Monday, May 17, 2010

A fairer tax shift

The National government is describing their upcoming tax cut for the rich as a "tax shift", a simple readjustment of the tax burden. They are trying to pretend that everyone will be financially better off by doing this, but by definition, this cannot be true. The rich get stonking great tax cuts. That means someone has to pay for them. And in true National Party style, the people paying will be the poor, through higher GST and higher rent.

Meanwhile, the Greens have launched a better plan, a "mind the gap" policy to reduce inequality. The core policy? A $10,000 tax-free bracket, funded by a comprehensive capital gains tax which excludes the family home.

That's a far better tax shift than what National is offering. This one benefits the poor at the expense of the rich, rather than the other way round. And taxing capital gains will help squash the damaging property boom-bust cycle and redirect investment away from economically valueless property speculation. That's fair, it reduces inequality, and it solves one of the big problems in New Zealand's economy. But somehow, I doubt National will be interested.

You can read the Greens' full policy here [PDF].