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<\/p>\nTayla Forward laughs. She\u2019s found herself unexpectedly at the centre of this election campaign, every time she passes an Opportunity billboard. \u201cThe Opportunity Party wants to run me so bad. All of their signs say not left, not right, but \u2018forward\u2019. I will never go into politics, but I\u2019ve got the name for the signs!\u201d<\/p>\n
This week she finds herself at the centre of the campaign in a more meaningful way. The political economist has published a report \u2013 an extension of Inland Revenue\u2019s big High-wealth Individuals Research Project in 2023 \u2013 that shows how much more untaxed wealth has concentrated in the hip pockets of NZ\u2019s wealthiest people.<\/p>\n
Now, the very wealthy in New Zealand pay just an 8.1 percent effective tax rate on their comprehensive income \u2013 less than half the 17.4 percent effective tax rate paid by middle New Zealand. Yet it\u2019s middle New Zealand who will vote, and pay, to maintain this seemingly unfair status quo.<\/p>\n
If the top 1 percent of wealthy New Zealanders had paid the same share of tax as middle New Zealand, then it would have generated an additional $7 billion a year in tax revenue from 2021 to 2024, the report says. That\u2019s enough to pay for all NZ\u2019s state highway network improvements over three years, or the entire Auckland Airport rebuild.<\/p>\n
After-tax returns rise with wealth. The tax system permits this. Reinvested, the top 1 percent\u2019s wealth doubles in about six years; the middle\u2019s, concentrated in the family home, takes around 11 years. Perhaps longer now, as house prices plateau.<\/p>\n
Since data collection closed for Inland Revenue\u2019s project, Parliament has reintroduced a top 39 cents rate for all taxable income over $180,000 per year \u2013 but it\u2019s only hit high salary earners. NZ\u2019s wealthiest people \u2013 the top 1 percent \u2013 have simply avoided the higher income tax by reducing the salaries and dividends they take out of their companies, and taking cash loans instead. Loans they need never repay.<\/p>\n
Inland Revenue spotted the use of this loophole and, late last year, began consulting on closing it. Officials wanted to follow the lead of other jurisdictions like the UK by treating such loans \u2013 if not repaid within 12 months \u2013 as dividends, and taxing them accordingly. But the Government put the kibosh on the proposal.<\/p>\n
\u2018Tayla Forward demonstrates how unequal New Zealand really is \u2026 A must-read.\u2019<\/p>\n
Professor Thomas Piketty, Paris School of Economics<\/p>\n
And so here we are at another election, with another report showing New Zealand\u2019s most wealthy individuals and families paying an even smaller share of tax, relative to their wealth, than ever before. <\/p>\n
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Surveys show many New Zealanders support new taxes \u2013 so long as it\u2019s not them paying the tax. A bed tax on tourists, yes. A digital services tax on rapacious tech companies, yes. A wealth tax on New Zealand\u2019s most affluent, yes yes yes.<\/p>\n
Yet also, National\u2019s war cry of \u2018No New Taxes\u2019 seems to resonate. According to tax consultant Terry Baucher, messaging from the likes of Act and the Taxpayers\u2019 Union has successfully created a disconnect between the taxes we pay, and the services those taxes fund.<\/p>\n
So we want more teachers and better hospital services, but we don\u2019t want to pay for them through taxes; we want our rubbish collected every week but we don\u2019t want to pay for it through increased council rates.<\/p>\n
\u2018She was imagining a Persian prince kind of scenario \u2013 like, tigers on gold leashes, palace jewels \u2013 and then she came back to Tai Tokerau! She went, excuse me, and promptly moved to Parnell.\u2019<\/p>\n
Tayla Forward, Ng\u0101puhi<\/p>\n
Paris School of Economics\u2019 renowned Professor Thomas Piketty, co-director of the World Inequality Lab, has acknowledged the rigour of the report by his former student. \u201cTayla Forward demonstrates how unequal New Zealand really is,\u201d Piketty says. \u201cAccording to her latest estimates, the bottom 50 percent of the population barely owns 3.5 percent of aggregate net private wealth, while the top 10 percent owns 68 percent of the total.\u201d<\/p>\n
This is not the only endorsement for Tayla Forward\u2019s work. She\u2019s regarded as somewhat of a prodigious talent. Baucher has also worked with her and acknowledges her smarts.<\/p>\n
Forward studied her undergrad at Auckland University and Sciences Po, the Paris Institute of Political Studies, chopping and changing between pure maths, applied maths, statistics and computer science, before eventually settling on maths and economics. \u201cYeah, mathematicians are freaks, and I love them dearly.\u201d<\/p>\n
She went straight into the New Zealand Treasury graduate programme and was suddenly modelling the Covid wage subsidy scheme and residual support payments. \u201cBy a few contingencies and mistakes of circumstances, I ended up a little bit more central to the Covid response than a 22-year-old maybe should be!\u201d<\/p>\n
\u2018The rest of the world has these taxes, and the world hasn\u2019t ended for them. I was astonished when the PM was saying that capital gains taxes restrict investment. Australia\u2019s had a capital gains tax for 40 years; they\u2019re wealthy.\u2019<\/p>\n
Terry Baucher, tax consultant<\/p>\n
Through it all, her Ng\u0101puhi whakapapa has contributed. Wellington may be Economics Central, but she bases herself in Auckland \u2013 in part, so she can occasionally get back to her marae, Parawhenua and Parahaki in the Mangak\u0101hia Valley west of Whang\u0101rei.<\/p>\n
This part of the country knows better than most the stark contrasts that can emerge, over generations \u2013 so much natural wealth and yet so much material poverty. And that resonates in her work.<\/p>\n
\u201cIf you\u2019re a curious person, you\u2019ll try and find a way to understand that. And yeah, I happen to be good at maths, so I do maths to try to understand some of the tensions and contradictions and dynamics going on, with regard to disparities.\u201d<\/p>\n
One of her t\u016bpuna was the young chief Kamariera Te Hau Takiri Wharepapa, who boarded a boat to London in 1863 in the hope of meeting Queen Victoria. <\/p>\n
He brought home an English bride. \u201cShe was imagining a Persian prince kind of scenario \u2013 like, tigers on gold leashes, palace jewels \u2013 and then she came back to Tai Tokerau! She went, excuse me, and promptly moved to Parnell. The north is abundant, of course, but perhaps not in the way she imagined.\u201d<\/p>\n
That\u2019s an early reflection of the wealth disparities emerging in the region, and they\u2019ve been perpetuated and compounded over generations. As Forward\u2019s report points out, the wealth of the top 1 percent now doubles in about six years; it\u2019s starkly different for those on middle and low incomes.<\/p>\n
Now, 29-year-old Forward is watching the impact of today\u2019s report on the election. Greens co-leader Chl\u00f6e Swarbrick called a media conference at 11am Friday to discuss it. \u201cThere\u2019s a reason the Greens\u2019 wealth tax has the support of two-thirds of New Zealanders,\u201d she said. \u201cPeople feel every single day how hard things are, and how rigged the system is.\u201d<\/p>\n
The report was commissioned by the lobby group Better Taxes for a Better Future. Campaign manager Kate Stone says successive governments have made choices about NZ\u2019s tax system that have increased wealth inequality and forfeited billions in much-needed revenue. \u201cThis is not inevitable. The question is whether the political will to do so can be assembled before the costs of inaction become even harder to address.\u201d<\/p>\n
National Party campaign chair Simeon Brown retorts, \u201cthe Greens want to get the wealth tax through the door first, then lower the threshold so it captures more New Zealanders\u201d. The Taxpayers\u2019 Union\u2019s Austin Ellingham-Banks says, \u201cthese new taxes are always just the thin end of the wedge\u201d.<\/p>\n
Personally, Forward backs a wealth tax as the best way to broaden the tax bases. Tinkering with the existing system doesn\u2019t work, she says, as shown by the way the top 1 percent avoided the impact of the 39 cents income tax band by keeping their money in their companies on the lower company tax rate, instead.<\/p>\n
Baucher is agnostic about the wealth tax. In its favour, it broadens the tax base as a more reliable alternative to other taxes; the downsides are expecting people to find the cash flow to pay it, and the difficulties valuing people\u2019s assets and capital.<\/p>\n
\u201cYes, there is a risk of capital flight, but there is some interesting data from what happened in Norway, which says that might not be as much as people say. And one of the things about wealth taxes is that the political economy is dominated very much by those who are most affected, so they make a lot of noise.\u201d<\/p>\n
If he were finance minister, he says, his first priority would be to install a comprehensive capital gains tax \u2013 one that covered realised gains on all real estate as well as company assets, shares and equities and crypto gains. He says his clients often expect to pay tax when they make a gain; they\u2019re surprised to discover they don\u2019t have to.<\/p>\n
But there\u2019s no party proposing a broad, comprehensive capital gains tax this election. Labour\u2019s proposed 28 percent capital gains tax would apply only to commercial property and residential investment property, excluding the primary home.<\/p>\n
Baucher thinks the big parties should step up. \u201cThe rest of the world has these taxes, and the world hasn\u2019t ended for them. I was astonished when the Prime Minister was saying that capital gains taxes restrict investment. Australia\u2019s had a capital gains tax for 40 years; they\u2019re wealthy.\u201d<\/p>\n
Tayla Forward\u2019s report doesn\u2019t reach any emphatic conclusion on the best way forward \u2013 but it does make it clear that the status quo is not sustainable.<\/p>\n
\u201cA tax system that applies formally progressive rates while leaving most of the income of its wealthiest households outside the base is progressive in form but not in substance. Closing that gap \u2013 through a comprehensive capital gains tax, or a tax on wealth \u2013 requires confronting the design of the base, not the calibration of the rates.<\/p>\n
\u201cThe question is whether the political will to do so can be assembled before the fiscal and distributional costs of inaction become harder still to absorb.\u201d<\/p>\n