Green Taxation – Jeanette Fitzsimons Speech
Speech by Jeanette Fitzsimons MP
Green Party Co-leader
In Parliament Debating Chamber
On New Taxation Legislation
Thursday, December 23, 1999
The Green Party supports this legislation. We support a progressive tax system and point out that a tax system needs to do three things if it is to be effective and acceptable.
First, it needs to raise enough money to underpin a civilised society and carry out the Government's programme.
Secondly, it has to be levied fairly, according to ability to pay, and thirdly, it has to set up the right incentives in society so that economic activity is encouraged into appropriate areas.
The National Government failed on all three of those criteria. The tax system did not raise enough money. It was not distributed fairly and it set up the wrong incentives.
This Bill addresses the first of those two issues and we are supporting it for that reason. It does not yet address the third requirement and we hope to come back to that issue.
Over the last 15 years inequality has grown in New Zealand and tax cuts have been part of that inequality. Along with cuts in benefits we have had a minimum wage that has not kept up with the average wage, and user charges, whilst at the other end of the scale we have grotesque over-the-top payments to chief executive officers, both public and private.
That tax system has driven, and it has also been driven by, a culture of greed and individualism, a culture that regards tax as theft rather than as the way we fund a civilised society.
I agree with Winston Peters that we need better enforcement of the existing tax rules, and I hope the Government will look very vigorously into tax evasion and fraud. However, that will still not give us the money we need to provide quality education, decent housing and health care and care for the natural environment.
We need to raise money to do that.
Over the years Governments have increasingly given away revenue, not just through reduction in income tax but also through reduction in tariffs. We often discuss the effect of reductions on trade and tariffs, but we do not often talk about the effect it has on Government revenue. That also occurs through the reduction in earnings from State-owned enterprises, both by selling them to the private sector and by reducing the expectations of dividends, for example, within the electricity sector.
The ability to raise revenue has shrunk considerably over the last few years as a result of those Government policies. I am happy to pay higher levels of tax on my income because I do not want to live in a miserable selfish society that has no concept of sharing for the common good.
It is not tax that is driving people away from our country, it is lack of opportunity, it is lack of access to education, lack of access to development finance, and lack of a sense of a shared society in which we are all in this together.
So the Greens support a more progressive tax system, but that in itself is not enough.
We need to look at the incentives that the tax system creates for those engaged in economic activity. What we tax we will get less of, and what we do not tax we will get more of - that seems to be a truism.
At present we tax work and enterprise, and we leave waste and pollution tax free.
Inevitably then, we have created a society where it is cheaper to waste resources and to save on labour costs by putting people out of work.
The Greens want to reverse that incentive structure. We welcome the tax review that this Government has said it will establish.
We have already told the Prime Minister that we are keen to contribute proposals to that tax review on ecological tax reform in order to address the third of those requirements for a decent and effective tax system.
A modest level of eco-taxes on waste and pollution would allow us to remove income tax completely on the first band of income - say the first $5,000 of everybody's income. That, of course, gives an equal rebate to all *income earners but proportionately it is much more valuable to those on low incomes.
I think that it has been a great myth of economic debate recently that a dollar equals a dollar equals a dollar, regardless of where it is in the economy or what it is used for.
To a low-income earner a dollar is worth very much more than a dollar to a high-income earner, and the proportionate tax decrease for people on low incomes would be much higher than for those on higher incomes. However, it recognises that everybody will pay some degree of ecological taxes and that therefore there needs to be an offset in income tax for everybody against that burden.
So where should we start?
We have three suggestions as to where one should start with ecological tax reform.
The first one is in addressing climate change. In the Speech from the Throne the Government mentioned that it would have a package on addressing climate change that would include better public transport to reduce the use of private motor vehicles, and an energy efficiency package.
Those ideas are good, we support them, we have been advocating them for a long time, but an economic instrument is needed as well to make them fully effective.
A carbon tax on the carbon content of fossil fuels, which is precisely what is causing the climate-change problems, would be the last piece of that package and make it effective.
Treasury has already done all the work. Simon Upton tried several times to get a carbon charge through his Cabinet but it would not accept it. However, Treasury has done the work, it would be quick to do, and we urge the Government to put that last piece of the climate-change package in place and use that revenue to reduce taxes on the bottom band of income.
Secondly, we would look at the amount of waste going to landfill. Solid waste going to landfill in Auckland is growing far faster than either the population or the economy.
Every dollar of economic output is creating more waste each year than it did in the past.
Every additional person in Auckland is creating more waste per capita than we did in the past. That is causing problems in terms of the siting of the landfills, and it causes problems in terms of pollution of water and soil.
A levy on solid waste would encourage recycling industries, which are job-rich, it would discourage the production of waste, it would start to work back up the production chain and affect how people manufactured products in the first place so that they could be reused and recycled, and it would be a valuable economic incentive.
Thirdly, we would tackle toxic substances.
In New Zealand we have major problems with spray drift of toxic chemicals and we have major health problems like ME that are associated with the use of pesticides.
We have an organics industry that is able to replace the use of pesticides, but at the moment pesticides are subsidised by the fact that they do not have to pay for the environmental costs that they cause.
We have hundreds of contaminated sites in New Zealand from toxic chemical use in the past. We do not even know where they all are and how bad they all are, but they are listed on the Government's balance sheet as an uncosted contingent liability.
That uncosted contingent liability will come back and bite us one day. We need to have economic incentives to develop the cleaner production systems that already exist in industry in order to reduce the use of toxics in the future.
So ecological tax reform could at the same time reduce inequality, reduce compliance costs for people on low incomes - who would not need to put in tax returns at all - and create powerful incentives to turn the economy in an ecologically sustainable direction. I commend to the House our document Thinking Beyond Tomorrow, which sets out how ecological tax reform could be an important part of a way to a sustainable future.