The Green Party has launched its first major new policy for the September 19 election, ditching its previous advocacy of a capital gains tax for wealth taxes targeted at people with more than $1 million in assets of any kind, a guaranteed minimum income of $325 a week, and expanding the accident compensation system to cover earnings lost by illness.
Two new tax rates targeting high income earners would kick in at 37 cents in the dollar for people earning over $100,000 a year and 42 cents in the dollar for incomes over $150,000. The top tax rate is currently 33 cents and applies to all income above $70,000 a year.
It would scrap the current range of income-related benefits and replace them with a basic guaranteed minimum wage at $325 per week, with sole parents receiving a further $110, bringing base payments to $435 a week. The Working for Families tax credit scheme would be replaced with a simpler system that would pay $100 per we week for all children under three and a single Family Support credit of $190 per week for the first child and $120 a week for all other children.
The guaranteed minimum income would also apply for tertiary students, replacing the current student allowance.
People would be able to earn more and lose less income in abatement than under the current system, which can penalise people who find extra work by cutting their benefit and family tax credit entitlements to a greater extent than their additional income.
"For the past 30 years, Aotearoa's social safety net has trapped people in poverty, by keeping support payments too low and creating complex barriers to getting support," said co-leader Marama Davidson, who launched the policy. "Our Poverty Action Plan will replace our outdated, unfair and unliveable welfare system with real, unconditional support for all of us.
"The people in power designed complex and punitive systems, with racism and discrimination built in, to keep incomes low. To keep people in constant financial distress. To limit our options in life," said Davidson. By imposing wealth taxes and higher income taxes on the wealthy, the system would ensure that "those with a lot of wealth will pay it forward."
Haves and have nots
The policy document argues that "those who have large amounts of wealth are not asked to contribute to help everyone else", making income inequality worse since being wealthy to start with tends to lead to greater wealth.
Party co-leader James Shaw told BusinessDesk that while a capital gains tax remained Green Party policy, it would campaign instead on wealth taxes since "the Prime Minister has ruled it (a CGT) out."
A wealth tax would be levied at one cent in the dollar on "net assets worth over $1 million" and two cents in the dollar for net assets over $2 million. The new taxes would only apply to the value above those thresholds and would discount the value of, for example, mortgages held by landlords owning a suite of rental properties. Household goods, including cars, that were worth less than $50,000 would be exempt from the calculation.
The Greens believe this would raise $7.9 billion in its first year and cover the costs of the guaranteed minimum income, while the higher personal income tax rates would raise $1.3 billion a year.
Today's announcements also propose a radical extension of the Accident Compensation scheme to cover lost earnings caused by illness rather than accidents alone, which was "too complicated and unfair" to people with health conditions and disabilities.
This would be delivered by a new Agency for Comprehensive Care and instead of building up a fund capable of meeting all future costs, the scheme would become pay-as-you-go.
"Part of the (current ACC) $46 billion investment fund will be redirected to pay for income support, as more people with health conditions are brought into the modified ACC scheme," the policy paper released today says.
Quite apart from the Greens continuing to advocate for a redistribution of wealth to lower income earners and families, Shaw said the impact of the covid-19 pandemic on the government's finances demanded new sources of income.
"Covid-19 has upended everything," said Shaw. "No matter what your choice or flavour of government, it's going to have to look at revenue when we're spending 10 years of Budgets all at once."
The government has committed up to $62.1 billion in borrowing to spend to preserve jobs and stave off the worst of an inevitable recession that the global pandemic is producing, with the Treasury warning in this year's Budget that the impact of covid-19 on the books goes far beyond that.
"The covid-19 shock will have a significant impact on the government's fiscal position through a reduction in tax revenues and increase benefit expenses," it said at the time.
Labour has yet to announce whether it plans any tax changes to help fund the historically unprecedented debt creation but has vowed to return the government's books to a fiscal surplus by late this decade.
Shaw also - as justification for wealth taxes - pointed to the fact that fiscal stimulus after the global financial crisis in 2008 had led to a global increase in the price of real estate and shares, exacerbating income and wealth inequality, with potential for a similar impact to occur from the massive money-printing exercise currently under way in many countries to shore up the global economy.
The Greens proposal takes a no-exemption approach to wealth taxes by making all assets, apart from 'normal' household items, taxable. In other countries, placing some categories of asset outside a wealth tax simply encouraged people to funnel their investment into the untaxed categories, inflating their value and avoiding the tax.