There is no evidence that asking those who can afford it to pay a little more will undermine aspiration. Many other high tax countries have high performing economies in which people thrive and can aspire to better futures. You can ask for evidence.

Most people do not want to be wealthy, they just want to be secure and have enough. Our country is wealthy enough to ensure everyone has enough to live with dignity.  Income poverty and material hardship rates for the whole population are around 12% (income poverty) and 7.4% (material hardship). Both of these rates are on a five-year downward track and this shows how using tax resources to lift lower incomes can make a difference. If the wealthiest and those on the highest incomes contribute more then we have the public resources to lift most people out of poverty (or even to end poverty in this country).

We all work hard and want the best for ourselves and our families. The minimum wage worker who has to hold down multiple jobs, the teachers and health professionals who work in incredibly stressful jobs in overstretched systems, the young people who have to go out to work rather than undertake study because their families need the money to survive.

We are all in this together and all of us (including people who acquire wealth) have been supported by tax funded public services in many ways, for example:

• Most of us are likely to have been educated in the public education system or
  benefited from having a workforce that has been educated in our public education system.
• Most of use roads and rail systems funded in part through taxation, whether to
  travel ourselves to transport goods.
• Just about all of us are eligible for universal NZ Superannuation (which was the
  largest single item of expenditure on social security in 2020 at $15.5bn out of a
  budget allocation of $44bn).
• We all benefit from our public health system, whether we or our whānau have had
  to use it ourselves or through the support it provides in maintaining the health of the nation, including supporting a healthy workforce.
• The justice system helps manage the disputes that naturally arise in any society,
  including those that arise out of commercial relationships essential to businesses.
• The Department of Conversation helps protect our natural environment while
  enabling access to it for the public and for business.
• The Police help keep the public safe (and help protect the assets of the wealthy)

In addition, business owners may well have benefited from such things as the regulation that supports fair competition, the research and development funded by government or from procuring contracts with government agencies.

It is true that many business individuals have taken considerable personal risks in building their businesses and should be appropriately rewarded for that (although some have inherited their wealth and others may have been assisted by good fortune). No one would argue otherwise, but the rewards should be treated like all income and taxed appropriately. The Inland Revenue Research into High Net-Worth Individuals released in March 2023 shows that New Zealand’s 311 wealthiest families pay just 8.9% of their income in tax – less than the rate paid by a minimum wage worker (10.5%) and less than half the rate paid by the average Kiwi (19.7%). These wealthy individuals have such a low tax rate because so much of their income (about 80%) is capital gains – money made from selling assets – and that is barely taxed. Only 17% of their income is conventionally taxable income like wages and salaries. So despite being worth an average of NZ$276m ($168m; £135m) each, and typically earning $8m a year, these families pay an average of about $640,000 each in tax – less than 10% of their income.

It is possible that some  wealthy people might leave New Zealand in protest against higher taxes on wealth. However, the evidence from countries that have introduced a net wealth tax does not support this claim (OECD. The Role and Design of Net Wealth Taxes in the OECD, p.66). More generally, even the highest earners are less sensitive to tax rates than is often thought. Swedish multimillionaires generally remain in Sweden, despite its high tax rates; American states with higher local tax rates do not see outflows of millionaires (Michael Mazerov, State Taxes Have a Negligible Impact on Americans’ Interstate Moves, Center on Budget and Policy Priorities, Washington, D.C., May 2014). While Australia might be an attractive destination, those moving there would have to pay capital gains tax and income tax at 45%. Other factors also matter. To quote the scientist Paul Callaghan, nations retain people by being places where “talent wants to live”. And talent generally wants to live in countries with safe streets, good health systems, highly educated workforces and a strong rule of law – all of which are supported by tax-financed government services.

This argument is closely related to the above argument that wealthy people will just leave the country if we tax them appropriately. As argued above, the evidence from high tax countries does not support this.
It is also worth pointing out that public expenditure is an important source of jobs for the economy through the:

• direct employment of public service workers;
• indirect employment of workers, by contractors supplying outsourced goods and services;
• employment of workers on infrastructure projects

It has been estimated that globally public spending supports 40% of all jobs: 15% as public employees, but 25% in the private sector (David Hall, Why We Need Public Expenditure, Public Services International Research Unit, London, 2010 p. 20 http://www.psiru.org/sites/default/files/2010-10-QPS-pubspend.pdf). In addition other public measures such as subsidies and employment guarantee schemes also support employment in the economy.

GST is a regressive tax, in that the less well off in society pay the same rate as the most well off for every product or service that they use. Creating exemptions for things that the less well off rely on, such as food (or fresh fruit and vegetables) would introduce complications, but it is not impossible as other countries such as Australia (which has a GST rate of 10% compared to our 15%) do it already.

The argument assumes that innovation is purely down to the efforts of individuals and businesses. However, Government has a major role to play in innovation both directly through its funding of research in our universities and Crown Research Institutes and incentivising research and development in the private sector. The countries often cited as innovation economies include Finland (tax take: 42% of GDP) and Sweden (43%). Both have capital gains taxes and Finland also has an inheritance tax.

Overall their tax takes are far higher than New Zealand’s 32%. Finland currently spends 2.94% of GDP on research and development and Sweden spends 3.53%, whereas New Zealand currently spends 1.49%. In other words these countries spend around double what we do and as high tax countries their economies are also more successful than ours with GDP rates that above the OECD average, while New Zealand’s is below the OECD average.

A wealth transfer tax or inheritance tax would not stop people from passing on their wealth to their families, it would just acknowledge that inheritances and gifts are a form of income and should be taxed accordingly. Inheritance taxes internationally do not usually impact most people as they have a high threshold for eligibility.

In 2019/20 the 122,000 people (representing 3.17% of the taxpaying population) who earned more than $150,000 a year provided the government with 24% of the tax received (Treasury, ‘Who Pays Income Tax… and How Much?').

So on the face of it this is true. On the other hand, given that our tax system is meant to be progressive, this should not be an issue – we recognise that those who can afford it should be asked to contribute more. But as the recent IR Research into High Net-Worth Individuals demonstrated, the system is arguably upside down. The report released in March 2023 shows that New Zealand’s 311 wealthiest families pay just 8.9% of their income in tax – less than the rate paid by a minimum wage worker (10.5%) and less than half the rate paid by the average Kiwi (19.7%).

This argument is raised regularly and the first way to respond is to point out all the useful and important things that public expenditure is used for. In 2020/21 we spent around 91% of our tax revenue on health, education and social security. There are also plenty of examples of positive public expenditure, such as the food in schools programme, that you can refer.

This argument is often based on misunderstandings. For example, when some people look at the annual 2020/21 spend of $44bn on social security they often assume that the bulk of this is going on the unemployed or other groups that they may hold negative views about, but the biggest single item of expenditure in this vote is NZ Superannuation at $15.5bn, which we are just about all entitled to receive once we reach age 65. 

People also sometimes point to things such as individual projects or programmes that they don’t like as an example of wasteful expenditure. Projects or reforms can be costly but they are usually one-off items rather than ongoing costs, and because someone disagrees with a particular project or programme does not necessarily mean that it is a waste of public money. Waste may occur, but it is important to have full and accurate information rather than relay on generalisations.

No one likes waste and there is indisputably some waste in government. Waste can be found in almost all organisations, but unlike most other organisations public sector entities are subject to review by bodies such as the Auditor-General and the Ombudsman. They are also accountable to their Ministers and parliament, who are in turn accountable to the public and subject to election every three years. Waste in private sector or not-for-profit organisations is less likely to be drawn to the public’s attention.

Another argument is that we are wasting money on an increase in public servants and the use of consultants and contractors. The Public Service consists mainly of government departments such as Inland Revenue, MSD and Corrections – it does not include other public sector agencies such as those that deliver education or health services. 

Public servants do essential work to support our communities as well as providing advice to the Government and administering large complex systems like our education system. The public service also deliver many services directly including benefits, conservation programmes and prisons. Around 40% of staff in the public service are in public facing roles and 55% work outside of Wellington in the regions.

It is true that there has been a growth in both public service numbers and the use of consultants and contractors over recent years, although the numbers of both have declined slightly off their peak numbers in 2021. Both the growth and the falling off reflect in part a number of one-off projects and events such as  the national Covid-19 vaccination rollout and government reform programmes. While it is important to reduce the reliance on external contractors and consultant, this will require building both the capacity and capability of the Public Service, rather than a reduction in the numbers of public servants.