Pure Tax

In a CNN article titled, ‘Why the US can learn from New Zealand when it comes to taxes,” Dody Tsiantar writes that American tax experts and economists are pointing to New Zealand as an example of a country best enforcing a uniform good-and-services tax to “nearly everything”. “In New Zealand, it works in a very pure form,” says Eric Toder, an economist at the Tax Policy Center and a former consultant to the New Zealand Treasury. Toder analysed the economic impacts of several different VAT tax models for the centre. “The population likes it. People think it’s fair because it doesn’t exempt some folks and not others.” Critics fear that an American VAT may invite the creation of an arbitrary morass of tax exemptions and could hurt those with low incomes the most. However, in New Zealand, it contributes about 25 per cent to the government’s bottom line, and the Tax Policy Center in December projected that a 5 per cent VAT tax in the US would generate over $3 trillion in revenue by 2019. That’s not enough to cover America’s huge debt obligations, of course, but it’s a start. The big questions will be whether or not politicians here can keep it as pure as New Zealand wool.