Open Letter to Chl?e Swarbrick

Yesterday the New Zealand Herald published the article I have attached below. It is behind their paywall and many people have asked if I could share a copy here. I have been truly humbled by the response to the article. If we are going to talk about tax then let's talk about all of it.

There is only one place that tax comes from and that is from people who have put everything on the line to create jobs that pay tax. I hope that Chl?e gets another perspective as she thinks about where her salary comes from, where her superannuation comes from, not only the $1 dollar she puts up but the $2.50 that the tax payer matches as well. Perhaps this will be the first time that she has thought about the fact that whatever tax she pays has already been paid by the people who created the jobs that paid the tax for her salary in the first place.

Tax pays for our teachers, our doctors, our nurses, our police our military, not to mention all of the public servants that are put in charge of how our taxes are spent.

This is the open letter.

Chloe, let me put this open letter in context for you.?

An ex-colleague of mine recently accused me of being a ‘chardonnay socialist’ because of the views I shared in an article I wrote around inequities in our tax system, my support of a capital gains tax and my willingness to pay more tax - not less.?

The article that had raised his ire was one I had titled - ‘Let’s Talk About Tax.’?

In it I questioned the terms usually associated with the word tax here in Aotearoa New Zealand. Terms like ‘tax avoidance’ and ‘tax burden.’?

Why couldn’t we talk about being ‘proud to pay tax’ as being part of the social contract we had with each other to create a fair and equitable society. A society that placed a value on education, health, and the well-being of everyone we shared that society with.

The ‘chardonnay socialist’ comment highlighted the tribalism that has become an increasing part of our political discourse. The article on your suggested ‘Wealth Tax’ accentuates that tribalism.?

The opening line read “The golden age of stashing vast sums of money in trusts, or indeed, anywhere, may be over.” You yourself went on to add, “wealth in Aotearoa is concentrated in the back pockets of a wealthy few. It’s time we got on and fixed this.”?

There goes the tribalism again. Bad people ‘stashing vast sums of money in trusts’ or the ‘wealthy few” stashing it in their back pockets.?

So, Chloe, in the interest of complete transparency, something politicians appear to be struggling with these days, I need to declare that I have one of those family trusts. I am assuming that you don’t, so let me share with you why I do.

Over 30 years ago I set up a business in Dunedin, not because I wanted to be rich, but because I had found the place I wanted to live and had decided I wanted to create a company that built high value jobs for others who wanted to live here.?

To do that I had to borrow $500,000 to get started and, as part of that, I had to guarantee that loan using our family home, on which my wife and I were paying a mortgage with interest rates of over 20%.

Within two years, working with some incredibly talented people who would have normally moved north, we had built a technology company employing over 30 people. All of them paying PAYE tax from the jobs we had created. All of them paying GST on the goods they bought, with the salaries they got, from the jobs we had created.??

I am not sure how many of your colleagues fully appreciate the risks involved in starting a business that creates real jobs. As I look around the debating chamber, I am not sure how many have ever created a business themselves.??Perhaps, more tellingly, the question might be, how many have spent most, if not all, of their working lives based on income that comes directly from taxes we pay.?

Tax that is generated by people who have taken the risks that are inherent in starting a business.?

In 2008 I faced that risk head on when I had to explain to my wife that the business we had built was on the verge of going under because of conditions beyond our control. This meant that the family home, where we lived with our two young sons, would have to be sold.?

Again, if you have never created a business, you probably won’t ever appreciate the sense of failure that comes as you face the prospect of sharing this message with your staff, the family who have built the business with you.?

As you may have gathered, we did find a way around this, but that’s another story.?

However, what I vowed from that experience was that as soon as I could, I would find a way to pay off that loan and get my family home in a trust to protect it, and them.??

It took more than 20 years to get to the position where I could remove the need to continually put our house up as security against the bank loans that were needed to keep the business running and people gainfully employed. Today the trust holds more than our family home and it pays tax on income generated. That tax is set by the government of the day and I am more than happy that it is paid.??

I don’t share this story because I think I am special. I share it because I know there are countless people out there who will have been through the same things. This is the reality of building a business that creates jobs - that pay taxes.

So, Chloe, instead of joining in on the tribalism, why not lead from the front, do things differently, avoid getting caught up in the nonsense that politics has become.?

We could start by agreeing this is a discussion we need to have, but let’s have it in the context of a celebration of the success of people who have placed so much at risk to create the jobs that pay taxes in the first place.???

People like a friend of mine who runs a hugely successful business that generates $80 million in annual revenue. I imagine that many reading the story on your wealth tax would place him in the ‘wealthy’ category - stashing money in a trust, or his back pocket, so he doesn’t have to pay tax.

So, let’s look at the tax he does pay, or collect for the IRD, based on that $80 million revenue.??

*???????????$26 million in PAYE and company tax. That’s tax that exists because of the jobs he?created and the success he has made of his business.?

*???????????$12 million in GST. That’s tax that exists because of the business he built and the income that business generates.

*???????????$2 million is made up of Kiwi Saver contributions, ACC levies, fuel tax’s, local council?rates and car registrations. Those are all taxes that occur as a result of the business he?has created, and the risks he has taken.?

That is $40 million in tax, annually, generated by one person who had the courage to build a business and create those jobs. Yes, he is wealthy, I prefer successful, but how many people can you identify in that debating chamber who generate that much revenue for you to spend, every year?

Which leads me to my final point.

The annual tax take is $113 billion a year. Of that, $19 billion is spent on health, $17 billion is spent on education. Both are on the verge of collapse.?

So, Chloe, my question of you is:

When will you start to give those who take the risks to create jobs that pay tax the confidence that, were we to pay more, you will spend it well and not pour it down a seemingly endless drain with little or no accountability?