Tax series: Greens’ Shaw on the Wealth Tax
What is the Greens wealth tax that we’ve heard so much about? How much of it will we actually come into fruition if they come into power this election? How is it going to impact the growing number of New Zealanders relying on investments for their income? Today we’re joined by James Shaw, Green Party co-leader, to understand the thinking behind the party’s aggressive new tax plan.
This is the first in a brief series of podcasts where we explore how each party views wealth, and how they intend on making it easier, or harder, for the everyday Kiwi to grow it.
For too long I think, the mainstream of New Zealand has been fixated on income exclusively, and not nearly enough on capital gains when it comes to making investment decisions, and tax policy too.
We’re taught from a young age to get educated, get a good job, pay your taxes, repay debt, and then invest, ideally in things that produce positive cashflow; usually in that order.
This default ‘value-investing’ paradigm places a relatively low reliance on expected gains we should be making on our investments. Is this really the way it’s going to work from here on in, when incomes are now increasingly likely to be at risk of being disrupted in a post-Covid world?
Our tax system, in NZ anyway, also supports this baseline assumption that you’re rich if you earn ‘high income’ (a relative statement!). But would you really call a sole earner of a five person family who makes $200,000 a year “rich”? What about a bachelor making $80,000 a year, but with more than a million worth of inherited assets?
You may think we pay a reasonable amount of tax already in NZ, although I suppose the less you earn, the higher you think the tax rate should be, and vice versa. So while your income is taxed on the way into investments, in many (but not all) cases, the growth in your investments is largely un-taxed.
This favours those who are ‘already there’, and makes it harder for those trying to get there. The fruit the tree produces gets the attention, but the tree itself is left alone.
In the new world we’re living in, complete with money printing from our central banks, it’s clear we’re heading into a space where gains on investments (capital gains) perhaps can be considered more reliable than our incomes. Understandably then, the government will try to position itself to benefit from this trend – perpetual money creation to solve the immediate problem will only get us so far.
Shaw was coy on whether he thinks any of their bold tax proposal will actually come to fruition, but he did take some time to explain exactly how they arrived at their proposal today. I for one don’t love the idea of the government hacking away at my trunk, when they’re already getting a good slice of the fruits from my tree. On the other hand, I recognise the need for society to solve the issue of our widening wealth gap. What do you think about the Greens’ ideas? Leave a comment on our social media, or drop us a line at firstname.lastname@example.org to share your thoughts.
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