Professor Arthur Grimes is Chair of Wellbeing and Public Policy in Wellington School of Business and Government at Te Herenga Waka—Victoria University of Wellington. He is also Senior Fellow at Motu Economic and Public Policy Research and was formerly Chief Economist and Chairman of the Reserve Bank of New Zealand. [email protected]

Budget

Wellbeing Govt’s empathy for the rich

In his latest "wellblogging" column, Arthur Grimes questions why a Government so focused on wellbeing is asking the people at the bottom of the income heap to subsidise property investors, students from wealthy families, and well-off retirees.

One of the most consistent findings in the wellbeing literature is that personal wellbeing is enhanced when one volunteers and assists others. Showing empathy to the suffering and difficulties of those around us makes us more rounded as individuals and more in touch with other people in our community.

Sometimes those who are suffering may be fortunate in other ways, and empathy is not reserved just for the less fortunate. We are capable of offering empathy to people who are flooded out of their luxury houses as well as to those from the poorest communities whose homes are washed away.

It is in this spirit that we see empathy pouring forth from the current wellbeing-oriented Government. Many people who do not work for a living faced the threat of having to pay tax on their unearned incomes – some of which are very high indeed. This was clearly going to be detrimental to the welfare of many of the richest people in our society.

Our Prime Minister, showing her enormous capacity for empathy, has opened her heart out to these people to ensure that they never face this threat again. They can rest assured that income derived from increases in asset prices (that have nothing to do with their own efforts) are safely guarded from taxation – not just for now, but for as long as this Prime Minister is “on her watch”. Of course, it is easier to be on watch if the ship never sets sail, but nonetheless there was always the risk that this ship could leave port at some stage in future.

I think of the people earning less than $14,000 per annum who pay 10.5 cents tax for every dollar that they earn, right from the very first dollar in their hand. And I think of the others who earn less than $48,000 per annum who pay 17.5 cents tax for every extra dollar they earn. Most of these people – many of whom are in real poverty – have never had an opportunity to show their empathy for people earning six-figure incomes arising from just watching prices rise.

Now, the wellbeing of the poorest in our society will be enhanced greatly through this vicarious extension of empathy on their behalf to the richest in society. I can just imagine the thrill experienced by these households when they learned how the Prime Minister had retained taxes on the lowest paid while continuing to exempt those at the top of the pie from the threat of taxation.

But empathy towards those at the top doesn’t stop just with the taxation decision. Imagine a working class family with six children struggling through winter in a cold New Zealand household. This family will already have experienced the same thrill of vicarious empathy when they found their taxes are funding people over 65 years on high incomes who are now paid a special allowance to subsidise their overseas holidays each winter.

Just picture a family in Mangere huddling under their blankets. They will be so extraordinarily grateful to this empathetic Government that they can pay taxes based on their own hard work to provide a wellbeing boost to a rich recipient of the “winter escape payment” to holiday in the Bahamas.

The Mangere family trying to make ends meet will also be thrilled to know how they are helping the scions of rich industrialists. These offspring now have no fees to pay when they study for their law, finance, engineering, medical, dentist or vet degrees, which will result in those scions having future debt-free sky-high incomes.

It is not often that people at the bottom of the income heap have a chance to subsidise the rich so explicitly as we have seen with the tax and expenditure policies of this wellbeing-oriented Government.

Empathy is truly a wonderful characteristic. No doubt the poorest in our society will be encouraging the Prime Minister to show even more empathy towards the highest echelons of income-earners so that the wellbeing of all is improved.