Inequity in Aotearoa

Here in Aotearoa, we appear to be in the midst of an economic downturn with high inflation (Statistics New Zealand, 2023; Porter, 2022), reminiscent of the 1980s circumstances when the Minimum Wage Act 1983 was introduced (Rasmussen et al, 2019). Currently New Zealanders are experiencing an annual cost of living increase of 7.7% (Statistics New Zealand, 2023). The minimum wage has increased this year by $1.50 to $22.70 per hour (Employment New Zealand, 2023), almost keeping pace with the driver of rising living costs: inflation, at 6.7%. 

But. The increase in the minimum wage does not appear to be assisting those amongst us with the least ability to trim their expenses: those on low incomes. The media are reporting families foregoing meals, and, in order to feed children, parents are skipping meals (Porter, 2022). To avoid concentration difficulties, schools are trying to feed hungry students on tight Ministry of Education budgets (Hunt, 2023). Sure, post-Covid-19 rising living costs has become a common global problem, but it doesn't help those who are going hungry to feed their children. Those struggling to afford regular meals need a stronger lifeline. 

The government is already in debt due to the Covid-19 pandemic. I understand the reluctance to borrow more: that is a mortgage against the future of the working poor which we will be paying for decades. However, there are some other levers which may help redress this inequity. One lever in particular looks easy, but has proved quite difficult to enact. Our government could work harder to shut tax loopholes for the very rich, and tax high income citizens the same amount as the average Kiwi. Currently 19.5% is the average tax paid (i.e., most of us are in this tax bracket; Rashbrooke, 2023). The rich pay 8.9% tax (Rashbrooke, 2023). The poorest amongst us, who are struggling to keep the lights on, put petrol in the car, and feed their families, pay 10.5% against an income of under $14k (Inland Revenue Department, 2023b), a higher rate than the richest (Rashbrooke, 2023).

And just to note, $14k less 10.5% tax is $12.5k, or $241 in the hand each week. Not enough to live on, when many of us in New Zealand do not have access to public transport, and 30l of petrol at $3.11/l is $93.30. Rent may well be $450/week for a one bedroom unit. Should we have the power on as well? And what about food?

Further, our richest citizens have many assets which are insufficiently taxed, such as property transactions; offshore accounts; trusts; and assets making capital gains. The wealthy can afford to pay for the expertise and instruments to shift wealth offshore or into trusts in order to avoid tax. They are also able to influence - threaten - governments to dump policy changes that the rich see as unwelcome, in order to protect their incomes (Inland Revenue Department, 2023a; Rashbrooke, 2023).

It would be nice to see some Government activity to redress the balance. Even if it is just a little.

Sam & Lori

References:

Employment New Zealand. (2023, April 1). Current minimum wage rates. https://www.employment.govt.nz/hours-and-wages/pay/minimum-wage/minimum-wage-rates/

Hunt, T. (2023, July 26). 'Lonely, cold, hungry': Pain even hits middle income schools in cost of living crisis. Stuff. https://www.stuff.co.nz/national/wellington/132412795/lonely-cold-hungry-pain-even-hits-middle-income-schools-in-cost-of-living-crisis

Inland Revenue Department. (2023a). High-Wealth Individuals Research Project [Report]. Te Tari Take. https://www.ird.govt.nz/-/media/project/ir/home/documents/about-us/high-wealth-research-project/hwi-research-project/final-report-april-2023/report-high-wealth-individuals-research-project.pdf?modified=20230423203807

Inland Revenue Department. (2023b). Tax rates for individuals | Ngā pāpātanga tāke mō te tangata. Te Tari Take. https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals/tax-rates-for-individuals

Porter, N. (2022, July 20). More and more parents skipping meals so children don't go hungry. Stuff. https://www.stuff.co.nz/national/129320031/more-and-more-parents-skipping-meals-so-children-dont-go-hungry

Rashbrooke, M. (2023, April 27). New Zealand’s millionaires pay lower tax rates than cashiers – it’s time to fix the system. The Guardian. https://www.theguardian.com/world/2023/apr/27/new-zealands-millionaires-pay-lower-tax-rates-than-cashiers-its-time-to-fix-the-system#:~:text=The%20report%20shows%20that%20New,the%20average%20Kiwi%20(19.7%25).

Rasmussen, E., Bray, M., & Stewart, A. (2019). What is distinctive about New Zealand’s employment relations act 2000?. Labour & Industry: a journal of the social and economic relations of work, 29(1), 52-73. https://doi.org/10.1080/10301763.2018.1556233

Statistics New Zealand. (2023, May 1). Cost of living remains high for all household groups. https://www.stats.govt.nz/news/cost-of-living-remains-high-for-all-household-groups/

* Lori Yau has kindly assisted with the material for this post