SQ Transp 2048

Arguments in NZ about the right mixture of government tax and spending initiatives have focused mainly on whether such measures might stimulate the economy. Among the major themes of the recent budget were the alleged need to address the 'undue tax burden' on high income earners and the implication that to widen and strengthen the tax net would deter investors. Instead, public sector austerity is to be the favoured path to revitalising the economy. While opponents have asserted that the opposite tack might provide even greater stimulation, there has been little analysis of this approach in terms of fundamental 'tax philosophy' and implications for social justice.

Justification of austerity as a response to the recession have largely been framed in terms of one of the most prominent mantras in the received orthodoxy - that taxation is little more than theft. Focusing on the UK's recent 'emergency budget', Martin O'Neill's recent Guardian article expands on this mean-spirited and unjust rationale:

On one view of taxation, the money that we receive in the market, whether as wages, profits or capital gains, belongs to us in some deep sense. When the government taxes this money, something morally troublesome seems to be going on. Taking "our money" may in the end be justifiable, if it is spent on sufficiently important ends. But at best taxation is a necessary evil.

O'Neill's piece provides a useful context for considering the source and impact of the constant pressure for tax cuts in NZ and argues that this justification withstands little scrutiny:

There is, however, a fundamental problem with this way of thinking about tax and tax fairness. The problem with everyday libertarianism is that it is incoherent. Market transactions and robust property rights are only possible given the existence of stable government – look at Somalia – and government requires taxation in order to function.

He makes the further point that balancing the budget through public service cuts, rather than tax increases, is fundamentally unjust:

On the everyday libertarian view, it is natural to think that the economic pain caused by the banking crisis and the resultant collapse in tax receipts should be spread throughout the population. On the social democratic view of taxation, there is no such presupposition. The question is, instead, whether anyone has a justifiable complaint of injustice in light of their treatment by the state, where the tax and benefit systems are taken together, and both are viewed against the level of provision of public services.

O'Neill concludes that 'rather than by raising tax levels on the better off, cutting down on tax avoidance, or finding ways for the banks to pay for their lavish levels of public protection', the new UK Coalition is committing the most fundamental injustice by attempting to 'roll back the state at exactly the moment when the most vulnerable in society most need its protection'. As in New Zealand, after skewing the gain, UK tax and fiscal policy now seems set to skew the pain.

The entire article can be found here.