Let them eat cake

I look forward to reading Max Rashbrooke’s latest book ‘Too much money” It is past time we had the public debate about the divisive and unsustainable inequality that has been driven by our low-tax, free-market system. Solutions will require vision, bravery and leadership.

The headlines in the daily paper show how far part society is drifting. A couple in Auckland (who may be perfectly nice people) are demolishing their $24m mansion on the waterfront (with swimming pool) and commandeering scarce building resources (in a time of a severe housing crisis) to develop an even more luxurious palace (together with Helipad).   

In the same week we hear that in the past three months, the demand for Te Tāpui Atawhai Auckland City Mission’s services has been the highest in the organisation’s 100-year history.

Helen Robinson, the Auckland City Missioner says 

The City Mission plans to deliver 9,000 food parcels and 30,000 gifts in the two weeks leading up to Christmas, which Robinson said was its capacity.

“In fact, we’ve been doing the most of what we can do for the last three months so this planning for Christmas is truly kind of the last draw of breath that the mission can give this year to respond to the level of need.”

I expect Max Rashbrooke to cover the issue of a wealth tax. A proper tax on holdings of real estate used for excess wealth accumulation would be a step in the right direction.  I hope Max also analyses NZ’s three major redistributive programmes; social welfare benefits for working age adults, Working for Families (WFF) for children, and New Zealand Superannuation (NZS) for those over 65. 

As evidenced from a recent article in interest.co.nz  many commentators clearly dislike beneficiaries, hate WFF and have little sympathy for the plight of low income children, and yet are happy to ignore the comparatively, overly generous treatment of those over 65 even if in full-time well-paid work or with multiple million-dollar properties. 

Even many on the left are deeply suspicious of WFF: arguing it is propping up wages that are too low many families. The welfare state is despised equally by both the right and the left, for different reasons.  

But the pandemic has shown, too many of us are only a few pay cheques away from the need of state support ourselves. Few seem to understand that all developed countries have a programme like WFF to assist in the costs of rearing children, usually more generous and better designed. 

Both NZS for the old and WFF for the young,  effectively ensure there is a basic income; the old get this cushion in the form of a universal taxable pension, the young in the form of a weekly cash payment to the parent that is given to all low-income families and reduces gradually as income increases above $42,700. For both payments, this is unconditional money that helps prevent old age destitution for those over 65 and child poverty.

NZS is expensive, ($18 billion for around 900,000 people) wage-linked and only slightly targeted through the tax system so that millionaires still get 75% of the amount pensioners with no other income receive. WFF is relatively cheap ($3.5 billion with around 1million children), is tightly targeted, discriminates against children in families on benefits, creates very high effective marginal tax rates above $42,700, is not linked to wages and is only partly indexed to the CPI.  

But the bureaucrats in Wellington have decided (with no evident objection from politicians) that their long-winded review of WFF had become too hard to continue this year. Instead of the profound reform that is needed, some minor ad hoc changes for next year have been announced.   Furthermore, subsidization of foodbanks appears to be their answer to the manifest, overwhelming need this Christmas.     

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