James Shaw says Kiwis don't appear to understand who the Greens' wealth tax would hit, confusing income for wealth.
The proposal has dominated the final week of the election campaign largely thanks to the tireless efforts of National Party leader Judith Collins, who's been claiming Labour will be forced to bring it in if they need the Greens' support to form the next Government.
The proposal would see the wealthiest 6 percent of Kiwis (according to the Greens' calculations) taxed at 1 percent on their asset wealth over $1 million, with various exceptions.
"This is part of what the Greens' policy and kaupapa has always been - that we need to redistribute the wealth," Shaw's co-leader Marama Davidson told The AM Show in a joint interview on Thursday morning.
"We have got inequality increasing - especially right now in COVID. It's a team effort."
While polls have shown Kiwis back taxing top earners more - also part of the Greens' tax policy - there doesn't appear to have been any scientific polling done on their support for a wealth tax. Non-scientific online surveys suggest most Kiwis are against it - if that's true, Shaw says it could be because they're confused.
"It's a bit like... MMP and people not understanding the difference between the constituency vote and the party vote. I think in New Zealand we actually confuse income and wealth. Actually, the real inequality is between people who earn and get wages and salaries and pay tax on those, and people who own assets and don't."
Drivers of inequality, and how the Reserve Bank is making it worse
New Zealand house prices have skyrocketed over the past two decades, and not even the biggest economic shock in almost a century - the coronavirus pandemic - could stop them. Housing unaffordability has been singled out as the biggest driver in inequality in numerous reports, from organisations as wide-ranging as the Ministry of Social Development, the NZ Initiative and the OECD.
An Oxfam report in 2018 found the richest 1 percent of Kiwis accumulated 28 percent of all new wealth created the previous year, while the bottom 1.4 million people got just 1 percent.
"If you look at incomes in the last 30-to-40 years, incomes have doubled for the richest New Zealanders, but they've barely increased for the poorest," income researcher Max Rashbrooke told The Project earlier this week. "After housing costs, the poorest New Zealanders have less disposable income now than in the 1980s."
The Reserve Bank dropped interest rates at the start of the pandemic, making borrowing cheaper than ever - leading to house prices rising through the pandemic like it never even happened.
Milford Asset Management senior analyst Frances Sweetman told The AM Show the Reserve Bank did this to keep the economy stable, despite its negative effects on inequality.
"Rising house prices is one of the big drivers of consumption - people spend more, people feel more financially stable. If house prices drop, the opposite generally occurs.
"They're not focused on wealth inequality - but that hurts the economy as well. It's just less clear, it's slower, it takes longer - you can kick the can down the road and ignore it. But you can't do that forever."
An OECD report in 2014 found rising inequality hurts economies - New Zealand GDP growth could have grown a third faster between 1990 and 2014 if it weren't' for the growing gap between rich and poor it said.
"We do need policies that address this growing wealth inequality," said Sweetman. But she's opposed to a wealth tax, saying the experience overseas and research suggests it's hard to collect, easy for the wealthy to avoid and hurts spending.
"The economy is quite fragile, and it is exactly the opposite of what the Reserve Bank is trying to achieve by lowering interest rates, which of course is driving house price inflation and this growth in wealth inequality."
Not a capital gains tax - Shaw
Like the Greens' wealth tax, Prime Minister Jacinda Ardern has ruled out introducing a capital gains tax as long as she's leader. Shaw said the wealth tax shouldn't be considered a capital gains tax.
"You would actually end up paying less than you would if it was a capital gains tax," he said.
"Let's say for the sake of argument you bought that house for $200,000 ages ago. It's now inflated 10 times over and you've made $1.8 million on that in capital gains. If there was a capital gains tax at, for the sake of argument, 20 percent - well, 20 percent of $1.8 million is a lot of dough. It's $360,000. You would have to wait a long time until [the wealth] tax accumulated into that kind of thing."
Under the Greens' plan, assuming the homeowner had no other major assets, they would only be liable for $8000 a year - and wouldn't have to pay it until they sold up, if they didn't have the income to pay it annually.
Coalition negotiations
If Labour does need the Greens to govern, it's unlikely to be a balanced relationship - Labour's looking likely to get around 50 percent of the vote, and the Greens will be lucky if they get 6 or 7 percent. Shaw says they got a lot done in the past three years just by being at the table, which is perhaps why the wealth tax isn't a non-negotiable.
"What we're saying is let's have an election, let's then have a negotiation. We want to see progress against six priorities."
"It really depends on the votes that we get," said Davidson. "We cannot pre-negotiate until we have seen where the votes have fallen."
It remains a "top priority", even if Labour has categorically ruled it out. Both Shaw and Davidson said they wouldn't withhold support if Labour stuck to its guns over the policy, which Shaw said, "occupies a very special place in Judith Collins' fever dreams".
"There is absolutely no reason to go around mischief-making and saying that it's all going to collapse now. Why would we do that?" said Shaw. "Jacinda Ardern has done a fantastic job as leader."
