It’s election year. That means arguing about tax.

Economists continue to warn our current spending can’t continue as more of our population ages, stops working and starts collecting the pension. We either raise more money through taxes and continue to spend, or we cut the spending.

Meanwhile, long-running debates over who should pay more or less tax, and what role wealth and capital gains taxes should play continue to be, well, long running. 

Here, journalist Mark Crysell, who recently ran for Auckland Council’s Waitematā local board, takes on his mother-in-law, publisher and former Act MP Deborah Coddington, in a debate about taxes.

Deborah Coddington: I suggest those who advocate for New Zealanders to pay higher taxes should know there’s no law against voluntarily paying more tax than you legally owe to the IRD (and, Mark, I’ve been called worse names than facetious).

Mark Crysell: Boom! I didn’t see that inconvenient truth coming, Deborah! 

DC: It would be an abnormal thing to do – people don’t usually go paying more tax than they have to, but if you do, it will be held in your name as a credit, but it’s not mandatory to claim that credit as a refund. 

Maybe just think about that before advocating forcing higher taxes on others who may be struggling. 

MC: The people who are struggling are already paying their fair share – and more. In New Zealand, people who work for their income are often taxed at roughly twice the rate of the country’s richest people, who earn income through wealth. Middle-income wage and salary earners typically pay between 20% and 30%, while the wealthiest cough up closer to 9% on their total economic income. 

DC: If you make accurate comparisons, the wealthy do pay more tax on their income – between 20% and 30%, while the poorer pay about 10.5%, if they’re earning under about $16,000. That’s because we do already have a progressive tax system. You, however, are mixing wages and salary income with what happens when assets increase in value – (that filthy word) capital gains!

MC: This is exactly my point. Yes, we have a progressive tax system on income – good for us, gold star – but that’s only part of the story. Much of the wealth at the top isn’t coming from wages, it’s coming from capital gains, and those are largely untaxed. 

So, the people whose wealth is growing fastest – often from assets they already hold or quietly inherited – can end up paying proportionally less than the nurse who patches them up after their skiing accident. They drive on the same roads, are protected by the same police, and bailed out by the same consular staff when their kids go off piste while on the piss in a far off land. 

This isn’t about voluntarism. It’s about whether the system is fair. And right now, it isn’t.

DC: Life’s not fair, that’s why I don’t read the comments. To qualify as the top 10% in New Zealand, aka “The Wealthy”, you only need a minimum net wealth of between $1.9 and $2.2 million, which shows how poor Aotearoa is, as a so-called developed country.  

MC: Fair point on the thresholds, Deborah – $2 million doesn’t buy you a fancy house in Auckland anymore, which tells you something about the state we’re in: asset-rich and cash-poor, feeling anything but wealthy. 

DC: You, and probably 90% of New Zealanders, argue for a comprehensive capital gains tax (CGT) and, I’m surmising, a wealth tax on unrealised gains. Those taxes have never been properly defined, nor have the parameters. Plus, the consequences have never been graphically demonstrated. For CGT and wealth taxes to support the 90%, they would need to be levied on all assets – family homes, corner dairies, those up-at-dawn sloggers we admire on Country Calendar who’ve built their agribusinesses up from nothing.

MC: The Country Calendar farmer deserves respect – and a tax system that doesn’t require them to sell the farm to pay the tax bill. But, I’m not arguing for a tax on unrealised gains (nice try). A CGT on realised gains, excluding the family home, is what economists have recommended for decades. Treasury said so. The Tax Working Group (TWG) said so. The only ones who haven’t are successive governments who keep shelving it. 

We’re not collecting enough revenue to fund the type of country we say we want. That gap gets handed down for new generations to wear. My daughter – your granddaughter – will be one of the ones working out how to look after us. I’d rather sort it now.

DC: I’m glad you brought up the TWG (set up in 2017 by the Jacinda Ardern-led coalition government), because it flagged pitfalls in a comprehensive CGT, notably the locking in effect, where people hold onto assets to avoid triggering tax. 

But we already have a highly redistributive tax system. A 2024 Treasury working paper showed 60% of taxpayers receive more in income support than they pay in tax, which means 40% of people are funding those 60%, with the majority of funding coming from the top 10%. Take that any further and there won’t be much for any of our daughters and sons to aspire to.

MC: Zzzzzzz. We’re really getting stuck in the weeds of the TWG. Here’s where I think we actually agree: the status quo isn’t sustainable. You want aspiration protected. Me too. The question is whether we get there by growing the tax pie or by hoping the current settings miraculously start producing different results. I’m not holding my breath on the latter option. So, the whole whānau deserves a country that’s ready to have the argument properly. Maybe that’s what we’re doing here.

DC: Yeah, my eyes are glazing over at all those acronyms: CGT, TWG… WTF.  We shouldn’t wrestle in the weeds.

You and I agree on wanting all New Zealanders to be better off, but we differ on how to achieve this. I admit, I’m a Pollyanna, I don’t want to drag the top level – the rich pricks – down with envy taxes, I want to raise the lower levels up, give them something to aspire to. I’m sure you want that too.

MC: I do, Deborah. Where we differ is I don’t think you can raise the floor while protecting the ceiling. At some point we need to get the ladder out. Rich pricks and plucky battlers alike – we’re all in this together, even if we can’t agree on who’s paying for the next round. Mine’s a kombucha please.