Making The Tradies Pay.

Crunching The Numbers: On the subject of the Capital Gains Tax, it is simply not sufficient to assert that all income is the same and, therefore, must be taxed the same. Those who say this ignore the fact that, as RNZ’s Guyon Espiner so rightly observed, not all income is made the same. The working life of the small business owner is very different from that of wage and salary earners. In addition to plying their trade and/or providing their service, they are saddled with a great many other responsibilities.

IT’S A CLASS WAR – of a most unusual kind. The looming battle over Labour’s Capital Gains Tax (CGT) pits a pampered and overpaid Professional and Managerial Class (PMC) against the constantly expanding class of tradespeople, service providers and independent contractors: the tens-of-thousands of small businesspeople whose daily labours continue to make, move and mend this country.

The PMC is determined to protect its cosy position in New Zealand society by making sure that any expansion of the state’s revenues is secured by taxing something other than their salaries.

They have been made aware of the rapidly rising incomes of the “tradies”. How could they not, with their brand new SUVs clogging the streets outside the local school every morning and afternoon? What’s more, they strongly suspect that all this new-found wealth is not being taxed in the same way that their incomes are taxed. They may not know much about running a business that isn’t funded by someone else’s money, but they’re pretty sure these nouveaux riche boofheads are dab hands at short-changing the IRD.

Clearly, these upstarts need to be taxed at the same rate as themselves – 33 cents in the dollar. And because, as the owners of small businesses, they can get away with paying themselves ludicrously low wages, they must be made to hand over to the IRD one-third of the currently tax-free capital gains they make when they sell their businesses.

They’ll squeal and moan, of course, but a CGT is by far the fairest fiscal solution. Capital gain is a form of income – and all income must be taxed. Besides, it’s just not right that people with nothing more than a trade certificate (or whatever they call it) and often with no qualifications whatsoever, should be making more money than someone who spent four or five years at a university getting properly qualified. A university, mind you, not a dreary polytechnic tucked away in some provincial hell-hole like Wanganui or Invercargill!

But simply saying that all income is the same, and must be taxed the same, ignores the fact that, as RNZ’s Guyon Espiner so rightly observed, not all income is made the same.

The impressively credentialled members of the PMC, large numbers of whom are employed by the state, turn up for work every day and are paid every fortnight. All the necessary deductions for tax and ACC have been taken care of by their employer. If they’re teachers, nurses, social-workers, or just plain, common-or-garden civil servants, there’s a very high probability they’ll be members of a union. Regular pay-rises and improved working conditions are expected – and delivered.

Life for the small business owner is very different. In addition to plying their trade and/or providing their service, they are saddled with a great many other responsibilities. They have to take care of their own tax payments – as well as the tax payments of any staff they may employ. Then there’s Kiwisaver and ACC payments to sort out. They must conform to the provisions of OSH legislation and deal with the infernal complexities of the RMA. For many, being able to pay their bills depends upon other people paying theirs – and getting some debtors to cough-up can be a nightmare.

So, Guyon is right. Not all income is made the same. Which is why not all income is taxed the same.

Which leaves the PMC with a problem. They are only too aware of the need for increased government spending on health, housing, education and the environment. After all, so many of their jobs are about providing these public goods. On the other hand, they have a lifestyle to maintain; overseas trips to pay for; kids to finance into university and home ownership. Yes, their salaries may be large – but they’re fully extended. They are not keen on paying higher income tax. Not keen at all.

It might not be so bad if all these tradies; these restaurateurs; these independent contractors were caring and responsible citizens. But dammit! What’s with all these monster SUVs? Haven’t they heard of global warming? And the things they say! Honestly, it borders on hate speech. Sexists, racists, homophobes: the whole kit and kaboodle. To call them “deplorables” would be to seriously understate the problem. And then they get to retire with a cool million bucks – tax-free.

No bloody way!

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 12 April 2019.