New Zealand has just ruled out one of the best measures for helping to address poverty. Is it still possible to do so?
Good question and one that irrespective of governing coalition, New Zealand must try to. The country that likes to think it is egalitarian and that the spirit of giving people a fair go is alive, has no choice if it wishes to reasonably continue thinking this.
It is a question that will rankle the supporters of the Labour-led Government of Jacinda Ardern. It will rankle many of them because the C.G.T. to many was a fundamental part of any policy platform for dealing with poverty. It would appear New Zealand wants to address poverty, but is absolutely loathe to introduce any sort of measure that check the unsustainable wealth accumulation by the top 5-10% of income earners. So, to cut to the chase, what are the options?
Is New Zealand even agreed on a definition of poverty?
To me poverty is the inability to afford and access the essentials for a life of dignity. What is life if it cannot be lived in a state of dignity where a human being is not degraded? To me, nothing. It is when one is unable to afford basic medical care, shelter, food, transport and education.
In one respect New Zealand is making progress, in that we are enacting a progressive increase in the minimum wage. It rose last year from $15.25/hr to $16.50/hr; from 1 April this year to $17.70/hr; from 1 April next year to $18.90/hr; from 1 April 2021 to $20/hr.
One thing New Zealand can do is ensure that the benefits administered by the Ministry of Social Development are fixed to a Consumer Price Index or other appropriate measure, and adjusted annually on 1 April each year. The rules for administering the schedule of benefits should be reviewed at the same time.
New Zealand can also try to implement the nearly 100 other recommendations that were made by the tax working group.
I still believe though that New Zealand should broaden its income tax regime. Currently the brackets sit at:
- 10.5% for income up to $14,000
- 17.5% for income between $14,000-$48,000
- 30.0% for income between $48,000-$70,000
- 33.0% for income above $70,000
A top tax rate of say 37.5% could take effect on incomes over $250,000 per annum, whilst the others are more evenly spread instead of a tight range covering just $56,000 between the end of the lowest bracket and the start of the highest.
No mention in the T.W.G. report appears to have been made of a luxury goods tax. Some might call it a jealousy tax. I disagree as it would be on assets that probably out of the reasonable reach of 95-99% of the worlds population. How would it be implemented and at what financial value does something become a luxury good? To be clear to me a luxury good is something that is surplus to the reasonable maintenance of life, and purchased simply because the buyer wants it for reasons of prestige and can afford it. As for what passes as a luxury asset, it would be any car, property, jewellery, aircraft, helicopter, rare items such as art works, other collectables. One can discuss valuations at which such assets can be defined as luxury goods upon inspection, however I think the following could be a good start (and exclude family homes, immediate business assets):
- vehicles worth $250,000+;
- yachts worth $1 million+
- property other than the family home worth $1 million+
- any helicopters, private jets