Tax interests me around some maths. It is fascinating to think that some advantage sought via lowering or raising the current rates may not be achieved. Changes to tax rates can have unintended consequences! Then there is the question of what are 'fair' rates of tax. For the life of me I cannot see how taxing the higher parts of incomes at higher rates is 'fair.'
A fair tax rate would be the same rate paid by each taxpayer. (For this paragraph's discussion, let's assume that salaried taxpayers cannot rearrange their income to pay less tax than designated by inland revenue). At 20%, say, a person on $50k pays $10k tax and a person on $2m pays $400k. At the same rate one pays 8x the tax of the other. On a regressive system on which, say, the latter pays ever higher rates beyond certain levels of income, even more tax will be paid, which no doubt benefits the Treasury. But is it fair to assume that the rich (which on a standard rate always pay more than the poor) must pay an even greater share simply because they are rich? Implicitly, moving beyond the same tax rate for all carries an assumption that the rich should have their income distributed across society in a way which makes them less rich. That is socialism via taxation more than it is a system of fair taxation!
Yet, lurking in this debate are various presuppositions which could do with theological examination.
Here is Jamie Whyte, leader of the ACT Party (for overseas readers, a party dedicated to reducing tax and therefore government intervention in society):
"Guyon Espiner interviewed me on Radio New Zealand a few days later. He claimed that by cutting the top rate of tax from 33% to 24% I was making a gift to people who earn over $70,000. This language is used all the time but it is bizarre. Of course, the government could tax all the money you earn. But it does not follow that your post-tax income is a gift from the government. You might as well argue that your TV is a gift from your local burglar because he has chosen not to steal it.
These journalists are not biased. They have simply internalized the prevailing economic ideas in New Zealand. During that debate on The Nation it became clear that all my opponents, with the possible exception of Peter Dunn, did not believe in private property.
On the topic of Auckland house prices, Winston Peter’s claimed that “we are selling our houses to foreigners”. When I pointed out that houses are not collectively owned and that individual New Zealanders were selling their houses to whomever they chose, he insisted that I was wrong about this. And, as you can imagine, Russell Norman and John Minto agreed that the government should decide who you may sell your house to – or, in other words, they agreed that it is not really your house.
Russell Norman’s enthusiasm for the State is so great that he believes not only that all property is the creature of the state but that all children are too. When I suggested that paid parental leave should be abolished, he claimed that this would mean no more children being born in New Zealand."Now I am inclined to agree with Jamie Whyte that it is utterly extraordinary to have reached a situation re taxation where otherwise sane and sensible people such as Guyon Espiner (however unwittingly it may have been that he did so) can speak as though every dollar I earn is really the government's and every dollar they do not take from me is an act of mercy and grace!
Nevertheless is the strict opposite true, every dollar I earn is mine and thus every dollar taken from me in tax is a kind of act of legalised theft?
Whether we draw on a theology grounded in creation or redemption (or both) for our understanding of the individual in relation to society, it is very difficult to see where Christians could develop a strict individualistic, "there's no such thing as society" view of money and property. Nothing material is utterly our own since everything belongs to God. God created humanity for companionship, we are our brother's keepers, we belong to one another. To be human is to take on obligations of care and share for the well-being of all.
Further, money is complicated when we analyse it. In order to engage the services of a competent CEO, the labour market may determine that the company needs to offer a salary of $2m per annum. But the last thing which is going on at that point is that the CEO 'deserves' that amount of salary. A true sense of desert such as the CEO deserves the pay rate of the best paid worker in the company topped up by a premium for responsibility with a bit extra to respect previous experience might yield, say, $500k as a 'deserved' salary. $1.5m is a bonus, an undeserved grace served up by the nature of capitalist markets. Does it 'belong' to the CEO or is it at the mercy of the government and (noting various ways in which society makes a play for donations from the wealthy) able to be called upon by charities concerned with welfare or promotion of the arts?
More importantly, the $2m p.a. comes from somewhere. Mostly workers within the business who are paid a lot less generate the income for the business which pays the $2m. (A very recent protest in the USA concerned MacDonalds' workers paid less than $10 an hour protesting the (?)$9m annual salary of the CEO). Our hypothetical $2m salary in at least one sense belongs to the workers who generate it and one consideration re taxation is that its distributive effects across society reconnect the generative capacity of poor workers with the fruits of their labours.
Counter-balancing this kind of analysis, nevertheless, is a properly theological recognition of the role an individual plays in society by making various choices in order to reach certain goals. A bright young person could choose to avoid university and launch straight into earning money, albeit in a job which may never lead to high levels of income. Another person of similar intellectual aptitude might choose to achieve more highly by making early sacrifices. Many years later, deep in debt with a student loan, offering the benefits of sacrificial study as a doctor, it is arguably entirely reasonable to expect to be paid well, not only in recognition of a choice made, but also in terms of responsibilities before society to serve it with work which only a well trained few are able to accomplish.
I think all this brings us back to choices we make as a society through elections. They are mandates for governments to act in certain directions rather than in other directions. Effectively a general election result is a renewal of contract between society and government in respect of taxation. One of the reasons why the ACT Party has never been elected to lead a government in Aotearoa New Zealand is that insufficient numbers agree with the general direction of ACT re tax.
By contrast, sufficient numbers agree with a Labour or National led government which, typically, offer a taxation contract in which we will be taxed to a significant degree with redistributive benefits across society, the difference between their offerings being a few percentage points re tax taken and a relatively few dollars re benefits received by individuals across society.
At certain points one party may offer a incentive re their economic proposals by promising to borrow more money than the other party to fund government initiatives but the general suspicion of the voting public for over twenty years now has been that borrowing is a recipe for long-term disaster and only tolerable by voters for short-term periods (of which 2008 till now has been one).
Generally, in the run up to this election, we are going to see a battle over which party can offer the biggest redistributive bangs for their/our(!!) tax bucks while each avoids giving the impression that they will take more from us through tax increases. Our appetite in these "contractual negotiations" is for the government to be more efficient in the use of their/our tax dollars than for them to take more of what is theirs/ours.
But, interestingly, in a post-Christian society, their remains a deep Christian commitment in these negotiations to understand society in a theologically responsible manner, because the one thing not being negotiated is giving away commitment to others in favour of strict individualism.
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Incidentally, for a few thoughts on the virtues of socialism (i.e. arguing there are none) watch Daniel Hannen:
If you disagree with Hannen's analysis, what are the virtues of socialism?
18 comments:
Therefore choose this day which road you will take:
A)Nordic Countires ie: Norway (High tax, good social services, lowest level of child povery_)
B)America ie:; North (lower tax, poor social service for the most vulnerable due to it being linked to earnings, one of the highest levels of child poverty in western nations_)
So far we have been tending towards B
NB: statements have nothing to do with the individual integrity of those living in each country, just political policies.
My own instinctive political instincts, Jean, is to find a middle way between A and B!
http://thestandard.org.nz/governments-need-to-do-some-work/
There is a very real sense in which "our money" is a gift from the government... it's only governments that run and defend private property systems. And, indeed, protecting private property is the central function of governments.
The rich are disproportionately advantaged by the government's maintainence of private property and economic systems that allow them to make disproportionate money for each hour of hard work they do.
This shows the inconsistency of libertarian capitalism.
It also shows why progressive taxation is justified. Even paying a much higher percentage of their incomes as tax (and therefore paying far more dollars in tax), they still keep far more dollars at the end of the day. Relatively high tax rates are still a good deal in exchange for the management of an economic system that allows them to earn the incomes that qualify them for those high income tax rates.
Of course, our current tax system is not entirely progressive anyway. There is no tax on capital gains. Sales taxes are flat yet effectively regressive, as they take up a higher proportion of poor people's incomes than rich people's incomes. And companies and wealthy people with the money for clever accountants/lawyers and the desire to minimise their tax bill can avoid paying much tax at all (hence why middle- and upper-middle-income earners pay the highest percentage of their incomes in tax, rather than very richest). And the overall tax system became less progressive with the 2010 changes.
Mana's suggestions of tax reform represent a more genuinely progressive tax system across the board.
Gareth Morgan has an interesting and quite different suggestion - a flat income tax rate (including capital gains), accompanied by a universal basic income and a tax incentive to not sit on land unproductively (ie with rental properties). There's an interesting calculator on his website where you can tinker with the numbers and figure out how to make people as well-off as possible without ruining the economy.
Re: economic plans, I thought you might find these articles interesting: 1 2
Thanks Caleb
Some food for thought there re all our lives being the gift of the government. Hmm, I would take some persuading!
Must dash to clergy conference and thence see on return about the links/articles you mention.
Hi Peter, You weren't fudging when you mentioned being centrist were you ? : )...
Talk of fudge should be separated from talk of tax, Jean. We don't want the IRD snooping around church cake stalls ...
Hi Jean
I am surprised that you want to go the Norway route ...
(1)have an enormous oil field, (2)exploit it
(3)add gigatonnes of CO2 to the atmosphere,
(4) use the money to have a good lifestyle at the expense of others...
I take it then you are an total supporter the government's push to explore the national parks and seabed for the first step in the process...
... otherwise you don't have your choice, rather you only have the USA option.
Mary
As this author documents, the differences between Nordic and US systems' overall provision is often overstated.
http://econ.arizona.edu/docs/Fishback/fishback.nordic.nber.wp15982.pdf
Re Caleb's comments, one could argue that the poor have far more to gain from effective government than the rich - since the rich (as in South Africa) can pay for their own protection, while the poor are often on their own
Have a holiday from politics, Peter. Prayers for you all as some of us fill the gap in the parishes.
Christ is risen, Alleluia!
He is Risen indeed, Alleluia!
Government welfare payments can be described as taxpayer-funded charity except that there can be no love in it when the giving is coerced and no gratitude when receiving such "charity" is considered a right. Looking to the government instead of to God for one's welfare is idolatry. It also destroys community and brutalises us because when we expect the government to look after the needy (because so much of our income goes in taxes for just that purpose) we are no longer faced, personally, with having to decide whether or not to help those we know who need help. We can just tell them to go and join the queue at Centrelink (or whatever the NZ equivalent is).
Hi Anonymous
Sorry I didn't know about Norway's oilfields I was trying to pick examples of tax systems (no doubt many countries have dubious forms of income from natural resources). Lets pick Sweden instead, progressive tax rate of 0% to 54% plus tax paid by employers, and a GST of 25%. Plus high level of social security
My understanding is the US has a social security tax that is paid seperately by employees and employers, the benefits from this tax paid by each individual is directly linked (mostly with a few exceptions) to the social benefits they receive. Different from say Sweden or NZ where welfare payments are funded by the bulk of government income and payments are not aligned to contributions.
NZ does sit in between as Peter suggested be the preferred option, in that our tax rate is lower and our social welfare payments/care is also lower than the likes of Sweden, but higher than the US (accepting of course you weren't a high earner in the US).
Janice re welfare being 'taxpayer-funded charity'
- it would be great if we could look to individuals to provide income for those who cannot or are not able to have enough to live on, however, I have little faith this would actually happen. Perhaps if we as Christians lived up to the biblical ideal of giving to everyone according to their need (rather than their earnings) this could be so for those within our christian communities. As social security is barely enough to live on (in NZ anyway) there is still plenty of opportunity to help the needy.
Michael - how would you define effective government?
Cheers Jean
Janice, I think you have a rather lop-sided understanding of what governments should make themselves responsible for - the GOOD & WELFARE Of ALL.
That's why we elect them!
Christ is Risen, Alleluia!
Peter: I didn't say all our lives are a gift from the government! I said property rights are a gift from the government (not entirely, but in a very real and important way). I think it's good to note (as you do) how all our lives are ultimately gifts from God - this is a corrective to human pride that assumes all we have is self-made. Another necessary corrective is to note the ways in which various aspects of our lives are gifts from other humans and human institutions. It's not correct to say that the goods we have are entirely self-created, but it's also not correct to say it's entirely from the government, or our parents, or the people that make the stuff we buy, or our national/class/gender/ethnic position, or our education, etc. In truth it comes from a combination of all of these, and ultimately from God.
Re: your idea of sitting between the 'extremes' of Scandinavia and the US... it's a fallacy to assume centrism is always correct. It can be an effective rhetorical device, but you can put it to almost any purpose you like. For example - welfare-state capitalism and social democracy occupy a "middle ground" between socialism and capitalism - specifically, private rather than collective ownership of the means of productive, and a post-production redistribution of wealth. Something else that would fit in this middle ground is market socialism (collective ownership of the means of production in workers' co-operatives etc, with market trading and not much redistribution post-production). Neo-liberalism could be seen as a "middle ground" between libertarian capitalism and welfare-state capitalism. Tony Blair's "Third Way" was a middle-ground between Thatcherite neo-liberalism and his party's traditional social democracy. And it seems you're advocating for similar - a middle-ground between the extreme neo-liberalism they have in the US and the social democracy we used to have in NZ and they still have in Europe. Theoretically though, someone could also seek a middle ground between full communism and social democracy. Or between the anarchistic monarchic theocratic peaceable communism of the kingdom of God and whatever-we-have-currently :)
While New Zealand (like everywhere) can certainly be construed as sitting between various extremes, we can also be seen as out of whack with where most others are at - for example, we're on the extreme ends of the OECD on things like inequality, poverty, house and rent prices, prison populations, domestic violence, cannabis use and corruption (you'll note some of these extremes are entirely good, some entirely bad, and on others we should probably try to find a healthy balance). Also, to make this more specific to the subject of this blog, this book argues that "New Zealand has a tax system of extremes. We charge less tax than almost any comparable country on high incomes, dividends, and capital gains. Our GST however, is bigger than most, both as a proportion of taxes and as a proportion of the economy as a whole. And our goal of aligning top personal and company tax rates is not one that other rich democracies seem to share."
Michael: it is certainly true that (a) the poor gain more from the rich from public services. It's also true that (b) government protection of property is in SOME sense 'progressive' in that the rich can afford to supplement government protection with private protection of their property - as you correctly observe. However, there is also a strong sense in which (c) government protection of property is 'regressive' - ie the more property you have, the more you benefit from it. My argument is that (c) is more significant than (a) or (b).
Lastly: including that URL without explanation at the start of my first comment was a mistake. Please ignore it. I link to it at the end of the comment with an explanation.
Peter, who are the two men in the video - so palely loitering?
I don't know who one is, Ron, but the other, Hannen, is an up-and-coming Tory politician.
Finally got around to watching your video. It represents a misleading and simplistic dualism between capitalism and socialism. When you pit the best expressions of capitalism (and the outcomes for those on the top, globally) against the worst expressions of socialism (and outcomes for those on the bottom), of course you'll decide capitalism is better.
Very few socialists deny that capitalism has been more powerful and successful than authoritarian attempts at socialism. Exploiting people through harnessing their freedom turned out to be more effective than exploiting people through denying their freedom. But this observation in and of itself does not amount to an argument that capitalism is good, or an argument against socialism altogether. Hannen is pretending (from his own very comfortable position) there's no downsides to the current form of exploitation, and he's pretending the only alternative to the current form of exploitation is the tried-and-failed form of exploitation.
His invocation of self-ownership as a right-wing notion is very strange. Self-ownership is certainly a libertarian notion - but it's the libertarian root of Marxism: that workers should own their own means of production and fruits of their labour. Capitalism means that means of production and the fruits of workers' labour belong to the owners of capital, and only some have the luxury of owning the fruits of their labour; most have to a settle for the wages they get from selling their labour.
I'd be very curious about how he'd deal with present-day China. This surely shows that capitalism does not necessarily go alongside democracy and freedom, any more than socialism does. In fact, it looks like capitalism is even more effective when not hobbled by inefficient annoyances like democracy.
Also, re: what motivates innovation, this video is very interesting.
Lastly, Karl Marx didn't invent socialism.
Hi Caleb
I personally wouldn't want to pretend or ignore downsides to capitalism but I would like to enquire whether they are preferable to the downsides of socialism.
In particular, it is very hard to come up with any examples of non-authoritarian socialism. (A possibility is Nyrere's Tanzania). Even China has given up on authoritarian socialism, though it hasn't given up on authoritarianism!
One of my personal experiences in life is continuing to find that no matter how darkly the USA as harbinger of capitalism is portrayed, people from around the globe want to live there. By contrast no one save for one or two quite strange people wants to live in North Korea, one of the few remaining attempts at socialism in the world today!
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