Tax the rich: quick thoughts on New Zealand parallels
Was gobsmacked to read that some sense is due to finally be shown by New Labour this week: I didn't think that a call to tax the rich was one I'd hear from our boys in New Labour, but here it is.
It may be a joke, of course - bit of Guardian wit - but let's treat it as fact for today. If Darling delivers, it will be fascinating to see how the notion of tax increases catches on, and how it works - and if raising taxes for earners in the £150,000+ bracket can be a vote-winner. I mean - let's face it, people. If the 'tax a rich wanker banker' card was ever going to play, now would be the time to play it. And okay - these increases will deliver wall-to-wall fuck-all in terms of real money: but as Dave Osler observes, there is something to be said for the symbolism.
It certainly worked in New Zealand for many years, and - although that economy was and is strikingly different from the UK's, a few parallels can be drawn.
So let's draw them. Let's talk about tax increases as a reality and look at an example where increases didn't result in instant electoral death for a Labour party.
New Zealand's Labour party won the 1999 general election on the strength of a Helen Clark and (finance minister) Michael Cullen pledge to a Taxation (Tax Rate Increase) Act: the charismatic and clever Cullen introduced the bill for its first reading in December of the very same year.
The important part of the Taxation Bill in this context was that it was blatantly socialist in its aspirations: aimed at higher earners (but by no means as high-earning as the people Darling reportedly has in his sights), it proposed a top personal tax rate of 39 percent on incomes above NZ$60,000 ($60,000 in New Zealand then was probably the equivalent of about £35,000 - £40,000 here, on a like for like spending basis. It was and is a good salary, but not an exceptional one. The median annual income for New Zealand in 2001 was about $27,700. The median average household income was around $60,000).
The political environment at the time was as complex as it had ever been: New Zealand had, by that stage, been 15 years in the grip of Thatcherite reformists of a variety of hues: the modernising David Lange/Roger Douglas Labour government of 1984 to 1990 (Lange resigned as finance minister Douglas turned market reforms on social policy), and then the conservative Bolger-Shipley National government to 1999. The time was right for third-way socialism - let's call it that for now - and Labour came to power (with Helen Clark as New Zealand's first elected woman prime minister) in 1999, forming a coalition with the left-leaning Alliance party and the Greens in New Zealand's new Mixed Member Proportional parliament.
The time, in other words, was right for a female prime minister and a show of socialism - much as Barack Obama's time is right now, albeit on a much larger, more significant scale. But it can be that simple as far as an electorate is concerned - an idea becomes a reality if its time has come. Few of us really understand the complexities of tax, but we do understand social landscapes, and it is possible to make a vote-winning argument in favour tax increases on the back of concerns about community.
Cullen's Taxation Bill in 1999 meant a relatively small increase of six cents in the dollar for people who were comparatively high earning categories. It was an intensely complex piece of legislation, with substantial knock-on effects for provisional tax, the controversial fringe benefits tax rate (New Zealand's tax on work related 'perks' like cars and contributions to funds, which Cullen also increased) and tax on lump sums.
Tax increases weren't Clark's only left platforms: she brought New Zealand's accident compensation scheme back into government control (post-1984 modernising governments had wanted to open ACC up to competition) and she scrapped the Employment Contracts Act - a radical move indeed. Introduced by the conservative Bolger government in 1991, the (extremely) controversial ECA destroyed collective workplace bargaining (and unions) by legislating in favour of individual contract bargaining.
Clark's were radical left moves, but the electorate demanded them. It was simple stuff, at the end of the day - people wanted those who'd lined their pockets in New Zealand's highly-deregulated, post-1984 economy to give something back New Zealand's various beleaguered communites. That was Labour's sale to the electorate - and the sale was made. And, okay, New Zealand is a very different place - a much, much smaller, export-driven economy and country, and a country in which history has generally been formed and driven by the Labour party, rather than conservatives. Nonetheless, by 1999 it had been a leading Thatcherite light for the best part of 15 years. It had delivered a generation that knew nothing else. However, it was possible to sell socialist ideas like tax increases to that electorate.
So. The New Zealand left in the form of the Labour-Alliance coalition showed it was possible to win elections in a post-Thatcherite environment after raising taxes for higher earners. The increase revenue was earmarked for free health services for children under the age of six, I think it was (GP visits are not free in New Zealand, in the way they are 'free' here) and for education and superannuation.
Labour went on to win two elections with that higher tax rate, and they would argue - as Cullen did in the bill reading on the link above - that they won the first one, in 1999, on the strength of it. The National party (equivalent to the Conservatives here) was unable to score any real hits on the subject of that tax increase in the last ten years.
And okay - Cullen increasingly stood accused of using that higher tax rate to keep inflation down, and eventually of losing control of the economy, and of being ill-prepared for recession. There was plenty of truth in those accusations: only a moron would have argued Cullen's corner in the last couple of years. I was no longstanding fan of Clark's government - I found her impressive on a personal basis (I interviewed her several times and talked to her at a number of functions), but thought she and Cullen become too introverted and inflexible when it came to defending the Labour tax line. I can well understand why John Key won the recent general election.
And the National party in New Zealand did just win its first election in many years - on the promise of tax cuts, the party would argue (National is at least partly right there, one imagines). There is plenty of room to argue that National could have won on tax increases for the wealthy as well as tax cuts, though, and that National won for many other reasons - one of those reasons being that it wasn't Labour. National party leader John Key was doing well in the polls long before the New Zealand economy began to crumble.
I'll come back to this: suffice to say for now that it's possible to raise taxes and stay in office for a very long time, and if there was ever a time for the British Labour government to test that theory, the time is now. After all - the wanker bankers have been given an enormous pile of our money. If Gordon taxes the buggers to tarnation, we'll get it back.
