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10:24 am, July 2nd, 2018 - 48 comments
Categories: auckland supercity, benefits, child welfare, class war, Economy, jacinda ardern, labour, making shit up, Media, national, poverty, same old national, Simon Bridges, spin, tax, the praiseworthy and the pitiful, wages, you couldn't make this shit up - Tags:
Yesterday the Government’s tax changes and the Auckland fuel tax kicked in.
First some comments about the fuel tax. Anyone who has ventured onto an Auckland road in the past few years knows that Auckland has a congestion problem. A big one.
Some things have been done to address this. Completion of the Western Ring Route, a project that was started under the last Labour Government, gave substantial relief at least for a while although the effects are now lessening.
And the rejuvination of the rail system continues to show outstanding results. Annual trips on the Auckland Rail System now exceed 20 million. Back in 2002 the figure was one million.
For the past decade the focus moved from public transport to more roads even though the international experience was that roads generate congestion rather than reduce it. The city rail link has been started. But National had to be dragged screaming and kicking to acceptance that the proposal was absolutely vital.
The basic problem that Auckland is facing is that under the last Government’s Auckland Transport Alignment Project there was an initially estimated $4 billion shortfall that ballooned by a further $1.9 billion in 2017. About a fifth of the projects were not funded. This is as sure fire a way of creating a transport crisis as you can imagine.
So the Government introduced the ability for Auckland Council to raise a fuel tax. At the level that has been agreed to about $1.5 billion will be raised over ten years. With the help of NZTA subsidies and other funding mechanisms this will fill in the funding gap. No worsening congestion.
What other options did the Government have? It could have used the NLTF or a Crown grant to cover the extra money. Aucklanders would still have paid a third of this amount and the rest of the country would have complained. This way is much quicker and less risky.
And congestion costs. Whether through lost time travelling or increased charges for anything that is transported.
Is the fuel tax regressive? The views appear to be yes and no. Simon Wilson, who is one of the most astute reporters writing about Auckland issues initially thought no but then changed his mind. He said this:
What will wealthier people pay? On average per household, they drive more, and as the pump prices suggest, they probably pay more for their petrol too. The wealthiest third of households will face an average fuel price rise at least double that of the poorest.
That might come as a surprise to anyone used to hearing that “fuel taxes hurt the poorest more”, but it shouldn’t. Wealthy people spend more on almost everything.
Despite that, however, it is true that these fuel taxes will hurt low-income households more. Low-income households spend a bigger proportion of their money on essentials, including transport costs. So every price rise eats into their disposable income, assuming they even have any.
Wealthier people might not notice having to spend $5 or more a week of something. But many others have to count every penny.
Another factor: people in poorer households are more likely to use public transport, thus not paying for petrol at all. Those who do drive may be travelling further than many wealthier people, and in less fuel-efficient cars too.
I wrote earlier this week that the fuel price rises are not regressive. That was wrong. Wealthier people will pay more overall but this will impact them less. The fuel taxes are flat taxes: we all pay the same per litre. And all flat taxes are regressive, for the reasons just outlined.
The effect is unfortunate. But there was another event that occurred yesterday that provides some balance. Labour’s family package kicked in.
A summary is in the Herald:
The Families Package, which was funded by cancelling the previous National government’s planned tax cuts, will cost $5.53 billion over five years.
The Government estimates that by 2020/21, when the package is fully rolled out, some 384,000 families with children will be better off by about $75 a week. It is projected to lift the number of children living out of poverty by 64,000, or about 41 per cent, by 2020.
“We know that low and middle income families have been really struggling with things like the cost of housing and the cost of living. For those families, when you are encountering financial difficulties it can really put a lot of stress on the family, particularly when you have children to raise,” [Carmel] Sepuloni told the Herald on Sunday.
“This will really make a difference to their lives.”
The elements of the Families Package are a boost for working families increasing the amounts families currently receive and extending it to 30,000 more families, a best start payment for families with new born children, the winter energy payment, reinstating the independent earners’ tax credit, implementing the accommodation supplement increases previously advised and the introduction of 26 weeks paid parental leave.
Jacinda Ardern announced the introduction of the package with this video.
One other package that has been criticised by the right is Labour’s policy of making the first year’s tertiary education free. The right have criticised the policy as a package of wealth transfer to the wealthy. I have to disagree. There has been a gross transfer of wealth from the young to the poor for decades. This is one attempt to use taxes to reverse this trend.
National’s response to the Regional Fuel Tax is to repeal it. Bridges complains that it is a lack of fiscal discipline that is the problem. But clearly the same fiscal indiscipline must have existed in 2016 and 2017 under National because the funding gap was identified then.
— Simon Bridges (@simonjbridges) June 30, 2018
And National continues its stupidity based attacks on the policies with this effort.
New taxes, bad economic policies & poor priorities by this Labour-NZ First Govt are loading costs onto the weekly bills of Kiwi families & leaving them significantly worse off. pic.twitter.com/LRWCVlE6sW
— NZ National Party (@NZNationalParty) July 1, 2018
No sign of any acknowledgement what the families package means for people, particularly poorer families. Maybe in National land these people do not exist.
To all the critics of the regional fuel tax I accept your concerns but the work is absolutely vital for Auckland’s future. And the other announcements will provide significant benefit for poorer families.