Keith Rankin: Taxing Migrants

Thursday, 14 February 2002, 9:29 am
Column: Keith Rankin

The New Zealand government has rightly apologised to the Chinese community for the discriminatory poll tax that Chinese immigrants had to pay from the 1880s to the 1930s. It is not clear however to what extent the apology is for the iniquities of the poll tax per se, or for the fact that the tax was levied only on Chinese. Nor is it clear that our [meaning 'western anglo-saxon'] attitudes to economic migrants are any more enlightened than they were 100 years ago.

Today the Australian government puts unwanted economic immigrants into prisons in the desert, or on to small Pacific Islands. A poll tax levied on Asian boat people would be an enlightened policy, in comparison. The leader of the New Zealand Act Party (Richard Prebble) believes that people from "desert cultures" are not appropriate immigrants into New Zealand. Does he mean Australians? Arizonans? I don't think so.

Let's consider the basic economic conundrum. Certainly migrating from a poor country to a rich country is one logical means for individuals to improve their living standards. Much as in Jane Austen's day, when the obvious strategy for a woman from a relatively poor family was not to create new wealth but to marry into (ie migrate to) a relatively rich family. (And when profligate men sought rich wives.)

A person of neoliberal persuasion today might a see non-discriminatory migration taxes as the most appropriate way to manage international labour flows.

Countries have public wealth, and individuals have private wealth. In this neoliberal view, public wealth is fixed to the territory of that country, while the private wealth is the private property of its citizens. The wealth of a country is the sum of its public wealth and its citizens' private wealth. So the total wealth of any person is their individual private wealth plus their equal share of their nation's public wealth.

A poor nation has much less public wealth per citizen than does a rich country. In this neoliberal zero-sum world, migrants take their private wealth with them, but leave their share of public wealth behind. In its place, they acquire a share of the immigrant nation's public wealth. As a result the fixed public wealth of immigrant nations becomes diluted and the fixed public wealth of emigrant nations becomes more concentrated. Citizens of an immigrant nation become fractionally poorer, while the remaining citizens of an emigrant nation become fractionally richer.

The obvious remedy is a poll tax. Indeed I believe the neoliberal Act Party did advocate something like a (non-discriminatory) poll tax soon after Sir Roger Douglas founded that party in the early 1990s. Any one could come to New Zealand, Douglas thought, so long as s/he paid an appropriately high admission charge.

How would such a charge be set by a New Zealand government? It would be set equal an individual share of New Zealand's public wealth. Thus a charge to enter New Zealand might be NZ$50,000. A charge to enter Australia would therefore be about NZ$60,000 and, on the same basis, a charge to migrate to the much richer USA would be about NZ$100,000.

Charging immigrants an admission fee is a superficially attractive idea.

But, if we follow this line of reasoning a bit further, each state should pay a negative poll tax to each person who leaves. An immigration tax should be balanced by an emigration subsidy.

Now, if the New Zealand government were to pay $50,000 to every emigrant, who would not leave? Well, I might stay. If everyone else left, I would become the sole proprietor of New Zealand's entire public wealth.

Or could it be that migrants take public as well as private wealth with them? If 3,799,999 New Zealanders were to leave, the public wealth - which includes our culture, our collective knowledge, and our institutions - would mostly leave too.

One difficulty arises from the fact that some migrants carry more public wealth with them than do others. Further, if we look just a bit more deeply, we will see that migrants don't simply transfer chunks of public wealth. Rather the very process of migration can create public wealth. For example, in history, migrants' talents have often been activated by the opportunities a new nation gives them.

Many of the poor migrants who came to New Zealand (especially in the 75 years before 1914) generated huge amounts of public wealth that would never have been created had they not migrated. (For example the New Zealand Labour Party was the product of mainly poor single Australian men who came to New Zealand in the 1900s' decade.)

Migration, if managed properly, is (like other aspects of globalisation) a positive-sum game. Every country benefits. If managed badly, though, migration (like other aspects of globalisation) can destroy public wealth. For example, when practising doctors and engineers migrate to New Zealand only to find out that they cannot continue to practice in New Zealand then both emigrant and immigrant countries become poorer.

In effect, the public wealth that many immigrants bring or create adds more to the wealth of a country like New Zealand than any realistic poll tax could.

To fully appreciate the issue of economic migration, we must also address the ethics of inheritance. If I am born into a rich country, am I any more entitled to a large endowment of public wealth than is someone who is born into a poor country? After all, by doing no more than 'choosing' to be born to parents who live in a rich country, I can hardly claim that I deserve a higher standard of living than someone born to poor parents in a poor country.

Nevertheless, the principles of inheritance and birthright of wealth are firmly established in most countries. 'Child Support' laws such as our own fiercely protect the right of children born into rich families to perpetuate that privilege even when their parents divorce or separate.

The principle that children should inherit the living standards of their parents is well established. So we must expect that principle to apply between nations as well as within nations. On that basis, we have every right to reject prospective migrants who, in our judgement, neither bring public wealth with them, nor bring the skills to generate new public wealth. A prohibitive poll tax is probably as good a way as any to reject what we see as the world's human flotsam and jetsam. And flotsam and jetsam is very much how we saw the Chinese in the late 19th century. A once great empire - with substantial public wealth - had been brought to its economic knees by internal stasis, European imperialism and the opium that British traders insisted (from the barrel of a gunboat or three) on selling to Chinese.

Yet a problem remains. It's about the very nature of public wealth.

Wealth is something that gives us a return. Public wealth is intangible, collectively owned and cannot be neatly divided into individual bits. Nevertheless much of the income arising from public wealth does appear in a nation's GDP (gross domestic product). Indeed a large proportion of GDP is attributable to public wealth. So therefore much of the substantial return on public wealth can be individualised. Strictly speaking, we all own an equal portion of that large part of annual GDP that represents the interest on our equally held public wealth.

The problem is that most of us do not receive anything like a fair share of the return on our public wealth. So, because the proceeds of public wealth are not distributed equally, those who get most of the interest on public wealth are under no pressure to share their incomes with immigrants. Immigrants for the most part get much less than the alluring images of public wealth in rich countries ('streets paved with gold') suggest to them.

We now take the argument one step further. How much public wealth is strictly national wealth? And how much is really transnational? Two of the largest components of public wealth are the natural environment (ie planet Earth) and the shared knowledge of humankind. A large proportion of the global economic product derives from resources that are in the international public domain.

So, strictly speaking, people in poor countries are not as poor as we think. They are equal shareholders of the world's public wealth. The problem is that we in the so-called rich countries have found ways to deny the majority of the world's people the proceeds of their shares of the world's wealth.

So economic migration can be understood as one means by which persons without access to the interest on their own property seek to find a key that gives them what they are due.

We might finally note that a large proportion of private wealth in the world today represents the investment of what was originally the inequitably distributed proceeds of public wealth. Because, just as most people on the planet receive far less of the interest on planetary wealth than the normal rights of property ownership would entitle them to, it therefore follows that a minority of the world's population receives (and has received) a much greater portion of the interest on the planet's public wealth than their actual shareholdings entitle them to.

Once we start to distribute the world's income in a way that better reflects the actual distribution of wealth in the world, the problem of economic migration will disappear. The people of China - and of Afghanistan and every other country - might want to travel, to learn English, or just to experience the world. But they will not need to permanently leave their homelands in order to prosper.

Poll taxes or other prohibitions on economic migrants make no sense in a world that respects public property and understands the link between global wealth and global income.

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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