New Zealand’s problem is that it does not tax enough, or enough


Max Rashbrooke is Senior Fellow at the Institute for Governance and Policy Studies at Victoria University of Wellington-Te Herenga Waka.

OPINION: A few years ago, while dining in Wellington, I spotted a low-key card on the restaurant table, asking me if I wanted to raise our bill by a small percentage to help fund a new children’s hospital. I’m not against private charity, but it seemed bizarre, forcing sick children to rely on the whims of Wellington diners to get the care they needed.

It was also emblematic of the desperate underfunding of our public services. New Zealanders sense the problem: they see schools unable to afford the computers that learning now relies on, waiting lists for public accommodation that grow longer and longer, delays for people who looking for hip replacement or the latest cancer drugs. And those who are lucky enough to have lived abroad, particularly in Europe, will have an idea of ​​the quality – the modernity, the responsiveness, the equipment – ​​of the public services.

But few people understand the full extent of the problem: that New Zealand’s public services are trying to get by on about $30 billion less a year than they would be if we funded them the way the Europeans.

Nobody likes paying taxes, but you can't fund champagne tastings with a beer budget, says Max Rashbrooke.

Tom Pullar-Strecker/Stuff

Nobody likes paying taxes, but you can’t fund champagne tastings with a beer budget, says Max Rashbrooke.

Tax collected by the New Zealand government, which funds our public services, accounts for around 32% of our annual income or GDP, just below the OECD average. But that average is dragged down by the poorest countries – Mexico, Colombia and others – whose public services we probably wouldn’t seek to emulate.

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Countries we service do the desire to finance theirs much more generously. Even leaving aside the tax-savvy Scandinavians, the Austrian authorities collect 42% of their GDP in taxes, the Dutch 40% and the Germans 38%. These countries get larger tax contributions from those who earn very high incomes, make capital gains, or receive large inheritances.

Think of what we could buy with a bigger tax grab, says Rashbrooke: more buses, more public residences, more computers in schools, to name a few.  (File photo)

MONIQUE FORD/Stuff

Think of what we could buy with a bigger tax grab, says Rashbrooke: more buses, more public residences, more computers in schools, to name a few. (File photo)

New Zealand’s annual income or GDP is $345 billion a year, so our 32% tax levy brings about $110 billion to our public services. But if we taxed at the Austrian level, we would still have 34 billion dollars a year; at Dutch levels $26 billion and German $21 billion.

Think what we could buy with that money! Computers in schools, thousands more state houses, reduced wait times for surgeries. Charging stations for electric vehicles and additional buses. Protecting our native birds from predators. Better support for retirees and disabled people.

New Zealanders want these things; they just don’t currently charge the required tax. They try, as the saying goes, to satisfy champagne tastes on a beer budget.

National Party leader Christopher Luxon wants to repeal any further tax hikes or additional levies imposed by the Labor government since 2017.

National Party leader Christopher Luxon wants to repeal any further tax hikes or additional levies imposed by the Labor government since 2017.

It’s understandable: higher tax intake, after all, means less out-of-pocket spending. But it is a compromise that most European citizens make. And I think many middle-class New Zealanders would consume less if it meant they could rely on a better healthcare system when they got sick, and if they knew the welfare system was doing more to help those who were unlucky. Tax may or may not be love – as Shamubeel Eaqub famously put it – but it is certainly how we pay for civilization, for all the thousands of things the government does to support our way of life. .

The counter-argument is that our public services could get more out of the money they already have. Now I’m all for efficiency and have ideas on how government could be run better.

But on most measures, we already have a fairly efficient public sector, ranking between second and sixteenth in the world. (In other words, if you think ours is bad, you should see the others.) And most of the nations above us are also big spenders. If you really want great utilities, you have to pay for them.

Max Rashbrooke:

JERICHO ROCK-ARCHER/Stuff

Max Rashbrooke: “We should think up new ways to fund public services properly.”

However, in addition to taxing more, we must tax more fairly. Low-income New Zealanders already contribute a lot, in part because the GST weighs heavily on them. Conversely, given the way the housing market has generated huge unearned capital gains, which baby boomers are converting into legacies that perpetuate intergenerational inequality, the case for some sort tax on capital gains, inheritance or wealth seem to be increasingly strong.

All of this gives context to the current fuss over low wages being driven into higher tax brackets via inflation. Yes, the brackets may need to be adjusted, but unless we add a new maximum rate to compensate, a large portion of the profits will go to the wealthy. National Leader Christopher Luxon’s plan would be to raise tax thresholds and deletion the current top rate, give him an extra $8,000 a year – but someone on minimum wage just $110. It would also give real estate investors tax relief.

But even Labour’s tax strategy, which largely maintains the status quo, amounts to playing on the margins, when we should be imagining new ways to fund public services properly. We need to invest more in our collective wealth. This way, sick children can know that they will receive the care they rightfully deserve, rather than having to constantly extend the begging bowl.

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