This government needs to be ready for that change.

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