If Re-elected, Labour Must Tax the Rich or Betray Its Supporters
Chris Hipkins says that now is not the time to tax the rich. This begs the obvious question: if not now, when?
Aotearoa’s economic system is broken. Wealth inequality is soaring, with the 311 wealthiest families in this country owning more wealth than nearly half of all New Zealanders. This inequality crisis got worse during the pandemic.
Jacinda Ardern promised in 2017 to lead a government that would be “transformational” and “empathetic.” Yet despite some progress being made on child poverty reduction under her leadership, rates of homelessness and material hardship are still alarmingly high.
Homelessness is only the tip of the housing crisis iceberg. Labour campaigned on ending the housing crisis under the last National Government, forcing John Key to admit it was a crisis. But whilst Labour has built more houses than National did, housing has grown even more unaffordable in the last six years. Far too many Kiwis are struggling to afford ever-increasing rents, whilst many homeowners are contending with huge mortgage payments.
Our public services have been underfunded for decades. Teachers and nurses have had to strike multiple times to demand fair pay and better funding for education and healthcare. They have had to fight hard to reduce class sizes in schools and guarantee safe staffing in hospitals. Their demands have not been adequately met.
All the while, the threat of catastrophic climate change looms larger than ever. The Auckland Anniversary flood and Cyclone Gabrielle have demonstrated unequivocally that we are already living with the effects of a warming planet. In the last three weeks, the average world temperature has been the hottest ever recorded. If humanity does not act now, vast swathes of our planet will one day be uninhabitable. Environmental groups had already been denouncing Labour’s inadequate action on the climate, only for Hipkins — immediately after the Cyclone — to scrap a number of green initiatives.
We are in the midst of multiple crises, and the Government’s response on all levels has been insufficient. Now, with polls for the 2023 election on a knife-edge, we face the threat of a National-ACT Government coming to power and setting us back generations with austerity.
System Change Aotearoa is bringing together a coalition to demand that the next government taxes the rich. The only alternative — austerity — will have disastrous consequences for ordinary people.
Profit Over People
The crises we experience today are produced by capitalism — an economic system based on the greed of the wealthy few. The top 1% will stop at nothing to accumulate more and more profit, and damn the consequences for the rest of us.
Capitalism is a system built on extreme inequality between the capitalist class and those who work for them. It’s a system where profit always comes before workers and the planet. Environmental catastrophe is inevitable under this system, as fossil fuel corporations put obscene shareholder dividends before all else.
The crises of capitalism have grown significantly worse over the last 40 years. Across the world, the 1980s saw governments come to power which rebalanced society in favour of the top 1%. It’s been 39 years since Rogernomics began in Aotearoa, when the Labour Party was captured by hard-line neoliberals who won the 1984 election on a left-wing platform only to turn around and launch a savage attack on the working class without any warning. Vast swathes of the economy were privatised and deregulated as unemployment soared. National came to power in 1990 to finish the job, and duly smashed the unions whilst slashing funding for welfare and public services.
Aotearoa has never recovered from the explosion of poverty and inequality unleashed between 1984-1993 without any democratic mandate. No government since has undone the grievous harm inflicted by Roger Douglas and Ruth Richardson.
The capitalist drive for ever-increasing profits was behind these reforms. Promises of increased efficiency, productivity and “freedom” have been debunked time and time again; the lasting consequence is that the rich keep getting richer, and everyone else suffers as a result.
The wealthy wanted to pay less tax, and Rogernomics ensured that they did. The top rate of income tax was halved from 66% to 33%; corporation tax was cut from 48% to 33%; and Goods and Services Tax was introduced at a rate of 10% to make up the shortfall. Since then, corporation tax has been cut further to 28%, whilst GST has been increased to 15%. The rich have benefitted dramatically, whilst the new tax system has resulted in the poor paying a higher percentage of their income.
This regressive tax regime remains in place today. The Ardern Government may have established a top tax bracket of 39% on income over $180K, but this has done little to fix the broken system. Revenue Minister David Parker recently unveiled an IRD report which demonstrated that the 311 wealthiest families in Aotearoa, whose mean net wealth is 276 times higher than the average household, pay a tax rate that is around a third of what ordinary families pay.
Parker resigned his Revenue portfolio in the latest Cabinet reshuffle, calling his position “untenable” after Hipkins’ announcement that Labour would not campaign for or implement a wealth tax or a capital gains tax. Finance Minister Grant Robertson also admitted to being disappointed. Robertson and Parker had been working on a now-scrapped proposal for a “tax switch” — a $10K tax free threshold alongside a 1.5% tax on net wealth over $5 million. This proposal was unilaterally ruled out by Hipkins.
Hipkins’ “captain’s call” makes no sense. He stated that “with many Kiwi households struggling, now is simply not the time for a big shake-up of our tax system,” knowing full well that those who would be affected by taxing wealth are not remotely struggling, and that the very households he is talking about would benefit significantly from a tax switch. His own Ministers are disappointed, as are many Labour Party members. His prospective coalition partners are furious — the Greens and Te Pāti Māori are both campaigning for wealth taxes and tax free thresholds to reduce inequality. A clear majority of voters in recent polls have shown support for both a wealth tax, and a capital gains tax on rental properties.
Whichever party wins this election will be faced with serious financial problems. The world economy is going into recession, and the inflationary crisis means that the neoliberal Reserve Bank will not allow the government to run large deficits. Unless they defy the Reserve Bank, Hipkins and his Cabinet — if reelected — will not only have no money to spend on helping Kiwis through the cost of living crisis, but they may have to actively cut spending, or raise taxes on working families. Both options will be vastly unpopular and will make the cost of living crisis even worse. Yet Hipkins has ruled out the only other alternative: taxing the rich.
We can already see this austerity logic in practice. Hipkins is now using right-wing rhetoric to justify his inaction, saying there is no "money tree" to meet the demands of striking teachers and nurses. To make this argument to union members just weeks after ruling out the obvious way to raise urgently needed funds is a slap in the face to the labour movement.
There is only one explanation for this move which makes sense: Hipkins is making a desperate, fawnish attempt to appease the wealthy. Taxing the rich is popular, necessary, and is the only way he can fulfil his stated objective of helping struggling Kiwis during tough times.
Aotearoa needs transformational change. Hipkins is trying to rule out any hope of change — but that decision is not his to make.
What Is To Be Done?
System Change Aotearoa is calling for a mass movement to come together to demand that the next Government taxes the rich.
The wealthy have hugely disproportionate power in our political process. They can donate vast sums of money to their preferred parties; they own most of the media; they can hold governments to ransom with their economic might. They are organised and fight aggressively for their interests. That’s the main reason why neoliberalism was introduced to this country, and it’s why it continues despite Labour winning power in 1999 and in 2017 promising reform.
But the rich do not have as much power as the workers hold collectively, because the capitalist class are a tiny minority. We outnumber them, and it is our labour which keeps their system running. If the working class organises collectively and demands change, there is nothing we cannot accomplish.
Now is the time to build a mass movement for economic transformation in the interests of the many, not the few. The rich must be forced to pay for this transformational change. There is no alternative which will benefit the working class.
We have five demands:
Tax the Rich for Climate Action
Tax the Rich to End Poverty
Tax the Rich, Housing For All
Tax the Rich for Universal Public Services
Tax the Rich, Cut Taxes for Workers
We have called a Tax the Rich rally for 19 August to start building the momentum for these demands. We have invited a broad array of progressive groups to be part of this, from unions to activist organisations to community groups.
There are two parties currently fighting for tax justice and a fairer society: the Green Party and Te Pāti Māori. These parties are the only options for voters who want to see real change this election. They must make taxing the rich a firm bottom line in any post-election negotiations.
We are calling on Labour members and supporters to join us in this campaign. Trade unionists and progressive activists do not join the Labour Party to see the broken status quo continue; they join Labour because it is supposed to be the party of working people.
The Ardern era revitalised Labour with rhetoric of transformation, kindness and empathy — and some of the Government's reforms, such as reducing child poverty and bringing in Fair Pay Agreements, have certainly been meaningful. But fundamental transformation did not occur, and now Hipkins is trying to take the notion of transformation off the agenda.
It’s time that Labour Party members and supporters say to Hipkins loud and clear: we want to see a more fair and just society. We demand that our Government tax the rich to reduce extreme inequality and tackle the climate crisis once and for all.
Next decade will be too late for the children who grow up in poverty between now and then; and it will be too late to avert catastrophic climate change. The time to tax the rich is now. Because if not now, when?
Elliot Crossan is a socialist writer and activist from Auckland. He is involved in the campaign group System Change Aotearoa