Wealth Inequality - High & Not Likely to Reduce Any Time Soon
The year is winding to a close, but last week gave us yet another reminder of why The Opportunities Party is the only prospect for real change.
Firstly we had the Statistics New Zealand wealth report. Not a great deal has changed since 2015 in terms of how wealth has shared, but that is precisely the point. It isn’t likely to change in the future either.
The top 20% of Kiwis saw their wealth surge by around $400,000 since 2015. They now own about 70% of the country’s wealth. Most of this surge has come from owning housing.
The bottom 40% of Kiwis basically own nothing. They have no stake in society, no access to the biggest tax break our country offers (a house), and no realistic hope of getting it.
By comparison, income inequality is not a real problem in New Zealand. Both Income inequality and child poverty rose in the early 1990s but has stayed fairly static since. The Global Financial Crisis and introduction of Working for Families largely cancelled each other out.
However, the after housing income numbers are more concerning. After housing costs, income inequality has continued to creep up since the 1990s. The bottom 10% of New Zealanders are no better off now than they were in the 1980s. And we know from the wealth report that many of this bottom 10% have taken on debt – not to buy a house but simply in order to stay afloat. As Max Rashbrooke points out this is real desperate stuff.
The real driver of inequality in New Zealand is housing. For the poor it is the eyewateringly high and rising rents. For the rich, it is the very fact that they own a house (or many houses) that has led to them getting richer. This isn’t just about capital gain, it is also the fact that people that own their own home don’t have to pay rent.
And as economist Susan St John pointed out on Friday, the Tax Working Group is unlikely to sort this problem. They are likely to report back recommending a Capital Gains Tax excluding the family home.
St John points out this tax would be politically fraught and enormously complicated. And all for what? It won’t solve the problem. All it will do is tax any change in prices that makes the wealth gap between rich and poor even larger. That might make us feel a little better, and make the tax system feel a little fairer, but it won’t change the fact that housing is what is driving the growing inequality in society.
To be fair to the Tax Working Group they have had their hands tied from dealing with the real problem thanks to an unhelpfully restrictive Terms of Reference from the Government.
Over summer The Opportunities Party will be laying out the arguments focussing on why a Capital Gains Tax will be so ineffectual and perhaps even harmful for Aotearoa New Zealand.
This is an important conversation.
So important that we have resurrected Policy in a Minute in order to have it.
So this summer over your Christmas BBQ, why not win friends and influence people by talking tax?
Stay in touch with the key talking points by liking The Opportunities Party Facebook page or subscribing to our email list.
Christmas is also a great time to donate to The Opportunities Party. No time like the present.