Our Revenue Minister’s “Piketty-Tax” Plan Laid Bare
Below is my column in the NBR this month:
France has a real estate wealth tax scheme. It is assessed on the total value of property owned by an individual. The tax starts when the value of your real estate assets exceed €1.3 million. It rises from 0.5% up to 1.5% of the total value of the properties. From everything that I know about Attorney General and Revenue Minister David Parker, this is the kind of tax he wants for NZ.
How come? The story begins with Mr Parker’s hero, the French economist Thomas Piketty, who is the world’s most prominent advocate of wealth taxes. If you’ve ever had coffee with David, there’s a good chance you will have heard him waxing lyrical about Mr Piketty’s book “Capital in the 21st Century”. David will tell anyone about it who cares to listen, including my University class. It’s absolutely no secret.
Green MP Chloe Swarbrick also seems to have been subject to Piketty-admiration lectures from David. In Parliament in 2020, Chloe said, “I look forward to hearing … from the Minister, who I know is a big fan of Thomas Piketty and understands why we have the massive wealth disparity that we do in this country today”.
The Beehive quotes David as saying, “I spent a very pleasant summer holiday reading Capital in the 21st Century, thoroughly … I am a disciple”. When asked about the solutions to inequality proposed in that book he replied, “Unless we tax all income (including capital) the gaps will grow ever larger. A modern form of feudalism, where concentrations of assets will substitute for large land estates - wage earners & beneficiaries will become modern day serfs”.
The evils of large-scale capital accumulation and the virtue of wealth redistribution bring out a passionate zeal of religious proportions in the normally reserved Mr Parker. The fact that he questioned why Thomas Piketty hasn’t yet been awarded the Nobel Prize in Economics in a recent speech at Victoria University is the latest round in his fanatical embrace of “Capital in the 21st Century”.
Our Revenue Minister’s views on the Nobel reveal little else other than how he has scant connection to the economics profession, probably since his training is in law. Mr Piketty’s contribution lies chiefly in assembling time-series data on inequality, collected from tax records going back centuries. His stature amongst economists arises from this information-gathering exercise, not from new, insightful theories on how best to design tax systems, about which he has strong political opinions.
Although Mr Piketty has lobbied hard for more and higher wealth taxes, politicians who have campaigned on such platforms have so far not done well. One example is Senator Elizabeth Warren, a “Piketty-disciple” like David Parker, yet who failed to win the US Democratic Party Presidential nomination.
What was the reason? Even most leftist US Democrats believe it is justifiable to accumulate capital - $260 billion of it in the case of Elon Musk - when it represents the outcome of innovation, ability and effort. It’s called the American Dream.
Nevertheless, one must assume that Mr Parker, being a savvy politician, is fully aware of the precise nature of the achievement which catapulted Thomas Piketty into global stardom and made his book an international best seller. What was it? To get everyone talking about wealth inequality and, in particular, the wealth of the top 1%, simply by measuring these numbers and making them public.
On a personal note, Thomas Piketty, who I greatly respect, helped me get started in economics by accepting an article I sent to a journal in the 1990s of which he was Editor. It explained why unemployment benefit generosity should increase when risk rises and fall when too many beneficiaries create funding problems. The reaction of many governments to the pandemic was indeed along these lines.
Back in 2001, it seemed so mundane listening to Thomas, long before he became famous, presenting graphs showing trends in his inequality data when he visited London School of Economics where I used to work. Little did I comprehend the effect those numbers would have in terms of heightening world-wide interest in the very wealthy and in policies targeting their assets.
The subject of other people’s wealth obviously holds a twisted curiosity. It unleashes the green-eyed monster of envy. Many of us share a perverse desire to pry into other people’s private affairs, especially the rich and famous. What do the big cats own? What toys do have they? Where do they live? Even NBR readers take the click bait. Once there was the “Rich List”, then the “Listers”. Both have already been used by Mr Parker’s officials to collect Piketty-style data.
It is this agenda, namely the collection of data on the top 1%, which Labour has latched onto. It is this agenda that the party wishes to implement in the Kiwi context. The ultimate aim is to so scandalize the public about the assets of the tall poppies, how they made their money and the taxes paid on it, that a majority will vote to appropriate their wealth. Labour is laying the ground to take us there.
However, the Parker-Piketty-tax project may back-fire. For a country like NZ that is short on savings, wealth taxes may reduce them further. Rewards for high-achieving youngsters who choose to stay here to build businesses are already less than what they could expect to receive in bigger nations abroad. Kiwi wealth has overwhelmingly been legitimately obtained. We have little corruption.
Moreover, our values and beliefs are vastly different from the French. Most Kiwis believe the poor are lazy; most French do not. David maybe a disciple of French socialism but Kiwis do not typically share his crusade. To the extent the wealth of our top 1% is viewed as being deserved, reflecting honest hard work and ingenuity that has benefited not only the 1% personally, but helped the nation as well, the public may be happy to leave well alone and not punish success.