Why Tax Policy Matters In Struggling Communities

Written by Stacey Shortall

For most New Zealanders, tax policy feels abstract - a debate for politicians, economists, and business leaders. But in the disadvantaged communities where I volunteer, tax policy shows up in very real ways: in the food families can afford, the schools their children attend, and the stability of their homes.

Tax is not just about government revenue. It is about choices - choices that determine who bears the heaviest load, and who gets the most support.

Who Carries the Burden

In New Zealand, disadvantaged communities often carry a disproportionately heavy tax burden. Not because they pay the most dollars, but because they pay the highest share of their income.

• GST accounts for around 25% of New Zealand’s total tax take. Because it applies equally to essentials like bread, milk, and electricity, families on low incomes pay a larger percentage of their income in GST.

• A 2023 Treasury report found that the lowest-income 10% of households face an effective tax rate of about 24%, compared to 27% for the highest-income 10%. That gap is far smaller than people imagine - meaning the poor and the wealthy are taxed at nearly the same rate once GST is factored in.

• By contrast, New Zealand is one of the few OECD countries without a capital gains tax or wealth tax. As a result, the richest 1% of households hold around 25% of the country’s wealth, yet face lighter relative taxation than low-income families who cannot escape GST.

For families already living on the edge, that extra $20 or $30 a week in GST is not small change. It is food, heating, or school supplies.

Why It Matters for Communities

The consequences of this imbalance are visible every day in the community work I do:

• One in five children in New Zealand lives in poverty; over 200,000 young people start life at a disadvantage.

• Foodbanks across the country are reporting record demand. Over half a million New Zealanders are accessing food banks each month.

• Families I meet are working hard - often both parents holding jobs - but still cannot afford basics once rent, tax, and bills are paid.

When our tax system leans heavily on consumption rather than wealth or high incomes, it is the most disadvantaged who feel it most.

The Flip Side of Tax

But tax is not just about what we pay - it is about what we get. In disadvantaged communities, the need for strong public investment is obvious.

Well-funded schools, accessible health services, decent housing, safe transport, and community facilities are the very things that help families break cycles of poverty.

When tax revenue is used fairly and effectively, it becomes opportunity. When it is not, inequality deepens.

What I’ve Learned

From the families I meet, I’ve learned that people are not asking for special treatment. They are asking for fairness. A tax system that recognises that those with less should not pay proportionally more.

I’ve also learned that fairness in tax is not just a numbers issue - it is a human one. Behind every statistic are real choices made at kitchen tables: Do we buy enough food this week? Do we keep the heater on? Do we pay the power bill or the school trip fee?

A Call to Action

If we want safer, stronger, fairer communities, then we need a tax system that reflects those values. That means asking hard questions about whether our current balance between GST, income tax, and wealth tax is right.

Because tax is not just about balancing government books. It is about balancing the lives of New Zealanders.

And right now, for too many in disadvantaged communities, the scales do not seem balanced at all.