Tuesday, October 26, 2010

From a limited viewpoint.

Had a pleasant long weekend, involving sitting on Mt Eden having fish and chips and cider with a few friends as the sun went down. Rather pleasant it was. At one point, the conversation trundled its way around to rising prices and following that path, onto taxes. As always when these things come up in conversation, I'm not particularly good at marshaling all my thoughts together on the spur of the moment. So I thought I'd give it a go here.

We are all painfully aware that prices are rising, while wages, not so much. One of the group is in the high income bracket, thus she gets taxed the most out of any of us. Her worry, was that new policies released, or at least talked about, by the Labour party were going to result in her paying higher taxes without gaining any material benefit. She did say that she would be quite happy to pay high taxes if she got something for it, such as free health care or education. None of us get that though, so she was a tad unhappy I think at the idea of paying more. If I was someone capable of thinking quickly, I would have like to have raised the following points.

1) We are already getting something for the taxes we pay. A baseline of health care. An educated youth (or at least partly depending on who you listen to). Roads. Local councils. Free health care, free education and the like exist. Examples were given of scandanavian countries that do this. Their taxes though, as best I can tell with a little digging are significantly higher, especially for high income earners. If you take the money that we currently pay for power, water, private health care and education and tacked that on to what we currently pay in taxes I imagine what is spent would be something similar.

2) Recently we had a GST rise. We also had a tax cut. For poor people, these two things essentially cancel each other out. For people in higher income brackets the amount of the tax cut is significantly higher than the the cost of the extra GST. Why should the upper income brackets pay more? Because they want basic services and they can afford it. Yes they might work longer and harder (though I doubt it, they just have better paying jobs, there is nothing inherent in a web designers job that makes that job more worthy than a janitorial position, if anything, it's the other way round) but if you assume that the society as a whole needs certain basic services and that the poor have to pay just as much as the high income earners then you are effectively starving an entire sector of the community. Which is basically saying that poverty is okay, as long as you are not in it.

Basically, it doesn't make sense for an individual to look at the tax they are paying and ask, what am i getting for this? The questions that need to be asked are:
  • what services do we as a society want to fund?
  • are we as a society paying enough to fund those services?
Then you get down to the nitty gritty questions of who pays what. The whole idea of those with more contributing more is that as a society we have the ideal that there are certain baselines under which we do not want the lowest rungs of our society to fall under. If you don't care how low some people fall, then that is a fundamental difference which makes this conversation impossible. If you share the assumption that there should be some baseline, then we need to discuss how society as a whole handles it. Who can contribute what and so forth. I don't think looking at it from the point of view of an individual taxpayer necessarily makes sense though. 

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