CTU Media Release

6 December 2011

OECD report suggests steeper income taxes on high incomes to reduce inequality

A new report from the OECD lists New Zealand as among the countries with the fastest rising inequality since the mid 1980s. “The report confirms what the CTU and many others in New Zealand have been saying: that inequality has grown to disturbing proportions in New Zealand,” says Bill Rosenberg, CTU Economist.

“The report says higher inequality has been driven by the rise in part time and low paid work, the falling level of welfare benefits, and cuts in top tax rates for high earners. It states that ‘There is nothing inevitable about high and growing inequalities’, pointing out that many successful countries have maintained lower levels of inequality,” says Rosenberg.

The OECD “underlines the need for governments to review their tax systems to ensure that wealthier individuals contribute their fair share of the tax burden. This can be achieved by raising marginal tax rates on the rich but also improving tax compliance, eliminating tax deductions, and reassessing the role of taxes in all forms of property and wealth”.

“Unfortunately the government is going in exactly the wrong direction on these matters,” Rosenberg says.

“While improving educational opportunities are important we also need to reverse tax cuts for the high paid and make more use of asset taxes such as a capital gains tax. We also need to strengthen our system of wage bargaining to give lower income employees a fairer deal.”

“The OECD says that we don’t just need new jobs, but ones that ‘enable people to avoid and escape poverty’. It says that ‘job quality has become a concern for a growing number of workers’. Once again, the government is going in the wrong direction in its employment law changes.”

The report shows that in New Zealand between the mid-80s and late 2000s, the richest ten percent of households increased their incomes after inflation at over twice the rate of the bottom ten percent – 2.5 percent per year compared with 1.1 percent. It also shows that the tax system reduces inequality much less in New Zealand than in other countries.

ENDS

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