Morgan Godfrey makes the case for taxes; why we need them, why we should pay them, and why Elizabeth Warren is right

This is the first of ten articles in the Public Service Association's "Ten perspectives on tax" series.*

By Morgan Godfrey*

“I’m not a racist” – this is the necessary qualifier – “but”. Sometimes I wish the same were true when talking about tax. Instead of standing to attention, people’s eyelids droop, their shoulders slump and they sink back in their chairs. “Tax sucks.” It’s not the subject you’d discuss in any sort of company.

In one way you can sympathise with this. When politicians discuss tax like they do data, all millions and billions, a thing existing in a privileged realm somewhere above politics and people’s lives, the first reaction is to switch off. Tax talk becomes about “thresholds” and “efficiency” instead of the schools it might pay for, the hospitals it might improve and the houses it might build.

In a government green paper titled, ironically, Making Tax Simpler[1], people are referred to as “customers” and the findings revolve around bureaucratic buzzwords like “flexibility” or vague platitudes
like “modernising the tax administration system”.

On this understanding of tax-as-technical-pursuit, most New Zealanders would willingly hand it over to technocrats and pointy-heads. It’s a neat trick for conservative or centre left politicians who want to encourage people to understand tax as a “burden”: here’s this bad and complex thing – tax – and we’re the only ones with the knowledge, skills and willingness to offer “relief.”

“We’ve had no tax relief for seven years, going on eight now,” ACT leader David Seymour told RNZ in March. “It’s time for the government to actually look after the people who pay the bill.” This is a cute soundbite, and typical of conservative and centre right politicians, but it leaves the most important things unsaid. 

If there is a tax reduction there must be a corresponding reduction in spending or a corresponding increase in debt. This is what’s at stake with talk of reducing the country’s tax income. Except no one mentions schools that might go without teacher aids, hospitals that might keep fewer patients in overnight and additional homes that go unbuilt if there isn’t enough tax income to either keep things going as they are or to improve things. Instead the emphasis is on what “I” might gain, like a “block of cheese,” to borrow former Labour Party Finance Minister Michael Cullen’s talking point from 2008. 

Against the idea of paying the same or more tax for better schools, hospitals and homes, the idea of gaining another block of cheese each week seems petty. What use is personal “relief” if others go without? It’s worth pointing out that this is more than hypothetical.

In the last budget Vote Health was, on a conservative estimate, $248 million short of what it needed to cover inflation, population growth – including the effects of an ageing population – and the new services the government announced[2]. If we only wanted to maintain current health services there are three options: “reallocating” funding – perhaps the government could keep school operation grants frozen – debt (though the government says it wants to reduce debt) or tax changes. 

The problem, at least as far as this government is concerned, is that its hands are tied. Income tax increases appear to be off the table. New wealth taxes also appear to be a no-no. The first issue here is ideological – conservative and centre right politicians consider tax a barrier to economic growth – and the second is discursive.

In the prevailing discourse, the economy is like a living, breathing person. It gets “jittery”, “confident” and it rewards “risk-takers” and punishes scroungers. News programmes cross to bank economists who read the tarots, consult the heavens and deliver their findings about how the economy is feeling. Will it punish exporters? Should consumers lift their retail spending to appease it?

Dressed in their tailored navy suits, bank economists are like the priests of old, holy garb and all, and they and their colleagues pronounce on the vagaries of The Economy. Are government taxes “hurting” it? The answer is almost always yes.

In this economic discourse, The Economy feels things like you and I. Now it seems so obvious it’s almost redundant, but it’s worth stating for the record: The Economy isn’t a person. It cannot feel – it certainly isn’t bestowed with intention or consciousness. Instead it’s the name we give to the sum of our decisions about production, consumption
and money.

In fact, tax is what makes the economy possible in the first place, not the thing “hurting” it. 

US Senator Elizabeth Warren put it best in an iconic speech that was (predictably) vilified by her opponents:[3]

“There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did.”

It’s an exhausted truism, but it seems apt here: “taxes are the price we pay for civilization,” as former US Supreme Court Justice Oliver Wendell Holmes famously said. At this point my chapter might read like a polemic. In one sense, I suppose it is, but in another sense it’s more than that: this is a plea to understand taxation in context. Tax isn’t a weapon politicians use against the economy. Tax is what we use to pool our resources and secure the things we need: schools, hospitals, homes and more.

Perhaps talking about tax in context is easier said than done. Everywhere you look and listen, tax is talked about as something holding us down.

Even the Greens, the most progressive Parliamentary party on tax, sometimes fall into the trap with former co-leader Russel Norman telling media in 2014 that National’s research and development policies “hurt the economy,”[4] again as if it feels like we do. I go on television and radio and sometimes lapse into talking about the “healthy” or “unhealthy” economy, again as if it were like you and I.

The ‘vile maxim’ to which the ‘masters of mankind’ adhere, wrote Adam Smith in the Wealth of Nations, is ‘all for ourselves and nothing for other people.’ The doctrine is better known as class warfare, waged not in the streets but in governments and parliaments. The battles are often fought over tax. How much and from whom? How much and to whom?

These questions determine whether a child in Moerewa attends a well-resourced school, whether a patient Tauranga receives the best possible care and whether the pot holes on the Desert Road are filled. Taxation is not the realm of technocrats. It’s not something we should cede to politicians. It’s the thing that helps us to determine the kind of life we might lead.

*Morgan Godfrey is a writer and trade unionist based in Wellington. He’s also a non-fiction judge for the Ockham New Zealand Book Awards and sits on the Legal Issues Centre board at the University of Otago. This is the first article in the PSA's "Progressive thinking series, Ten perspectives on tax."