Following last week’s furore over a poorly handled and wonky bit of tax policy, there’s renewed energy behind the need to talk tax, writes Anna Rawhiti-Connell.
Let’s just copy and paste Australia’s tax code
Tax. It’s everywhere I turn right now. Maybe an indictment of my reading habits, but that wonky bit of Kiwisaver tax policy from last week seems to have kicked off wider conversation about taxes. I’ll be honest and say that tax usually feels like a lumpy, complicated thing mere mortals aren’t meant to comprehend but instead are left to just grumble about paying. But I pay taxes and have done since I first started working, assembling inedible ham salads at the local Cossie Club. We all do. “Death and taxes” is a truth. That’s why I’m leading with Hayden Donnell’s accessible and funny piece on The Spinoff this morning where he proposes that we simply copy and paste Australia’s tax code. I do not know if he is right but it’s not just a laugh – he makes several highly readable points and has experts to back him up.
Why should tax debate remain the domain of specialised experts?
Donnell freely admits he is “the guy who spent 2018 trying to get the Big Fresh Animatronic Fruit & Veggies to Te Papa” but why should tax debate remain the domain of specialised experts? A Herald opinion piece (paywalled) from actual tax experts yesterday on the Kiwisaver issue calls for “informed, considered discussions about what tax policy means for our collective futures”. It does also talk about “highly technical policy”. If you follow Bernard Hickey’s logic, having only these highly technical policies as a means for the government to generate revenue is indicative of 30 years of failure on tax. Hickey lays the blame at David Caygill’s feet for his “inability to complete the ‘pure’ trifecta of a simple, exception-free income tax”.
Earnings under $18,200 not taxed in Australia
One of the experts backing Donnell is economist Shambael Eaqub. We got him to run the numbers on importing Australia’s tax code. One of the main features of that system is that earnings under $18,200 are not taxed. Donnell’s central thesis is that our tax system is not remotely egalitarian or fair and that it penalises our lowest earners. Eaqub agrees and thinks simply lifting Australia’s income tax rates would be relatively affordable, including the $18k threshold of untaxed earnings. $3.3b to be exact. Eaqub argues the new system would reduce poverty and its resulting welfare and healthcare costs. Donnell and Eaqub aren’t alone in their tax chat. On Newsroom yesterday, Gareth Hughes was arguing for a reduction in GST. Economist Susan St John made the same call last week.
Urgent need for income tax brackets to be reviewed
As well as lending Donnell support, tax expert Terry Baucher (who once spent his precious and expert time trying to explain tax to me), took up his own tax cross yesterday. Baucher is calling for an urgent review of income tax thresholds or tax brackets. Baucher argues that tax brackets have not changed in more than a decade and that’s too long, especially in the current high-inflation environment where wages are growing, pushing more people into higher tax brackets. Baucher called the government’s reluctance to move the thresholds “plain cynicism”. Lifting income tax thresholds is, of course, part of the tax policy the National party floated in March and then got slightly muddled on. Never thought I’d say this but bring on the election year tax policies.
