Is Charitable Giving the Alternative to a Wealth Tax in New Zealand?

Jess Berentson-ShawTax and Welfare1 Comment

Recently a Fairfax journalist asked me, in my capacity as head of research at The Morgan Foundation about the annual rich list. As a public policy think tank, we have done quite a bit of research on tax policy. I pointed out that New Zealand is fairly unique in the world in that we have no real wealth tax. It is one of the main reasons our tax system is considered a fairly inequitable one. The tax burden lies heavily on salary and wage earners. I went on to point out that if we were going to celebrate wealthy individuals, it would provide some balance to see exactly how they were contributing to our pooled resource (public funds) on a regular basis. Such a report would, give the public a good idea about how these individuals and families were contributing to New Zealand society relative to others.

Does charity ‘make-up’ for a lack of wealth tax?

In the Stuff article the journalist went on to ask me about the philanthropic contribution such individuals and families were making – which I took to infer that even if these people were not contributing much (as a proportion of their total worth) to the tax take, they perhaps were making up for that with charitable contributions? I myself work for an organisation funded by such philanthropy. I think philanthropy serves a pretty important role in society (I would wouldn’t I?). However, The Morgan Foundation has always taken the line that charitable activities should come in addition to effective public policy. So in that same article I pointed out that the research is very clear that the most effective public policies are those provided in a universal way (I view private charity as a type of targeting).

The evidence from multiple jurisdictions shows that universal services pools risk, identifies everyone who needs help and, because more people are invested in the policy working, undergo a greater level of public scrutiny. Targeted programmes tend to miss people. Private individuals do not have sufficient information or skill to cover off all the needs of vulnerable people, and nor do they have a legal obligation (and sometimes interest) to do so. They may be picking winners based simply on their interests. Targeted programmes also miss people because they are notoriously bad at identifying who is most at risk. Our own government run social investment programme can only identify around half of the children at risk of not participating fully in society as adults.

Targeting misses too many people to be the sole solution

One of the very interesting findings of my book Pennies from heaven is that people (including politicians) tend to greatly overestimate the ability of targeting to improve lives: they are to quote one systematic review “more popular than they are powerful”. Recently, Joanne Black, took exception to my comments about universalism and philanthropy, and in her Listener column she claims that “Chances are for many problems a local solution will be better, quicker and more cost-effective”. As an evidence based policy researcher I prefer not to leave policy development to chance; and the evidence is clear that targeted solutions are simply not as cost effective and wide ranging in their impact as universal ones.

Is there no place for targeting in policy then?

There is an important place for targeting in policy. In fact Professor Michael Marmot’s famous “proportionate universalism” concept, which I draw heavily upon in my research, is based on evidence that targeted assistance on top of universalist policies a very effective way to deal with inequity in society. In the UK in the 2000s a very effective and sweeping set of policies to deal with child poverty took exactly this approach. Before it was halted, with the change in government, the science showed it was having a significant impact on all children’s wellbeing, with the greatest gains for children from the lowest income families.

What about private charity?

For private charity, the onus on showing ‘it works’ shouldn’t be any different. A dollar spent, whether via the pooled funds or direct from my pocket, should be used as effectively as possible. The intention to ‘do good’ does not always lead to good outcomes for vulnerable people. For those interested in evidenced based charitable giving, the organisation Give Well does a great job of examining what works best in international aid.

So while Joanne Black misinterpreted what I said and concluded that “to dismiss the additional good it can do [charity] is arrogant, and, frankly, stupid”. I did not make any such dismissal. Simply put there is a place for everything, support however, needs to be carefully considered and balanced based on what will work best for those that need the most support. As such charity is not the alternative to wealth tax, not when we know the very powerful impact that pooled resources can have on the wellbeing of society.

Is Charitable Giving the Alternative to a Wealth Tax in New Zealand? was last modified: August 9th, 2017 by Jess Berentson-Shaw
About the Author
Jess Berentson-Shaw

Jess Berentson-Shaw

Dr Jess Berentson-Shaw is a science researcher working for the Morgan Foundation. Jess holds a PhD in Health Psychology from Victoria University.Jess has over 10 years’ experience working on applying science and evidence to public policy. She worked on improving the use of science in public health practice in NZ, before working as a Research Fellow at University College in London, where she researched how doctors and clinicians translate scientific evidence into their clinical practice. While in the UK she also developed a national data collection system, which was used to determine what factors contribute to poor outcomes for women and babies during pregnancy and birth. On her return to New Zealand she directed a research group that specialised in the independent evaluation and application of research and science to health policy and practice. Jess loves science and what it can do to make the world a fairer place.

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