Wednesday, January 27, 2010

Feathering their own nests

In the Herald today, Fran O'Sullivan points out exactly how much government MPs have riding on the tax review:

A flick through Parliament's annual register of MPs' pecuniary interests reveals many parliamentarians could lose out if the Government moved to plug the tax loopholes that sprang up after its predecessor whacked the top personal tax rate up to 39c.

More than two-thirds of the National line-up have beneficial interests in trusts (entities that the Inland Revenue believes are responsible for a $300 million hole in tax revenues at the current 33 per cent tax rate).

Then there are investments in rental property (another area which IRD says cost the Government $150 million in lost tax revenue) and the traditional investments in farms and share portfolios.

The MPs' personal wealth - like those of National's support base - is spread across asset classes which stand to either retain or lose value depending on which of the working group's options the Government chooses to fund major cuts to company and personal taxes.

John Key is among them - his extensive property portfolio (homes in Remuera, Omaha Beach, Hawaii, London and Wellington) mean he is seriously exposed to a capital gains tax or land tax. The implication is that these people will put their own interests first, and hike GST rather than voting to increase their own taxes. And sadly, it's probably right.

Unmentioned by O'Sullivan is that MPs are in the same boat on income taxes as well. Every single MP earns at least $130,000 (plus expenses) from their parliamentary salary - putting them in the top 2% of income earners. Cabinet Ministers, on $243,000 a year, are in the top 0.5% (figures based on IRD's 2008 data here). Once you notice this, their relentless focus on cutting top tax rates seems just a little self-interested.

Meanwhile, as an ordinary person, I'd like us all to be paying more taxes. Why? Because it means my local hospital wouldn't have to whore itself out to McDonalds to make ends meet, our schools wouldn't have to hit parents up for "donations" to provide the basic service we expect, our parents could get the paid leave they get everywhere else in the civilised world, and that people wouldn't face permanent destitution due to inadequate benefit levels as a result of temporary misfortune due to serious illness or unemployment. And as an ordinary person, I understand that simple fairness dictates that those who can afford to should pay more. Unfortunately, their high salaries, tax-rorting trusts, and extensive property portfolios blind our rich MPs to the views of their ordinary constituents. On this issue, they're on a completely different planet. Is it any wonder we get policy which reflects their interests, rather than ours?