The Big Kahuna. Comprehensive Capital Tax + Universal Basic Income. – Gareth Morgan. 

We’re like those people, you probably know them, even if only from the mirror, who have stuffed their houses with all the latest “labour-saving devices” purely so that they have more time to… work. It’s hard to avoid the conclusion we’ve all gone a little bit funny about money.

We may have slightly lost track of the benefits, the sheer quality of life that the affluence of the West affords, but we’re in danger of completely losing sight of the obligations.

Our forefathers arrived determined that whatever kind of society they built here, it wouldn’t make the same mistakes as the Old Country.

They didn’t question the equal worth of individuals, nor that this translated in practice into the need for the state to redistribute wealth to ensure a dignified existence for all. That, in essence, is a key purpose of transfer policies, or at least, it was, until everyone seemed to forget

The tax and transfer system came to represent little more than the electoral equivalent of an automatic teller machine: push the right buttons, and it will reliably deliver votes. Any thought of the actual purpose of the thing has been lost in the scramble for political advantage. Little wonder it’s been apparent for quite some time that the system is sick.

The intervention of the state via tax and transfers is intended to redistribute resources from some in society to others.

We’ve all but lost sight of why we tax and transfer in order to redistribute, the extent of redistribution that we deem desirable and whether or not we achieve those objectives.

The first reform we recommend covers an issue that successive tax studies have recommended be addressed by New Zealand governments in order to lift economic efficiency.

It’s a comprehensive capital tax (CCT) that all owners of productive capital (land, buildings, structures, plant and equipment, intellectual property) are annually liable for.

Hand-in-hand with the CCT proposal, we alter the income tax régime to a single “flat” rate on every dollar of income. All income, whether cash or in kind, is captured for taxation purposes. This is what the CCT achieves.

Resources are taken from those who have relatively more in society and given to those who have relatively less: it’s a “progressive” scheme.

The greatest source of means for the well off isn’t income (which can be manipulated to appear artificially low), it’s wealth, and the present system largely leaves that beyond the reach of the redistributive machinery.

The redistributive goals of our society have been reduced to assistance of last resort. Like an ambulance at the foot of the cliff, it kicks into action only when a person’s lot has fallen so far below what society deems adequate that our compassion is engaged.

The second reform is directed at making quite explicit the redistribution objective of the state, by paying every adult an unconditional basic income (UBI).

This is a quite different approach to the present one. The UBI provides for every adult to receive enough to eat, clothe and house themselves, unconditionally, this being the universal entitlement to an adequate basic income.

In a society that produces far more than required for the basic needs of food, clothing and shelter, why shouldn’t a basic income be guaranteed? If nothing else it’s a signal that the society is sufficiently developed for all to live in dignity.

But what of the person who chooses unpaid rather than paid work? The economy comprises a raft of unpaid occupations, parenting, care of the elderly, volunteer organisations such as sports clubs, artistic or creative pursuits, and so on. The amount of time that anyone can spend on these is largely limited by their access to independent means, their own income or wealth, or that of an earning spouse.

This book is about a revolution in our tax and transfer system, not the next step in an incrementalist journey of patching up the current, structurally compromised régime.


Gareth Morgan

from his book: The Big Kahuna, Turning Tax and Welfare in New Zealand in its head.


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