|
Keith Rankin
is a political economist and economy historian |
| |
 Go to Athens/Delphi: David's Pi_ge |
 Go to RainForest: David's Page : |
| http://www.oocities.org/RainForest/6783/ |
The Government has two ways of impacting on our lives: through
its executive power to make policy, and through its willingness
to provide public goods as part of a social wage. In New Zealand
from the 1980s, as Government has retreated from the latter social
expenditure role, it has become more prominent as a source of
arbitrary power. Hence, the support for MMP as a means of curbing
the growing power of a diminishing public goods provider.
MMP has worked, to the disgust of those whose codeword today is
more "economic leadership". For "economic leadership",
read "tax cuts". In the absence of MMP, we would have
had a National Government that was able to implement a commercialist
agenda without checks - an agenda of powerful government rather
than big government - of government acting in accordance with
the dominant business interests. Coalition government, along with
a more diverse parliament, has stemmed the commercialist tide
just a little; it has checked the return of the "commercial
system" that Adam Smith so strongly opposed. The new
political environment has seeded doubts about the programme of
delivering ongoing dividends to the wealthy, through cuts to income
tax.
The public cannot rely, however, on the vigilance of minority
coalition partners to expose all future commercialist rorts. New
Zealand First has had to indulge the electorate on tax cuts as
part of the trade-off for September's superannuation referendum.
The expectation remains that there will be a further round of
tax cuts in 1999 or 2000, in addition to those already legislated
for in 1998. It is no secret that these tax cuts will involve
a significant cut to the top (33%) tax rate.
As it is, the 1998 tax cuts give much to the rich and little to
those on low incomes. They will give much to those who would have
had little to pay under the Compulsory Retirement Savings Scheme.
The 19992000 cuts will give, proportionately, even more
to the rich and even less to the poor. We have to start opposing
them now. First, we draw a line in the sand: the 1998 tax cuts
will be the last.
In the longer run, social democrats have to remake the case for
higher taxes. For me, the tax issue is central to the concept
of economic sovereignty; indeed the reassertion of the role of
the sovereign as an "agent of production" - as a provider
of public goods and as the landlord of the public domain - may
be a prerequisite to the turning rather than just the stemming
of the commercialist tide.
Income taxes represent one half of the fiscal contract; a contract
that is an implicit social contract. A social wage represents
the other half. Social democrats - all who are suspicious of the
commercialist system of small powerful governments - should be
getting behind the social wage concept, and openly acknowledging
that a bigger less powerful government needs to levy higher taxes
in order to fund a higher social wage.
Taxes represent the revenue of the sovereign. They represent production
costs, rents, royalties; charges legitimately levied for the use
of public goods and sociallyowned property; for everything
in our economic universe that is not the subject of a private
property right. Thus, taxes are paid - or should be paid - in
proportion to the use of public resources. The income taxes that
we like to say we pay as individuals are really a share of income
generated by our employers, and they rightly represent a proportion
of our employers' rather than of our personal use of public domain
resources.
Taxes are not a deadweight cost in the economy. Just like any
other economic cost - ie just like wages and interest - taxes
also represent an income for someone. In particular taxes represent
an income to the sovereign. The sovereign can be thought of as
a nominal figurehead, with absolute property rights over the public
domain, and whose administrative agent is "the Government".
But the sovereign is really "the people", treated for
analytical convenience as a single party.
We can think of the entire income of the sovereign as the "social
wage fund", a fund that is owned equally by every citizen.
(For the purpose of economic analysis, the term "citizen"
closely matches the term "tax resident" that is currently
used by the Inland Revenue Department. The use of this term implies
that every human being is a citizen of one and only one country.)
Thus, if the NZ social wage fund is equal to $NZ 45 billion, then
the social wage attributed to each New Zealander is $12,500, given
a national population of 3.6 million.
This approach could be taken up by a far right party such as Libertarianz
to justify a Social Dividend of $12,500 per person, no tax increases,
and no spending by government on public goods. (Or, more likely,
a social dividend of $6,000 plus big tax cuts.) The entire social
wage would then become a social dividend, and the stock of social
capital would be allowed to erode.
The opposite extreme sees none of the social wage paid as cash
to citizens. In that form, the social wage is entirely represented
by government spending. That's OK, so long as the spending is
mandated on our behalf through the political process. Government
spending is socialwage funded, which means that each citizen
- including children - contribute equally to the provision of
benefits and social services. It is not true to say that
the rich - who pay more taxes - pay more for more social expenditure.
It is the sovereign who pays more.
The intermediate position places the sovereign in an analogous
position to that of a private or public company. Indeed, the sovereign
is a corporate representation of the public. All
of the income of an incorporated entity is the property of the
corporation's shareholders. Some is paid out as equal
dividends, and some is ploughed back into the company to maintain
and enrich its stock of capital. Retained company profits are
analogous to the retention of social wage income by government
in order to fund social spending and to invest in social capital.
The intermediate position suggests a balance between social dividends,
current social expenditure, and social investment.
We must avoid the following increasingly common style of thinking about taxes; a style of thinking that implies social expenditure should be more favourable to high income recipients:
Government expenditure is funded from the income of the sovereign
- the social wage fund. It is not funded more by men than by women,
by white than by brown, by rich than by poor, by those of working
age than by the old and the young. Government expenditure is funded
equally be everyone, and should be spent in accordance with social
priorities.
Higher taxes mean higher charges to those who make greatest use
of public domain resources, and they mean higher incomes to the
sovereign. We are entering a fiscal crisis, as the Sunday StarTimes
editorial acknowledges; a crisis represented by a lack of social
expenditure and by a failure to pay equitable social
dividends. Higher taxes are an important part of the solution.
From the point of view of a low wage earner, higher taxes may
mean a cut to net wages. But they also mean a higher social wage.
For example, for someone today on $20,000 per annum net, a net
annual wage cut of $500 resulting from higher taxes might be matched
by an increase of $1,000 in that person's social wage. That person's
true income would rise from $32,500 ($20,000 + $12,500) to $33,000
($19,500 + $13,500).
The higher social wage could incorporate a universal benefit as
a formal social dividend. Rather than granting tax cuts
as a means to pay social dividends to the rich, tax increases
make it possible to pay genuine social dividends to all, rich
and poor. And they make it possible for the government,
accountable to a representative parliament (accountable in part
by "airing its dirty washing in public"), to provide
the social expenditure that the public demands.
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