A levy for new migrants

Dr Rachel Hodder
6 March, 2017

If migrants are generally good for New Zealand and already contribute substantially to the public purse, why on earth would The New Zealand Initiative have suggested a levy on new migrants?

The Initiative’s report on immigration, The New New Zealanders: Why migrants make good Kiwis, finds that New Zealand’s current immigration system is broadly successful but some tweaks could be worth considering. Our suggestion of considering an immigration levy to help fund new infrastructure has been received with mixed reviews. Multicultural New Zealand was disappointed that we recommended a levy despite finding that immigration is a boon to New Zealand. Similarly, Immigration Minister Michael Woodhouse noted it would be unfair to levy migrants - who already pay more in net taxes.

We view the levy proposal as an excellent example of policy in second-best worlds. The best solution to one specific problem viewed in isolation may create three different, bigger problems elsewhere. Analysts look instead to a ‘second best’ solution which does the best job of solving the specific problem while causing the least damage elsewhere.

Second-best solutions are seldom popular and a levy is definitely in the realm of the second best. Without considering the second best, it would seem puzzling that our report suggested a levy on migrants while arguing that migrants make a strong contribution to New Zealand and that most of the concerns about immigration are overblown. High population growth has been causing strain on New Zealand infrastructure. This is not the fault of migrants, nor is it the fault of those born here. But it is a problem that needs to be solved. And it is understandable that New Zealanders may not welcome more people into the country if they perceive immigration (rightly or wrongly) as a burden on themselves.

We see a levy as a compromise. It could ease the financial burden on existing residents while accommodating a relatively liberal immigration system. In this way it may also hit another bird with the same stone – it may ease integration by persuading more New Zealanders to see immigration positively.

Integration is a two-way street. Integration is more likely to succeed when the existing population is welcoming to migrants. Our report does highlight that the vast majority of New Zealanders are positive about immigration and the broadly positive reception we have had to our report confirms this. Unfortunately, not all New Zealanders agree. And legitimate concerns over infrastructure spending act as a respectable way of framing anti-immigration stances.

Our recommendation then also stands as a challenge to political parties that have been using infrastructure burden as justification for cutting immigration. If that is the genuine reason you believe immigration policy needs to be adjusted, then why not explore this option first?

Voters should be sceptical of the motivations of politicians who argue fiercely to restrict immigration because of infrastructure costs, but who will not consider the simplest way of addressing infrastructure costs. Maybe, just maybe, some of those stated concerns about infrastructure costs are simply a mask hiding ulterior motives.

Responding to our report, Prime Minister Bill English said that a new levy would need a lot of consideration and would have to meet a high bar. We completely agree. And we invite those who have been blaming migrants for clogging up the roads and hospitals to start considering it.

Stay in the loop: Subscribe to updates