Monday, March 05, 2018

Time for new taxes

The Tax Working Group is considering a variety of new taxes:

A wealth tax, a tax on financial transactions, a broader capital agains tax, a land tax and new environmental taxes will all be options considered by the Tax Working Group, its chairman Sir Michael Cullen says.

Cullen said those new taxes would be among the options canvassed in a "background paper" that will be published on Wednesday week.


Speaking to the International Fiscal Association conference in Queenstown on Friday, Cullen gave several strong clues on his own thinking on the direction of the tax system.

Cullen appeared warm to the idea of taxes on environmental and social ills, such as greenhouse gas emissions, pollution and the causes of obesity.

Good. Firstly because the government clearly needs more money to rebuild the state after National's nine years of vandalism, secondly because we need environmental taxes to deal with pollution and climate change, and thirdly because taxing things other than income will reduce the opportunities for the rich to rort the system and avoid paying their fair share. The problem with taxing income is that it is relatively easy to hide - the rules enable rich people to hide income in companies, trusts, or overseas. And we know that they do this because it shows up every year in income distributions, in a spike just below the top tax-rate. That spike is rich tax cheats hiding their income.

I'm not sure what the best addition is. General wealth taxes on the uber-rich are appealing, but probably easy to avoid. Land taxes are very easy (you can't hide land, and the government already values it for rates), but don't capture all wealth (OTOH, some is better than none, and it would make farmers pay their way properly). Water and carbon taxes are obvious moves, though a bit messy to implement (requiring settling with iwi and repealing the ETS respectively). But throwing something else into the mix to make a fairer and environmentally better system seems like a no-brainer to me.