A fairer society is a richer society

A new United Nations Trade and Development Report has found that reducing taxes for those who earn the most has not delivered widespread economic prosperity, as promised. In fact, the UN has found that such policies have caused developed economies to stagnate and grow increasingly unequal.

The UN report found that better income distribution within an economy helps to stimulate the economy in the short term while providing stronger incentives for investment, innovation and job creation in the long run.

Progressive taxes do not reduce incentives to invest in fixed capital, innovation, and skills acquisition. On the contrary, the reduction of inequality that can be achieved by progressive taxes is more likely to accelerate traditional growth and employment creation than the current trend towards less progressive taxation and lower social transfers.

Also of interest in the report was their finding on labour-market flexibility. The UN found that, not only has deregulation of the labour market failed to reduce unemployment, but it has even tended to exacerbate it!

What’s the solution? One answer is to do the exact opposite of the National Government and reintroduce more progressive tax rates.

14 thoughts on “A fairer society is a richer society

  1. Not that this is anything different from what we have always known here. We need more brackets as well as the higher top tax.

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  2. The link between rising unemployment and deregulated labour markets is probably the associated ability to import skilled labour – this reduced bonds between workplaces and worker training. This will worsen with building workers from China reducing wages in that sector.

    The western economic problem was finding ways to finance modernisation of the economy as old production transferred offshore. The private investor found too many easy ways to make money by owning assets for a period of time – especially as the money markets allowed them to multiply their wealth (borrowing to buy property and then leveraging property to invest elsewhere).

    The western government problem is now how to finance a government capable of managing the social cost of inequality within a domestic economy operating within the global market. Given the gains made by the capitalist “elite” and the role played by the banking sector/money markets, I favour direct monetary funding of government.

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  3. This Key/Banks/Dunne Govt. has proved over & over that they are not about looking after ALL kiwis, just the top 51% who keep them in power. The longer they stay there the wider the gap will get. Words like : SMUG, ARROGANT, SELF-SERVING etc. spring to mind..
    Words like ‘Fair’ dont seem to belong in this Govt.s vocabulary !!

    Kia-ora

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  4. “the reduction of inequality that can be achieved by progressive taxes is more likely to accelerate traditional growth” – traditional growth is part of the problem. Income redistribution yes, but we should making much more effort to work towards sustainability and inclusiveness in society.

    Many people contribute who do not have “jobs” – we really have to move beyond the idea that everyone has to have a job to be considered part of society. Growth and consumerism are not the things we should be aiming for.

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  5. You hold back on immigration so you get low unemployment. This of course drives up the market cost of base-level labour (creating some equity). The higher cost of labour then incentivises business to invest in automation and better systems (capital) to offset those higher labour costs – giving us real economic development.
    This is much more important than tweeking about with the tax brackets.

    The worst thing you can do, with high immigration especially, is create regulations that choke off capital investment that in turn drives it out to China and elsewhere, instead.

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  6. Couldn’t agree more. Fairness needs to be understood in the widest possible sense: societal fairness.

    This notion of fairness is something I’d like to see talked about more often in NZ politics. It is a hallmark of our very culture. Even the right has referred to it on occasion (albeit with very different connotations). But its not often fully understood. Most New Zealanders, even the Bankses of this world, cannot deny they want a fairer New Zealand.

    And yet, they do not fully appreciate the role that redistribution plays in bringing about social equity. One begets the other, and the more we choke the welfare system, the distribution system, the more we choke this simple notion of fairness by which we define ourselves. Taxes are blunt, yes, but they remain the primary source of government revenue: where they fuel distribution, so do they fuel a fairer and better society.

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  7. The UN report found that better income distribution within an economy helps to stimulate the economy in the short term while providing stronger incentives for investment, innovation and job creation in the long run.

    Sound good to me.

    However, note the magic phrase – “income distribution”

    This has nothing to do with the communist ideal of wealth redistribution. Excessive income disparity is unfair, and wealth redistribution is unfair, and compounding two unfairs does not magically make a fair.

    Taxation is not a tool for wealth redistribution; taxation funding can only serve two purposes:

    The first is the provision of those things which it makes sense to do from the public purse. The second is the provision of the welfare safety net to stop those who for whatever reason can’t be “fair” members of society from falling through the gaps.

    Any other misuse of the taxation system is just robbery.

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  8. Oh what nonsense, a society does not exist to serve the economic system, the economic system serves the society.

    If the economic system is unable to deliver jobs that allow workers to support families, then transfers must exist within the tax system.

    You cannot name one country related to our own cultural and democratic heritage that does not do this.

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  9. A richer society is a fairer society. The United States would not have been able to have a democracy with it’s virtues, if it was not in the process of becoming and maintaining its riches. When the money goes, so does the democracy, which some considers the most fairest of all societies. So to reiterate, A richer society is a fairer society.

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  10. Why do my comments stay so long in moderation?

    [frog: They stay there until I wake up from my nap and notice them. To avoid this, just log in first and your comments will bypass moderation entirely and appear immediately.]

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