Taxing questions

So, are taxes low enough already? Or should they be lowered further? That’s going to be the extent of the tax debate this year, if Michael Cullen’s self-congratulatory press release yesterday (reported on here and here and commented on here) is anything to go by. When it campaigned for a the privilege of a first term in 1999. Since then, it’s lost all interest in (or the guts to) make any meaningful changes to the tax system. There’s been no raising of income tax or significant remodelling the tax system.

But let’s be frank. Something’s going to have to change with tax if the Government’s going to be able to free up a great deal more money to fund social services adequately and implement sufficient measures to protect the environment from the detrimental effects of modern consumer society.

It’s lamentable that the tax debate’s gonna be shaped by National and Act’s calls for tax cuts for all workers. This casts Labour in reactive/defensive mode, when it could be advocating some of the other ideas floating around.

Some say that if taxes were higher, our economy and therefore society would grind to an halt. Those who do are either being disingenuous or dishonest, because it’s an assertion simply not bourn out by the facts. Just ask the recently visited Swedish Prime Minister (quoted here).

So, Labour doesn’t want to follow Sweden on tax? Well, maybe it does want to have a look at what Tony Blair’s been saying recently. As the Guardian reported:

Tony Blair wants to find out how happy you are. More than 10 years after his buddy Bill Clinton won an election with the slogan, “It’s the economy, stupid” … Mr Blair sought to marry the pursuit of growth with a secure future for the planet.

Right on, Tony. Meanwhile, one of Blair’s peers in the House of Lords, Richard Layard, has just released a book entitled Happiness: Lessons from a New Science. Commented on here and here, it argues that being happy or unhappy doesn’t depend on how much you earn, but how much you earn compared to the people around you. So, governments should use tax to engineer less inequalities in income. Layard argues:

Paying taxes and redistribution is a way of helping other people. People who help others are happier than those who just pursue self-realisation.

We favour eco-tax reform, which would:

shift taxes off work and enterprise, and onto waste, pollution and scarce resources. Those who waste and those who pollute, pay more. Clean business pays less and everyone pays less income tax. It’s common sense if we want a sustainable economy, and it’s happening now in many European countries.

In concrete terms, the first steps would be:

  1. Everyone paying no income tax on the first $5,000 income a year they earn.
  2. Diesel taxed, like petrol is, raising $300m a year.
  3. Various taxes and levies on carbon dioxide emissions, waste production, use of hazardous substances and dioxins.