



That a more equal society is almost universally more harmonious is the thesis of The Spirit Level by Richard Wilkinson and Kate Pickett, Allen Lane (Penguin Group, 2009). It clearly demonstrates that more equal societies do better in most respects.

The Opportunities Party, then headed by economist Gareth Morgan, campaigned for a capital tax (net wealth tax) in the 2017 elections, in conjunction with a reduction in income tax or other redistribution of the yield. The Party estimated that with a capital tax of either one or two percent, under their proposals 80 percent of the population would be better off. That was a tax neutral proposal.

The Tax Working Group dismissed a net wealth tax on the basis that such taxes were perceived by the authors of an OECD report as being too complicated. The Working Group also referred to New Zealand's perceived historical difficulties with the administration of estate duty.

The problems with estate duty were that it applied at too low a level and valuations of assets were checked in minute detail, with an accompanying level of frustration as probate could not be released until estate duty was finalised. Moreover because of the way it was administered the costs of administration outweighed the return, or so nearly did that it was not worth collecting.

As to complications with a net wealth tax, it’s surely not beyond our capability to devise a comparatively simple form of it.

The Tax Working Group was no doubt also influenced by a report from its secretariat. This report was prepared at a time when a capital gains tax appeared to be the preferred option. It did conclude, however, with the observation: "The preliminary conclusions of the OECD work is that an annual wealth tax is not needed as a mechanism for addressing inequality (as it has the disadvantages of adding a novel tax base to most tax regimes and it is more difficult to apply than an income tax) if [italics added] there is a comprehensive capital income tax including a capital gains tax and an inheritance tax. The OECD also says a net wealth tax may be desirable if a country does not have an inheritance tax ...."

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Incidentally, a net wealth tax should also encourage the productive use of assets and discourage such practices as land banking. Those with wealth exceeding a designated exemption level should be able to use that wealth to produce a much greater annual return than the amount of any low level net wealth tax.

Another advantage of a net wealth tax is that the revenue from it is not dependent on the sale of assets and the realisation of a capital gain. Revenue will accrue from the first year after implementation and will thereafter provide revenue at an almost constant annual rate, facilitating national budget estimates. The government of the day would need to decide which percentage of the population should be liable: the top 1 percent, 2 percent, 10 percent or 20 percent depending on projected yield, needs and the perceived overall benefits of greater social and economic equality. This can be achieved by the level at which an exemption is set.

Data released by Oxfam NZ, in association with its 2018 report Reward Work, Not Wealth, reported that one percent of the population received 28 percent of the country's wealth in a single year while 1.4 million people (30 percent of the population) got barely one percent of all the wealth created in 2017. If just that one percent of the population was liable it would still make a significant difference.

As also reported by The New Zealand Herald last year, "The research also showed a mere 10 percent of New Zealanders own more than half the nation's wealth and the inequality gap has widened significantly in the past year."

Colin James in Unquiet Times (Fraser Books, 2017) refers to an OECD finding that too great income inequality has a negative and statistically significant impact on subsequent growth. One of the things that a capital tax could do is fund greater income equality, as proposed by the Opportunities Party.

James also notes that on a single day in September 2016 the president of the European Central Bank, the president of the European Council and the head of the International Monetary Fund all warned of a backlash that could undermine market-capitalism. The recent mass demonstrations in France could be just the beginning.

Additionally, James noted that an International Monetary Fund report in 2014 found that "the combined direct and indirect effects of redistribution are on average pro-growth". James wryly observes: "Neither the OECD nor the IMF are wistful socialists of a bygone age. They have been one of the strongest advocates for a market economy."