Photo: Getty Images
Photo: Getty Images

SocietySeptember 21, 2017

You’re not selfish if you want a tax cut – but there’s a better way

Photo: Getty Images
Photo: Getty Images

People who are ‘just managing’ in New Zealand are not heartless if they support policies that will help their family most in the short term. But there is a better, more positive way to ease their pain, writes Jess Berentson-Shaw.

Yesterday I had a play with the Herald’s income inequality tool created by Max Rashbrooke, Keith Ng and Emily Beausoleil, to see how our family was doing. Later, as we were deep in the chaos of the morning routine with the kids, I had a realisation. “We are doing just fine income-wise,” I said to my husband, “but a lot of our income goes on high housing costs and our student loans. So imagine what it’s like for other families on middle incomes?”

As I looked at the tool again I saw how much income inequality has impacted those in the middle-income brackets. I got thinking about the accusations that people in the middle are selfish if they vote for tax cuts or other policies that benefit them in the short-term, and I wonder if we have got the conversation about fairness a bit wrong.

Except for a lucky few, everyone is hurting

You can see from the screen shot of the inequality tool below that pretty much everyone in New Zealand, across the income spectrum, has suffered from the imbalance in income gains in the previous 10 years – the exception being the richest 10%.

What the tool does not show, of course, are the housing costs, the student loans, the childcare and transport costs that people are paying while also experiencing the sharp end of unbalanced income gains. What it also doesn’t show is that the richest 10% have not only had the most income gains, but have grown their wealth on the back of rising housing costs. The two figures below shows us just how much of New Zealand’s net worth is tied up in housing (it’s over half) and how wealth is unevenly distributed in New Zealand.

The impact of the unbalanced distribution of income and wealth is that the majority of New Zealanders are feeling the pressure. And there is an obvious truth about being a human being: what hurts you and your family now is what matters most to you. It is just plain old psychology. Of course we still care about others who are doing it really hard, but we have to find a way to stumble through our own challenges. I will come back to why this matters in a bit.

Why is everyone but the few hurting?

New Zealand, it has been said, has a ‘rock star’ economy, but if you dig down to what this actually means it loses a lot of the glitter. We have rising house values (which means homes are more and more expensive), we have a strong dairy industry (but government continues to subsidise water use and pollution), and through immigration we have sufficient skills and people to drive the economy (but we are failing to invest in many New Zealand children or ensure a good quality of life for those immigrants).

A few people are making a lot of money from this, a long tail of people are treading water, and many are sliding backwards. It is a certain type of success for sure, but it is no way to build a thriving, innovative society and economy. Economies that thrive over the long term are ones where all are invested in early; it is one where the finite reality of physical resources are accounted for. Thriving economies are diverse, forward looking and support innovation (and the failure that comes with that). This is not New Zealand right now, and it is not New Zealand because people in politics over a very long period – 30 years at least – have chosen policies based not on good evidence for long term well-being, but on shallow metrics of success for the short term.

The pain that many are feeling needs to count

So let’s get back to that pain most are feeling. We have a terrible problem in this country; I write about it a lot. Those living on the lowest income are going backwards, struggling to feed their children and heat their houses, and the impact of this is multi-generational. All children and families really matter, and the majority of New Zealanders believe strongly that we need to do much better for those who are suffering.

But the middle income brackets are also struggling. The promised trickle down never happened, they are treading water financially, and the younger generation cannot get into housing despite having an expensive education. They put off having children to get ahead but still the financial impact on their families is serious because of housing costs.

Photo: Getty Images

Let’s consider dairy farmers in particular. They too have become in many ways the victims of the failure of government to choose innovative policies for our economy. Getting involved in a booming dairy sector makes sense if you live in the regions. A big component of dairying’s primary input – water –  is subsidised, as is any degradation to the environment. And because there are few other alternatives to do well in the regions (a lack of investment in anything other than housing means a non-diversified economy) dairy is often the best choice, even if it means a high debt and stress load.

So when people are asked to make what they perceive to be an immediate economic sacrifice for those at the very bottom, or the environment, and then told they’re heartless if they find it hard to do so, it’s a pretty bitter pill to swallow.

Economic well-being is not a zero sum game

What we should be talking about is why progressive, innovative policies will actually benefit us all. Humans are complex – they can cope with the idea that such policies can be about self-interest and care and compassion for others. The process to get there might just look a little different to what they expected.

Yes, if you are in the middle income bracket and suffering right now, a tax cut may look like the best way to deal to that pain for your family. Your pain should be recognised, but unfortunately house prices are going to keep rising and so will that income and wealth inequality. The pain will remain. If you are a dairy farmer then continuing the subsidies of water and pollution may look like the best way to avoid the pain of the massive debt burden that keeps you awake at night, but a diversified regional economy will benefit both your region and children.

Wealth taxes, large-scale community housing investments, living wages, universal income support for children, diversified investment and innovation policies, pricing pollution, public transport investment – they all require a bit of faith and hope, but they do work, they do deal with the pain everyone is feeling. As the well known psychological test goes, if we can wait a bit longer to eat the marshmallow, we all get two.

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