The Post: Greens' wealth tax plan reflects a more mature country – and party

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One of my favourite quotes, from the American entrepreneur John Paul DeJoria, is this: “Success unshared is failure.” It delights me to see people do well, develop their talents, make something of themselves. But if that success isn’t shared, if it doesn’t help elevate others, if it won’t acknowledge our individual reliance on collective goods or seek to bolster that shared wealth, then something is badly awry.

Former prime minister John Key came out swinging this week against scrutiny of the rich. A recent Inland Revenue report, which showed that multi-millionaires like himself pay a lower rate of tax than supermarket cashiers, was “pathetic”, he said. Clearly it was a prelude to hiking taxes. Instead, we should be “ambitious”.

But where’s the contradiction, John? Raising more in tax, in order to buttress public services, is the height of ambition. It’s about being ambitious for the country as a whole. Multi-millionaires have often worked hard, but they’ve also used government-funded ultrafast broadband, driven on public roads, attended state schools and checked into public hospitals. (Key, of course, grew up in a state house.)

Having drawn deeply from that pool of collective services, the well-off need to replenish it with equal generosity, so future generations can flourish. Paying an average tax rate of around 9% is hardly generous, not when aged-care workers on $26 an hour pay around 17%.

Admittedly, that Inland Revenue report did count increases in the value of unsold assets as income. But many of those increases get cashed out at some point – and when that happens, there’s unlikely to be much tax paid.

The simplest solution would be a capital gains tax, buttressed by a levy on the largest inheritances. A landmark 2018 OECD report backed that combo. But it also said that, if your country has neither of the above, a wealth tax – a small annual levy on the biggest fortunes – is a good backstop. Switzerland deploys one, raising 1% of GDP a year without scaring away billionaires.

Hence the Greens’ recent announcement of a 2.5% tax on wealth that couples hold over $4m, clear of any debts. This would fund tax cuts for low earners, drastic reductions in child poverty and better support for the long-term ill.

It’s a refinement of the 2020 Greens proposal for a levy of 1% on individual assets over $1m and 2% over $2m. Although in reality that would have caught just the wealthiest 7-8%, too many Kiwis thought immediately of the average house being worth $1m.

The new tax has been tailored to not alarm the middle classes. Almost no couples own a house worth $4m, let alone mortgage-free. And even then the tax would be levied only on the increment above the threshold – the last $100,000 of a $4.1m fortune, for instance. Just 1% of Kiwis, the Greens estimate, would be affected.

And while the attacks on it will no doubt build, so far the reaction has been warmer than in 2020. Then, a wealth tax seemed terribly radical, and Jacinda Ardern ruled it out right away. Now, though, Newshub polling shows a majority of Kiwis back such a tax, albeit one applied at an unspecified threshold; other, unpublished, polls reveal similar support for a levy cutting in at $14m.

Part of the appeal is that people love taxes they will never have to pay. But thanks to the Covid wage subsidy and the recent asset bubble, people have also become accustomed to more generous government support – and to the idea of unearned wealth.

The Greens, meanwhile, are a safer prospect than before. In the past, insiders say, research on “Green-available voters” painted a picture of soccer mums and dads, enthusiastic about the party’s values, but worried about looking flaky. They needed reassurance and a low-risk vibe.

The same research now suggests the Greens have, after five years of being a stable government partner, ticked that box; their target voters expect more – dare I say it – ambition. These voters, many of them current – but dissatisfied – Labour supporters, want the bigger party pushed out of its comfort zone.

The trick, for the Greens, is to peel those people away from Labour – but not go so far left that they frighten centrist voters back to National, handing the election to the Right.

The wealth tax proposal by itself won’t do that. Nonetheless, with his eye fixed on the middle ground, Chris Hipkins will presumably rule it out. The question then is what compromises would be available, should Labour and the Greens beat the odds and form a government, probably with a Te Pāti Māori that also likes taxing wealth.

The Greens might need alternative policies then. But they would enter negotiations knowing that, as the public mood slowly shifts, taxing wealth starts to look less like something scary – and more like a vehicle for our collective ambition.