Thursday, February 11, 2010

On making the rich richer by making the poor poorer

Apparently all the rich have to do to have their taxes reduced is to assiduously devise ways to avoid paying. The Labour government introduced a modest increase in the top tax rate. Now the National government proposes to remove it - because so many wealthy people are managing to avoid it. This is like removing speed cameras because more people have radar detectors, or repealing the equal pay laws because so many employers are managing to flout them.

Any quaint notion that those who earn more should pay more tax is fast vanishing. Meanwhile the offsetting introduction of higher GST represents not only a further shift away from income tax to consumption tax; it also means that those who have no choice but to spend all or almost all of their low income will have their tax burden increased.

Here's what John Kenneth Galbraith said about cutting taxes on the rich (in The Culture of Contentment):

"The only effective design for diminishing the income inequality inherent in capitalism is the progressive income tax. Nothing in the age of contentment has contributed so strongly to income inequality as the reduction of taxes on the rich; nothing…so contributes to social tranquillity as some screams of anguish from the very affluent. That taxes should now be used to reduce the inequality is, however, clearly outside the realm of comfortable thought." (p.179)

CROSSOVER: My recent post at The Hand Mirror on last Sunday's SST Sunday Mag article based around the grievances of those without kids against those with has stirred up 23 comments, and counting.

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