During the US Presidential primaries last year I supported Democratic Senator Elizabeth Warren for the Democratic nomination.
She didn’t win for several reasons. She was regarded as too left wing, she was regarded as too old (she is about seven years younger than Joe Biden), she was a bit schoolmarmish (she had been a teacher and a law professor).
I was attracted to much of her philosophy, and her policy platform, but here I want to talk about her wealth tax proposal.
I strongly supported Warren’s wealth tax which she pushed pretty hard. It proposed a 2% annual tax on anyone with assets over $50 million. Warren set out in detail what this could accomplish for the poorest of Americans, and it was very persuasive. There are a large number of Americans with assets well above $50 million.
I attended the Green Party launch of its poverty package before our election last year, and then just a couple of weeks ago I attended a Fabian Society lecture on housing and taxation by two well known left wing economists, Susan St John and Terry Bauchier.
I was surprised to hear at the Fabian Society the proposed ‘Fair Economic Return’ method, a wealth tax by another name, and almost identical to the Green Party one. Both are well meaning attempts to level the waka somewhat, as inequality and poverty have got out of hand in Aotearoa/New Zealand.
At both meetings I heard about the aggregation of wealth in the hands of the one percent, and the first decile of citizens too.
At the Fabian meeting other taxes were canvassed, including the now much maligned capital gains tax. I think it a huge mistake for Jacinda Ardern to have ruled it out as long as she was leader. Bright line tests or not, if someone buys and sells property as a living and makes a profit on it, they should pay tax like anyone else does where they work to sell goods or services at a profit.
But the Fabian lecturers and the Green Party hierarchy both settled on a wealth tax.
Wealth taxes have been on the decline around the world, with fewer countries using them. Some countries have watered them down so much with exemptions they bring in little revenue. Clever accounting, and trading in overseas jurisdictions has hidden much wealth from the tax man too.
Still, without a CGT, and without more progressive income tax rates, something is needed if we are to return New Zealand to a more fair and just society.
So, I supported Elizabeth Warren, why not our Green Party?
The targeted asset level was set too low. Mainly because of house price inflation, hundreds of Aucklanders I know, and many other New Zealanders are now living in multi-million dollar homes through no fault of their own. Some can sell up and move to the provinces, taking a lump of cash out of their Auckland home. Others love their home, their proximity to friends and family and don’t want to move. These fixed income families are already burdened by increasing rates, maintenance and insurance. They are virtually renting their homes now.
Every home around the central city is now worth one, two, three, or more million dollars. The Greens proposed exempting the first million dollars - two million for a couple.
That still left couples on pensions only (some with small nest eggs earning almost no interest), possibly paying $10,000 a year on their 2.5 million dollar home and a $500K family bach.
People were told they could defer payment until the sale of the property. That’s just a disinheritance tax. Another hazard-if one partner dies, the surviving one has only one million exemption, not two.
Now these sound big numbers, but a million dollar property is now just a national average price. Millionaires are two a penny, and many have little or no income.
Introduce a capital gains tax, increase income tax brackets for the thousands of people earning two, three or more hundred thousand dollars.
Finally, do introduce a wealth tax, but like Elizabeth Warren proposed, set it high enough to avoid pensioners who have a highly valued house through no effort of their own - just through rampant house inflation.
The New Zealand level - exempt the first five million dollars. (JOHN ELLIOTT)