Some households get so much back from the state that they're "effectively" not paying tax, says Bill English. Is that fair comment? And should we all be held to account for what we use in state services? Or just some of us?
At what point do the government-funded benefits and entitlements you gain as a citizien of this fine country amount to you getting off scot-free when it comes to paying your taxes? (And for those who are interested, it seems "scot-free" is the correct phrase as "scot" is an old word for tax). Are you one of Bill English's free-loaders "effectively" not paying any tax?
It's a question prompted by a press release by the Finance Minister in October, highlighted by Andrew Osborn in the thread on one of Josie's a recent posts. Here's the release. And here's the sentence that leapt out to me:
“At any particular time, a large number of households effectively don’t pay tax.
“The income tax paid by these households is exceeded by the amount they receive from welfare benefits, Working for Families, paid parental leave and accommodation subsidies. That’s entirely appropriate for those families genuinely in need."
It's a telling point; that is, it tells us a bit about Bill English. It's not the first time he has used this line, so I can only assume he genuinely views the world this way. And I imagine he'll use it again this election year. But it disconcerts me. "Effectively" is a word that hides all sorts of spin.
First, is it in any way fair or accurate to say that if you consume a lot of government services you're "effectively" not paying tax? And second, why does English pick out benefits, WFF, paid parental leave and accommodation subsidies as the four things that counter-act tax payments? It seems an oddly random group to select. Why not a university education? Roads? Health services? Superannuation? Legal aid? The Olympics? Emergency rescues and disaster relief? Or any other tax-payer funded activity?
The only thing that seems to link the four categories selected is that they are things that National governments pay reluctantly and are for those towards the bottom of society; they are labelled by some as government services for "bludgers".
Yes, English clearly points out that it's "entirely appropriate" to support those in genuine need this way. He says nothing about bludging, it's me raising the question as to where that line is. Yet isn't there a dog whistle behind that suggests something pejorative and that these people are getting more than their fair share? At very least the release is urging us to appreciate how much the wealthy contribute to our government services and consider how little the poor contribute.
So is it fair to say this large number of households "effectively" don't pay tax? Well, it's English and his peers who set the tax and benefit rates, so if he's suggesting some aren't paying enough or are getting too much he can and should do something about it. If there's something wrong with poorer households not paying enough tax, he should act. If there's not, what point is he making?
By the end of the release he seems to answer my question: his point is that Labour is wrong to call for "even greater transfers to low income families". Which implies that the settings he has are just right – bang on – and in fact these families effectively paying no tax are paying exactly the right amount. And they should thank him for that with their vote. And fair enough, this is politics, after all.
But why name only those government services?
By English's logic you could argue that the likes of Hamish Carter and Dean Barker at certain times in their careers have "effectively" paid no tax. Is that bad? What about some farmers in a drought year, who might minimise their tax return and at the same time accept state support? Do public servants who go on taxpayer-funded trips (English and his staff included) have those costs calculated and put against their tax bill? Why not add to the list the flash new tech start-up which gets a government grant and maybe some NZTE advice and promotion, which yet pays sod-all tax? Are they also case studies to use against a more progressive tax system?
English mentions accommodation subsidies. What about the landlords who use those to hike up their rents? Then there are those who individuals who spend longer in the education system, those who spend more time driving on the roads and those who get sick more often (many of whom would fall inside that "benefits" category). You can go on and on.
And of course there are the elephants in this room – retirees. The elderly especially tend to be net tax-takers, so why aren't they on that list? Perhaps because many vote National and English doesn't want us tsking at them? If those households were added to English's list, I wonder what it would do for his other numbers and underlying argument.
I'm intrigued by English's claims in the release – and if lower income households are paying a smaller proportion of net income tax than they did in 2008 then well done to him. And I've got no problem with him arguing that higher income New Zealanders are more than paying their share.
My concern is the pejorative nature of that list and the fact that only those few categories were selected, as if road-users and export-subsidised business-people and aid-assisted farmers and Phd-educated scientists and anyone else who uses taxpayer-funded services are more entitled, more worthy than beneficiaries and women going back to work after having had children.
More, my problem is that the poor will always be at the wrong end of this metric. The rich can always afford choices and elite private options the poor cannot and are less reliant on the public sector. But isn't the whole point of a thriving public sector so that even those with less can still themselves thrive in New Zealand?
So sure, let's have the argument about how much taxes should redistribute and how much those with plenty should be willing to chip into a society so that those with little can also participate and even flourish. But Mr English, either flesh out your list or put it back in the drawer, eh?