Late last week, Newshub published an opinion piece from New Zealand Council of Trade Unions (NZCTU) President Richard Wagstaff. He argued the Government needs to tax the wealthy more in more to fund public services.
This opinion piece from ACT Party leader David Seymour is a response to Mr Wagstaff's piece.
Opinion:Today is the 127th day of 2018, and the year is 35 percent complete.
It's Tax Freedom Day – the day on which New Zealanders have collectively paid their tax bill and can keep the other 65 percent of the year's income for themselves.
Richard Wagstaff would clearly enjoy for the day to fall later in the year.
Last week, he argued we need to "harness the power of tax".
According to Wagstaff, we can't maintain our public services if the Government doesn't take more money from us.
That is factually untrue. The Government could choose to cut billions in wasteful spending before it decides to hit us with higher taxes.
Instead, Wagstaff wants a more progressive tax system - higher incomes should be taxed even harder than they are already.
The problem is that tax deters people from performing productive activities.
Just as the Government taxes cigarettes to deter smoking, taxes on working, saving and investing mean people do less of those activities too, leaving us all poorer.
When the Government collects a dollar of tax, it doesn't just take a dollar, it also deters two parties from coming together to participate in win-win situations.
Every dollar raised in tax actually takes $1.20 to $1.60 out of the economy because people don't get the benefits from those transactions.
The other 40c-60c comes from the lost opportunities. They are called "deadweight loss".
This is the real power of tax - the power to make us poorer.
For tax to make sense, every dollar the Government spends has to be worth not just the dollar that's taken directly, but make up for the 20 to 60 cents of "deadweight loss" as well.
But more often than not Government spending doesn't deliver these benefits.
And we could be paying a lot less tax if the Government wasn't trying to buy votes.
The $3 billion Provincial Growth Fund provides great photo opportunities for politicians but will deliver projects of dubious value.
There's no good reason for a government to fund a tourist attraction in the Hokianga or a nursery in the Bay of Plenty.
The Provincial Growth Fund is just one example of what's sometimes called "corporate welfare".
Government spends billions on handouts for businesses which include subsidies for film companies or payments for irrigation projects.
These ventures should stand on their own feet.
If consumers don't support them, then I'm sorry, but maybe those consumers are trying to tell them something.
It's wrong to take taxpayer money and give it to those firms anyway.
This Government will also spend $3 billion making tertiary education free.
The Government admits that barely any additional students have enrolled as a result. 'Fees-free' will simply pay for the education of kids who would have studied anyway, and who will earn much more over their working lives than non-graduates.
Mr Wagstaff is right when he says taxes will need to go up if we are to afford superannuation.
We spend $11 billion (and rising) each year on pensions.
That's unsustainable.
If Grant Robertson was sensible, he would gradually raise the age of eligibility to reflect the fact that New Zealanders are living and working longer.
He could also means test superannuation.
Is it right that we are paying a millionaire couple $702 a week from the age of 65?
I'm sure there are other things Mr Wagstaff and I agree on.
For example, there's a strong case for genuine 'public goods' to be funded by taxes.
These are goods that wouldn't be produced if the Government didn't provide them.
Law and order, national defence and our democratic institutions are good examples.
Beyond public goods, the guarantee of basic public health, education and an income for those genuinely incapacitated through no fault of their own is easy enough to justify.
But once we get beyond these core activities, Government spending becomes less valuable.
The problem is that politicians make promises to get elected and taxes grow to fund them.
Income tax was introduced in 1891 at 5 percent on only the highest incomes.
Now it's 10.5 percent on the lowest incomes and 33 percent on the highest.
In the early 1900s, government spending was a one tenth of the economy.
Today, the government spends a third of all money in the economy.
But we seem to have as much poverty and neglect as ever.
The only reasonable conclusion is that greater government spending has been an unmitigated failure.
It serves many political purposes but few useful ones.
Beyond funding a limited number of activities, tax is more likely to do harm than good.
David Seymour is leader of the ACT Party
