Let’s call ‘taxing the rich’ what it really is

Last month the Government, under urgency, halted all pay equity claims thereby disproportionately affecting women who experience pay inequality. This is one of many policies that included gutting government departments and cutting public service spending to accommodate a massive wealth giveaway in the shape of tax cuts to landlords (a policy designed to supposedly stabilise rents but which seems to have had little impact).

As reported in March last year, the tax giveaway to landlords is estimated to cost the country $2.9 billion. To put this in perspective, that is more than the amount paid in Treaty settlements since 1985, which is about $2.7b. In other words, in one year, the current Government awarded landlords more money than has been paid out to Māori in 40 years as compensation for historical wrongs.

I note this to introduce my central concern that economic policy, as has been the case for the last four decades, is dominated by the central myth (now axiomatic for almost every government) that all our ills will be solved if we keep giving as much money as possible to the rich.

This is based on three central assumptions of current economic dogma that those who question are branded as ‘radical leftists’. These assumptions are underpinned by the beliefs that wealth trickles down; deregulation is good for business; and the state should stay out of the market and everything should be privatised.

First, wealth, especially when given away in tax cuts, does not trickle down. It stays at the top. Ever-increasing wealth inequality as measured by the Gini coefficient or any study of income trends show this.

Second, seen from a purely corporate perspective deregulation is no doubt a path to profit. However, it is also socially disastrous as costs of deregulation are outsourced via public bailouts following financial crises, for example, that are directly caused by the rolling back of legislation designed to safeguard the wider economy.

Third, the state has always been an economic entrepreneur funding all kinds of technological innovation, such as the internet, but this often goes unreported in the dominant economic journalism.

All this results in top-heavy, financially starved economies as governments continually try to make the wealth giveaways fit into a budget by stripping support for public services or selling off public assets at knockdown prices. (There is a tendency to undervalue the future social benefits of publicly owned resources.) Such sales are no more than an attempt to generate a short-lived financial hit that dissipates as quickly as the resources we all once owned.

The fact that the global economic outlook as well as specific national economies remain so fragile and unstable, and are increasingly unable to secure the basic needs of their populations in terms of health, education and social support, is surely enough evidence that the principle of continually moving wealth upwards doesn’t work, certainly not for society as a whole. However, because it has become communal liturgy, recited from almost every media pulpit for the last 40 years, it has become increasingly difficult to challenge.

Just as there is no economic justification for structuring an economy in which only the very wealthy are the true beneficiaries, there is also no moral justification. From inside this dogma, the moral justification has always been that it is the rich in the form of investors and entrepreneurs that are the only wealth creators, and so they deserve to reap the wealth they create. But you only have to see the collapse in wealth creation during the pandemic when workers could not work, to know that workers also create wealth. Yet many are told they do not even deserve a living wage.

Supressed wages is of course one way to structure an economy (there is no such thing as ‘the’ economy, by the way) to ensure wealth moves upwards. This results in a phenomenon called corporate welfare where the state has to step in to pay benefits to allow workers to actually live. What this means is that the money taxpayers pay out in social welfare is really a direct contribution to shareholder dividends. Welfare often compensates for the company not paying enough to workers so it can pay more to investors.

This is another example of the outsourcing of problems for which the government picks up the tab. Just as the Joker begrudgingly loves Batman for maintaining the order he gets to break, the neoliberals love the government because they know it will be compelled to bail them out – a phenomenon known as the ‘Greenspan Put’ named after the US Fed chair who first bailed out the banks in 1987.

Tax breaks are, of course, the main way to benefit the wealthy by directly increasing the wealth they keep and by breaking the public purse and public services. This then opens up new opportunities for privatisation and profit that will benefit a very small group. And I haven’t even mentioned our non-existent capital gains tax.

The assault on the Te Tiriti ō Waitangi is another example of efforts to structure an economy to favour the wealthy. Aside from the persistence of a colonial mentality hostile to all things Māori, Te Tiriti remains a firm barrier to expanding corporate appropriation of public resources. Should the Regulatory Standards Bill get passed (another piece of legislation aimed at weakening democratic control of resources and opening them up to private exploitation), Te Tiriti will be all that protects us.

As our society is placed under increased stresses and strains beneath the extreme weight of amassed, socially useless wealth that sits with a very small class of people, there have been increased calls to tax the rich. I think we need a different slogan.

In keeping with the dogma, conservative supporters have made tax a dirty word. Rather than tax being an individual or corporate contribution to the maintenance of a functioning society, the corporatist right has over the past four decades tried to make it a synonym for theft. The idea that taxing the rich is really a form of theft also makes it easy for the dogmatists to present the call as a form of envy; a petty resentment of the successful.

Instead of a call to ‘tax the rich’, the call should be to ‘reclaim the wealth’. I believe this phrase more adequately represents the request to return a greater share of what was commonly created. It is also a call to give back even just a small amount of what was taken through the design of an economy knowingly and carefully organised to purposefully benefit the few.

Even if the progenitors of the dogma genuinely thought it would be a social good, which is hard to believe because they themselves do not believe in society, there is no reason to believe the fantasy now.