Who says we can’t afford it!

11 Aug

By Mike Treen, Unite National Director

One of the constant refrains we get from the right wing is that we can’t afford the social benefits that go to working people.

The right wingers also claim that “we are all equal” and should be treated equally to avoid any privileges arising like Maori and others are alleged to get.

If we were really all equal then all our income would be taxed at source at the same marginal rate as for other income we get.

Workers pay tax before they get paid and have to argue with the tax man afterwards if they want some back.

The super-rich (including multinationals, banks and local monopolies) treat tax as some kind of theft from their birth right that must be avoided at all costs. The penalties for avoidance are near zero. In really big cases like when the the big overseas-owned banks were caught avoiding billions of dollars in taxes no one went to jail and they got to pay back less than they avoided.

Companies like Apple, Google and Microsoft can structure their affairs to pay next to nothing in tax even though they have a massive presence in the economy and are reaping monopoly super profits from their business model.

The super rich in NZ should be paying at least 33% on all income above $70,000. That should include their income from company dividends and property speculation.

The super rich pay no tax on capital gains. That makes no sense. A gain is a gain. A profit is a profit. It makes no sense that if the profit is from speculative activity it is somehow different or superior to other types of business profit or wage income and remains untaxed.

The super rich also get a special tax credit that applies virtually to them alone because the rich own virtually all shares. This is the rich persons benefit called a Dividend Imputation Credit. It is paid to owners of shares so that they don’t have to pay the full marginal tax rate on their share income that would normally apply.

Since share owners generally would be in the 33% bracket that would be the rate that should apply to this income. But the greedy rich rewrote the tax law so that their dividends would be taxed at a lower rate than their marginal rate. They did this by arguing that tax has already been paid by the company on this income so their tax should be reduced by whatever tax the company paid. This is logical nonsense. The company pays company tax. The individual pays income tax. The dividend is income. It should be taxed the same as other income. This income comes from their share speculation. Any capital gains earned from this share speculation are also not taxed.

This is only the beginning of the tax rort.

Working people hate taxes. We know we are taxed to the eyeballs and pay far more than our fair share. We are taxed on every dollar we spend. We are taxed on every dollar we earn. We pay disproportionately to our income for every “sin tax” around – tobacco, alcohol, petrol. We are massively overtaxed because the rich avoid their share.

I always hated middle class types in allegedly left wing movements who go on about how “we” should be happy to pay more taxes to help those less fortunate. Actually “we” – the majority shouldn’t be paying tax at all. “We” are the wealth creators. The vast majority of that wealth has been appropriated off us. “We” should have a simple programme to shift all taxation off ordinary wage income and on to the incomes of the rich and their accumulated wealth.

Lets look at some statistics on what has been stolen from us in these last few decades.

The July CTU Economic Bulletin calculates that “labour share of income fell from approximately 60% of income in early 1980s to 46% in 2002 – a loss to wage earners of about a quarter of aggregate income. It then recovered to around 50% – a sixth lower than the 1980s. In current dollar terms, that is a loss of about $19bn per year or $10,000 per wage earner per year. The present value of the loss over that period is estimated at between $660bn (invested in term deposits) and $1,200bn (paying off mortgages) or 3 to 5 times GDP. New Zealand’s labour share is very low by developed country standards: Piketty considers 60-70% typical. In United Nations comparisons, only Chile and Mexico are lower among OECD countries.”

The successful right wing neoliberal offensive against working people in the late 1980s and afterwards has robbed workers of a sum of wealth equivalent to at least $660 billion dollars in today’s money!

That is why it will never be enough to simply think that a slight rejigging of income taxes is going to change anything.

It is the accumulated wealth stolen from us that needs to be attacked and clawed back. We need a whole raft of wealth taxes if we are going to begin to turn back the congealed inequality that has developed over the last few decades.

That is also why it is economic nonsense to fall for the arguments that a changing demographics mean “we can’t afford” to continue to provide national super at 65 or top quality health care to the aged.

There is a mathematical rule that you can work out how long it takes for a quantity to double by dividing the growth rate into 70. This is useful for looking at economies.

Between 1978 and 2011, aggregate labour productivity in New Zealand grew by an average of 2.73% a year according to a recent Productivity Commission report. Assuming that continues that means that every NZ workers will be producing twice as much in 26 years. The problem is not “can we afford it” but who will control that additional wealth.

For the past three decades NZ and the USA were among a few countries with the enviable achievement that their workers doubled production but ended the period poorer in real terms than when they started because all of the wealth gain was captured by a kleptocratic elite. This is the first generation in the history of capitalism for that to be a reality. Not something its defenders should be proud of.

They fact they have done it to us without us rising up in anger and hanging some of them from the lamp posts is to our shame.

But I am an optimist. Humanity is saying it has had enough of inequality, injustice and war. We want a different future. The anti-neoliberal left is sweeping Latin America and has revolutionary leaders of international stature. I think there are signs of that revolt in Internet-Mana in New Zealand. The continued attacks on that party from big business and the right shows they too may be a little afraid.

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