The new Labour/NZ First/Greens government is inheriting some significant challenges – one of which is infrastructure. Failure to invest in infrastructure has led to some major problems in NZ’s cities. A key example of this problem is congestion in Auckland with gridlock by the airport reaching crisis levels. The new government has announced an ambitious plan to build a light rail link between the airport and the CBD. This project is overdue and popular but the proposals to fund the project are controversial.
Mayor Phil Goff has announced a regional fuel tax of ten cents per litre across the Auckland. This will raise about $160 million a year towards infrastructure projects, especially the airport link. According to Goff, “Auckland has to pay its share”.
Isn’t it fair enough?
Why is this a problem? Light rail won’t build itself – it needs to be paid for. The problem arises from is how this tax will operate, and who it targets.
Fairness matters. When raising revenue the financial burden should skew towards those who a) can most afford it, and b) who have the most to gain. The fuel tax does the opposite.
Firstly the fuel tax is regressive. Rich and poor will pay the same surcharge at the pump but this has a significantly larger effect on poorer families than on the rich. Someone with a large disposable income won’t notice the charge but even this small increase will have a dramatic impact on working families. As a proportion of income, travel costs are greater for lower income families, and increasing this cuts on those who can’t afford it. Flat taxes hit poorer families harder, and this is made worse by the social geography of Auckland.
This tax will mean those who drive their cars more will pay more. Those who use public transport or walk will be spared the cost. Inner city suburbs have significantly better public transport options and shorter commutes, they are also much more expensive to live in. Poorer families are often priced out further into the suburbs, and the further out from the city center. Thus working families have poorer access to public transport, are more dependent on cars, and will carry a greater burden of the tax. The flat tax already disproportionately affects poorer people, but this is supercharged by the way Auckland dispatches the poor to the cities margins.
The petrol tax will place the biggest burden on far flung commuter suburbs. In many cases these people would have the least to gain from the development of light rail link between the city inner city and the airport. This will be a big bonus to those along on the new tram route, tourists and airport businesses. But for those carrying the greatest share of the new tax, the benefit is marginal.
There are other ways fairer to raise revenue.
The first option could be to put a levy on Airport arrivals. Over 9.5 million passengers will arrive in Auckland Airport this year. A $20 levy would generate about $185 million a year (more than the proposed fuel tax). This is a flat tax, but the nature of air travel as a luxury item would put a greater burden on businesses who travel frequently, and on tourists. Those paying for the project would also be those who would benefit most from the light rail connection.
Even better, we could just claim the profits of the airport itself. The airport was built with public money, but has been been partially privatised (Auckland Council still has a large stake). It’s making a killing. Its annual review proudly claims that last year the airport made more than $330 million profit – an obscene amount. Given that the airport company is set to benefit the most from the bonus infrastructure, it is reasonable to ask that they pay for it. Government could legislate a $200 million a year infrastructure levy which would finance the light rail, and have plenty left over for other desperately needed projects. This would still leave at least $130 million a year for shareholders (if we are being generous).
There are plenty of other fair ways to create funding, if we think creatively (levy on airport based businesses, other levies on tourists etc). And it is important that suburban workers are not left holding the can. A failure to look at other options runs the risk of creating real political problems for the government and the left.
The risk for government and the left
This is more than an abstract debate about funding models, it goes the the core of how this government will function and for who.
The political right wing is desperate to claim they represent ‘Middle New Zealand’. These politicians in no way represent working people. The neoliberal project of the last three decades has led to the infrastructure problems we now need to overcome, but right wing political actors could use genuine frustration at unfair taxation as cover for their political project. As it stands, the current funding model expects the majority of Aucklanders to finance projects that will give greater benefit to some than others. Telling people in the suburbs to suck it up won’t solve the problem, and right wingers blaming “council waste” or government largesse could gain currency.
This is especially dangerous if the benefit seemingly goes to inner-city liberals who already have better access to public transport at the expense of the suburbs. Those in under resourced suburbs have the most to gain from a government investing in better infrastructure, but if those people feel like they are disproportionately covering the bill, the resentment could lead to cynicism at government investment in general.
It’s of particular concern for the Greens. On every measure of policy a Green government would be the better outcome for working people. However, Green Party support is often weighted towards inner city educated voters. It is strategically important for the Greens to be able to speak to other layers of the population who would benefit from their environmental, welfare, workplace and infrastructure policies. Making working people pay for these important projects reinforces the (unfair and untrue) image of the out-of-touch Greens only concerned for Ponsonby Road latte sippers.
It would be positive for activists of the left to speak out and organise against this tax and push for fairer funding. It is necessary to avoid this space to be taken up by the right wing, who are opposed to taxes and public projects in principle. While some might not feel comfortable to be speaking against “our” government so soon, it is important for the left to maintain the initiative. If the right is able to consolidate on issues such as this regressive tax, it will make it harder for the left to push for strong reforms in Government. It’s time to dream big.
If we want to see more light rail and public transport, then the left needs to fight for it to be made for working people, and after 30 years of neoliberal reforms, we shouldn’t be afraid of turning the tide, and asking the rich to pay their fair share.