Tax, finance and resources

It is a matter of principle that tax measures should be progressive: they should be broadly proportional to the ability to pay. Regressive taxes like GST must be replaced.

Our taxation system has to move to support the urgent drive to reduce consumption, pollution and promote sustainability. We are likely eventually to be taxing carbon and other greenhouse gas emissions. We may have to tax imports based on their embedded energy. Short-term we will have to implement environmental taxes to replace part of the lost revenue from abolishing GST. The stategy is to tax socially undesirable items, that people can avoid if they change their behaviour and lifestyle.

The drive to environmental sustainability will not be comfortable. How we distribute limited supplies to an excess demand is a vexing question. The most credible solutions on offer to date are tradable personal carbon credits. This limits the total to acceptable levels, and allows those who consume the least (usually the poorest) to sell their allowance to those who wish to use more.

Excessive short-term residential housing gains are a clear candidate for taxation. Houses should be places for people to live, not quick return investment opportunities for non-residents. A scheme that takes account of inflation, through indexing, and typical running repair costs should be possible and is necessary. Something like a relief of rpi +1.5% cumulative per complete year owned would work to tax short term gains, without penalising long term owner occupiers.