The Post: Biggest obstacle to tax reform? A lack of ordinary Kiwi anger

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Are you having a nice recovery? The question was first asked back in the 1990s by the Wellington musician Don Franks, whose satirical song of the same name pointed to colossal inequalities in a nation supposedly returning to growth.

“Are you having a nice recovery? Is your champagne chilled just right?” he sang. “Or are you scratching to find something to feed your children tonight?”

The same question could be put now, when more than 500,000 New Zealanders are forced to use food banks but the Rich List, as announced this week, has just topped $100 billion, up $7b in the last year alone. Complaints, however, are puzzlingly muted.

On RNZ’s The Panel, chef Martin Bosley did note there was something “a bit tone-deaf” about celebrating extreme wealth when so many ordinary folk are struggling. Even his fellow panellist, former ACT MP Heather Roy, was moved to remark that we are “leaving a lot of people behind”.

Yet there is no sign of mass unrest. Why not? Well, for one thing, New Zealanders just don’t harbour any great dislike for the wealthy in the abstract. A decade’s worth of polling on economic disparities makes this clear: broad-brush attacks on “the rich” simply don’t land.

New Zealand’s Rich Listers, by and large, know how to fit in. They are remarkably good at maintaining a low profile, keeping controversial opinions to themselves, and not making themselves conspicuous objects of derision.

There is no New Zealand equivalent of Australia’s Gina Rinehart, an ultra-combative mining heiress who wants to slash minimum wages and slates her fellow Aussies as work-shy slackers. Our nearest equivalent might be the toy magnate Nick Mowbray, possessor of a $10b fortune and some really quite reactionary views. But even he has nothing like Rinehart’s profile.

Our business tycoons also benefit from glowing media coverage, constant deference to their opinions, a raft of other accolades. And there is, of course, nothing wrong with people working hard, building useful businesses and enjoying at least modest rewards. But there is much more – and, in a sense, much less – to the Rich List than that.

For one thing, property-based billionaires make up – alongside investors – the largest share of the Rich List’s Top 10 – hardly a sign of an innovative, cutting-edge, export revenue-generating economy. And while the list is far from uniformly dynamic, it is conspicuously dynastic.

According to an analysis I carried out a decade ago, and which I doubt is much changed, roughly four in 10 of the fortunes have a large intergenerational component. The Spencer family business was passed on from the previous generation; the Masfen investment empire is now run by the founder’s children; the Gough family fortune is multi-generational.

Given that these firms have not been driven into the ground, their inheritors are presumably smart and hard-working; but so are children growing up in poor families who don’t have multi-hundred-million-dollar opportunities fall into their laps.

Moreover, the rewards – even when tied to individual effort – are often excessive. A successful business generally relies on hundreds of staff; in days gone by, stronger trade unions ensured that a greater share of company revenue went to those frontline workers, and the country as a whole benefited. Not so today.

Anyone who has accumulated wealth, what’s more, has done so by drawing deeply from a collective pool of resources: government-run hospitals, taxpayer-funded roads, state-supplied courts and police. The traditional way in which that pool is replenished is through people paying a decent amount of tax.

Not so today’s wealthy. As the Inland Revenue has established, our Rich Listers pay just 9% of their income in tax, less than someone stacking shelves in a supermarket and half the rate of middle New Zealanders. Nor is this surprising, in the world’s only developed nation not to levy a capital gains, wealth or inheritance tax.

Such facts have not, however, registered with most voters. People who observe focus groups tell me that New Zealanders’ overriding opinion about tax is very simple: they pay too much.

This is not a relative view, a sense that they pay too much because someone else is paying too little. They just think they pay too much, full stop.

Ordinary Kiwis are strikingly not angry about Rich Listers’ low tax rates. That’s partly because no-one really knows about the Inland Revenue research, or can properly absorb its findings, and partly because there are – as above – few domestic figures to which people could easily attach their anger.

Kiwis are very willing to believe that overseas firms or investors aren’t paying their way. But although that’s true – tech-giant tax evasion costs us hundreds of millions of dollars a year – this pales into comparison with the under-taxation of our home-grown rich. Until that fact registers, though, the lack of any domestically oriented anger robs pro-tax advocacy of the fuel it most needs.