There is unanimous, yet false consensus among the Tories and their supporters that a tax-hike for the wealthiest New Zealanders will result in the dreaded ‘brain drain’ and secondly the loss of support (and indeed the fear) of the Left.
I reiterate this is false consensus.
The Tories are finding comfort in their misguided belief that all top income earners are arrogant and self obsessed. That is not true.
That is only true for those among the top income earners who vote for the National Party.
My uncle, a CEO, enjoys what most of us would call a more than modest income. He is able to own his own house, pay the bills with a sense of comfort, and can afford to keep his house warm and dry. A lifestyle, then, most of us would seem most adequate – at least in the current circumstances we find ourselves in this century. These said ‘luxuries’ – a warm dry home owned for one’s self and living in no anxiety of the approaching power bills was once the common description of almost every New Zealander.
Last election my Uncle voted for the Maori Party. He saw this as a vote to prop up John Key’s National-led government in what he told me was a “tactical vote”. He gave his candidate vote to Christopher Finlayson of the National Party. I told him in 2011 my preferences were with the Green Party. He then proceeded to rant at me that voting for the Greens was in some way desiring a communistic-totalitarian regime. Which surprised me, then, to learn that today he was full-on praising the Green Party’s plan to raise the top income tax to 40c in the dollar, and use the $1B revenue to help reduce the child poverty epidemic we have in New Zealand.
But then – I thought – that isn’t all that strange. When my uncle lived and grew up in a society which cared for it’s people; old, young, disabled, working, pregnant and retired. There were benefit opportunities for practically every New Zealander if they needed them. Although much of these were unneeded because of the next-to-zero unemployment rate. The top tax rate was ever changing, but mostly hung above 50 cents to the dollar. New Zealand, before the free-market revolutions of the 1980s, was regarded by it’s global counterparts as one of the most equal and prospering countries in the world and an example to be followed. Our economy was booming in the 1960s as the world’s attraction to our beef, wool and dairy products escalated. The profits were shared, and everyone got ahead. The general mentality among New Zealanders at this point was ‘if my neighbour is well, then I am well’ and ‘we all move forward together’. That was what it meant to be part of a country.
These mentalities have died worldwide, but in New Zealand most drastically. Incredibly, tax avoidance doesn’t concern us (despite our low top tax rate). Welfare abuse, which only accounts for 1% of the costs of tax avoidance, really concerns us. So much, that we chose to ignore those receiving welfare are largely our elderly, disabled and those struggling to get by on one income.
There is no reason why a tax hike on the wealthy would mean opening the feared ‘brain drain’. It is my honest opinion that most ‘brains’ are lost through student debt, not tax. Free tertiary education is being disregarded as an option to halt the brain drain. New Zealanders choose to see allowing our young people to study for free as an expense, not an investment. There is no greater investment than allowing our young people to study and stay here. We are plunging our future doctors, politicians, lawyers and business leaders into debt, and in doing so scaring them offshore. That is what is causing the brain drain in New Zealand.
Restoring the mentality of working for each other, not just one’s own self, is crucial. If we are to do this, we must not be afraid of raising taxes on our wealthiest people. When a family working two full time jobs can’t afford to pay the power bill and our wealthiest people can’t spend their money as fast as they earn it – something is seriously wrong. As Nigel Latta points out in his new documentary The New Haves and Have Nots, the growing inequality crisis hurts us all. Rich and poor. More people in poverty accounts for more crime, and forces the wealthy into gated communities.
If we look at some of the more unequal countries on our planet, for example America – we can see exactly this in play. Their wealthiest citizens are increasingly finding comfort behind tall, brick walls as the wealth becomes more concentrated. America’s economy is also heavily in debt, with the most recent accounts posting a $17 trillion blackhole – with every citizen in the United States owing close to $56,000 to the overall national debt. Top income earners pay about 39 cents for every $1 USD. These reforms of the top tax rate mostly came about in the 1980s during the western world’s global free market revolution. Reagen brought taxes down to record lows and borrowed literally billions of dollars to pay for them. Similar patterns occurred with Thatcher and Major in Britain and Mulroney in Canada. Britain and the United States responded (overall) well to the new, lowered taxes and neoliberal economic charters. One country didn’t – Canada. Mulroney recorded a record low approval rating of 11%. His government was smashed in the 1993 federal election – losing all but two seats. As a result, even Canada’s Conservative Party incumbents today are forced to keep surcharge taxes above 50%. Although since claiming a majority in the 2011 election, Canada has slashed spending on public services to pay for new tax cuts (despite still being in deficit).
But even with all this evidence stacking up, New Zealand’s government is now rumored to be talking about lowering New Zealand’s top income tax even lower.
Then on the other side of the coin from the United States are countries like Norway and Denmark, which enjoy progressive tax systems. In which, top income earners pay more 50% in income tax. The brain drain is very light, and Norway in particular enjoys no debt. It’s healthcare, welfare and (free) education is all paid for. Why do we not desire this in New Zealand?
Why do we not desire a future where we can all get ahead under a progressive tax system exemplified in the Nordic nations?
Free tertiary, and a quality public education system can all be paid for if we all pay our fair share. Which, as Latta has proven, is better for all of us. We need to stop living in fear that taxing those on the high end of the scale a fair amount will cause a brain-drain. Investing in our education and creating opportunities made through investments in the right areas (like science and technology) will significantly boost our GDP and keep jobs and skilled people here.
We can have the best of both worlds. All we need is a progressive tax system. And I’m glad so many are waking up to that fact.