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Hickey on the UBI

Written By: - Date published: 11:19 am, March 27th, 2016 - 200 comments
Categories: class war, economy, jobs, john key, wages, workers' rights - Tags: ,

Bernard Hickey makes some excellent points on the Unconditional Basic Income / Guaranteed Minimum Income:

Key fickle on minimum wages

It may be a little early to be fighting an election over, but the idea of a Guaranteed Minimum Income deserves a lot more thought and debate than the dismissal it got from the Prime Minister.

John Key described the idea, suggested as one of many at Labour’s Future of Work Commission, as “barking mad” and “utterly unaffordable”. In 2004, he described Working For Families as “communism by stealth”, yet he kept that programme more than eight years as Prime Minister.

He is also a staunch defender of several other limited versions of Guaranteed Minimum Income New Zealand already has. …

Hickey goes on to discuss Superannuation and various other existing welfare categories.

Key is right that a true Guaranteed Minimum Income, where the Government essentially paid everyone a version of New Zealand Superannuation, could not be afforded with our tax system. Gareth Morgan’s Big Kahuna proposal for a Universal Basic Income of $11,000 a year per adult would cost $18 billion, which he proposed would be paid for with major new tax on capital.

This is where the debate gets interesting and where it starts to marry up with the reason so many other countries are debating a Universal or Guaranteed Minimum Income. Finland and the Netherlands have launched trials and Switzerland will vote in a referendum on one later this year.

After discussing the increasing automation of work…

If the bulk of incomes are generated by capital owned by a few rather than wages going to many, maybe capital or intellectual property taxes are a better way to support the machinery of government and a civil society. Some call this massive transformation a Fourth Industrial Revolution or a Second Machine Age. Whatever it is, New Zealand will not be immune from its stresses.

Final word on the UBI:

We should do some proper work on it.

What an excellent idea.

200 comments on “Hickey on the UBI”

  1. Incognito 1

    We should do some proper work on it.

    Key will do everything to prevent this from happening; marginalise, ridicule, isolate, and try to stop it in its tracks as early as possible. Watch & wait for the textbook political warfare to rear its ugly head yet again.

    • Iceberg 1.1

      You mean like the flag debate?

    • Draco T Bastard 1.2

      Of course he would. I’m sure that he’s intelligent enough to realise that a whole lot of National’s donor would go broke over night if there was a UBI simply because nobody wants to work for the arseholes.

      Have a close look at National’s changes to our welfare system. It’s all about forcing people to work.

      • Incognito 1.2.1

        I wonder what would happen to the 90-day trial period if we were to get a UBI in NZ. This thing is complex!

        • Andre 1.2.1.1

          Seems to me a UBI would justify freeing up some labour laws making it easier for employers to let staff go. Which would be a big selling point to business types.

          • Incognito 1.2.1.1.1

            I honestly don’t know. However, section 2.4 of the Discussion Paper covers this, but obviously the devil is in the detail. It does mention of a compromise between flexibility and security. It also alludes to the asymmetrical relationship between employer and employee (“power imbalance”) and suggests a UBI “could have a beneficial impact on workplace relations”. I therefore think that it is highly likely that the 90-day trial will be reviewed if it ever gets that far.

      • AmaKiwi 1.2.2

        “National’s changes to our welfare system. It’s all about forcing people to work”

        + 100

        And penalizing those who work without pay caring for those who cannot help themselves – young children, disabled, mentally ill, aged, sick, and alike.

        National knows the price of everything and the value of nothing.

  2. The Chairman 2

    A UBI of $11,000 is insufficient. It’s less than many of the welfare benefits that are paid now. Thus, preventing many of the touted benefits from eventuating.

    A flat tax rate coupled with a capital tax (a tax on paper gains and not gains achieved) will capture a number of those a UBI is touted to assist, leaving them fiscally worse off.

    This is why Labour should stay well clear of the Big Kahuna.

    An intellectual property tax and a financial transaction tax would be far more worthy of further consideration.

    • Foreign waka 2.1

      And yet pensioners are being expected to live on this income.

      • weka 2.1.1

        Do you mean now? $11,000 is what the dole is. Super is $19,500.

        If you mean Morgan’s proposal, I agree with TC there are definitely problems with it. But we can use it as a starting point rather than the model we have to adopt.

        • The Chairman 2.1.1.1

          Yes, now.

          Keep in mind, $11,000 is merely the base single adult job seeker benefit rate without accommodation costs, which most beneficiaries also receive.

          And yes, it’s also far less than current super rates.

          Therefore, $11,000 is insufficient.

          Coupled with a capital tax, there are certainly problems with Morgan’s proposal. It’s largely an example of what not to do.

          • Craig H 2.1.1.1.1

            Big Kahuna intended for the accommodation supplement to continue.

            The Capital Tax is only paid if the person doesn’t pay as much or more income tax. The taxpayer can opt to defer, and pays interest if they do.

            • The Chairman 2.1.1.1.1.1

              “Big Kahuna intended for the accommodation supplement to continue.”

              Labour expects a UBI will replace benefits. See the misalignment?

              “The Capital Tax is only paid if the person doesn’t pay as much or more income tax”

              And how many low income earners will meet that criteria? None.

              Who will meet that criteria is the well off. See the problem?

              “The taxpayer can opt to defer, and pays interest if they do”

              Merely increasing the burden and putting off the hardship while robbing the next generation (with home ownership trending down) that will require that inheritance. For some, it will be their only chance of owning a home.

              This is meant to assist the poor and their offspring, not roll them.

              One would expect a model like that to be pushed by National, not Labour.

              • RedLogix

                Nope, it’s you demanding wealth in capital remain tax-free that’s the National party line.

                Here’s the odd thing; you seem ok with the idea of a CGT paid on sale and realised value, yet unhappy about a CCT which is much the same sort of thing being deferred and paid out of an estate. The details may be different, but in practise they will likely have similar outcomes.

                So why the acceptance of one, yet outrage at the other?

                The simple fact is that our housing market is broken. It needs a major restructuring and a CCT could be a useful part of that. It’s not the magic wand by itself as others have noted; but frankly the option of leaving capital wealth in domestic homes untouched just doesn’t work.

                If you tax all other forms of capital wealth and leave the domestic home exempt, all you do in increase the current distortion.

                • The Chairman

                  “Nope, it’s you demanding wealth in capital remain tax-free that’s the National party line.”

                  What rubbish. Your average worker has worked hard and paid tax on the wealth that was put into that capital/home. The problem is you want to tax them again on paper gains that may never eventuate.

                  “Here’s the odd thing; you seem ok with the idea of a CGT paid on sale and realised value…”

                  Wrong again. If you read my comments you would have seen why I’m not.

                  “The simple fact is that our housing market is broken. It needs a major restructuring and a CCT could be a useful part of that. It’s not the magic wand by itself as others have noted; but frankly the option of leaving capital wealth in domestic homes untouched just doesn’t work.”

                  The simple fact is we can address our housing market and those outrageous gains without a capital tax. A capital tax doesn’t prevent as much as it tries to cash in on those gains. It requires gains to produce revenue.

                  Moreover, once the market has been restructured and capital gains cease, there would be no actual capital gain to tax.

                  • RedLogix

                    What you are assiduously avoiding saying is that for years you’ve been making far more passive rentier money on the increased value of your home, than you ever did by working at anything productively.

                    And you don’t want the free ride to end. Fair enough.

                    You’ve gotten used to the idea that the state would pay you a guaranteed Superannuation to pay your living expenses, while expecting you could make north of $50k pa untaxed riding the Auckland property market.

                    Nice earner. I can see why you don’t want that to come to an end.

                    And then you could pass a big lump of it on to the kids untaxed as well. Cool, they could damn well do with it. Maybe thirty years late, but they’ll be pleased all the same.

                    But spare us the ‘poor me’ schtick.

                    The simple fact is we can address our housing market and those outrageous gains without a capital tax.

                    I’ve already stated that, and made at least one bullet-proof suggestion to bring it about. But the fact remains, if we are going to tax income, then it should be treated the same regardless of what source it comes from or what form it is in. Otherwise we merely finish up privileging one over the other and creating stupid distortions that harm everyone.

                    And once we decouple our tax/welfare system from this endless, venal squabble, defending various privileges over another … once we establish the principle of true equity where the system treats all people and all forms of wealth the same … then maybe we could get on with paying some attention to real problems that matter.

                    • The Chairman

                      “What you are assiduously avoiding saying is that for years you’ve been making far more passive rentier money on the increased value of your home, than you ever did by working at anything productively.”

                      No. That’s merely your attempt to paint me (thus my genuine concerns) in a bad light. Insinuating I have a sinister self interest, while attempting to diminish the concerns.

                      What I don’t want to see is more driven into poverty.

                      This tax (a CCT) fails to genuinely distinguish between the rich and poor, largely treating all capital the same. Therefore, will put more into fiscal hardship. Not all property owners are rich.

                      Moreover, it will put upward pressure on rents as the tax burden will largely have to come from incomes because the gains calculated have yet (if they ever) come to fruition. Creating more hardship.

                      Additionally, it will add to the cost of owning a home. Not only will people have to buy and pay off their home, now (if this tax is introduced) they will also have to pay this new tax burden. Making it fiscally more difficult to own a home.

                      The less disposable income people have (due to higher rents or higher home ownership costs) the less they have to spend. Negatively impacting consumer demand, thus business returns.

                      You seem to be blaming the soaring gains in property on those that own property. As if owning a property is a bad thing.

                      I’m more than happy to see soaring gains come to an end.

                      However, If you wish to addressee soaring gains there are far more effective measures one can take, instead of introducing a tax that seeks to capitalize off gains (whether they eventuate or not) while further putting a number into hardship.

                      You seem so out of touch with reality. Today we have a number of generations of poor living in the one family home, you want to tax that away from them.

                      Not only does that go against what is trying to be achieved, it’s also abhorrent. You and your ilk should be ashamed.

                      Poverty is not only a reality, thus problematic for some. The vast inequality prevents the wider economy from sustainably performing. Therefore, what you simply write off as venal squabble is actually one of the real problems we all face.

                      One can only hope Labour can see past your rubbish.

                      Grant, if you are out there, do you care to comment yet?

              • mikesh

                “The Capital Tax is only paid if the person doesn’t pay as much or more income tax”

                “And how many low income earners will meet that criteria? None.”

                In Morgan’s scheme homeowners would constitute major payers of this tax, even if they are low earners. The point being that the rent saved through homeownership is in fact income and should be taxed as such.

                • The Chairman

                  What is being overlooked is not having the burden of rent is what’s keeping a number of home owning low income earners out of further poverty.

                  Moreover, as a CCT is applied (whether or not gains eventuate) landlords will look to pass it on. Putting further upward pressure on rents. Negatively impacting on the renting class.

                  These are not the high income groups a tax should be challenging to redistribute wealth and improve inequality.

                  This tax will push more further into poverty, defeating the purpose and number of benefits of introducing a UBI.

          • pat 2.1.1.1.2

            If the government moved heavily into social housing with the likes of a state housing program and tenant tenure then the workability of a UBI is greatly enhanced….introducing a UBI without other significant change is unworkable IMO.

            • The Chairman 2.1.1.1.2.1

              “If the government moved heavily into social housing with the likes of a state housing program and tenant tenure then the workability of a UBI is greatly enhanced”

              Indeed. But as New Zealand’s wealth is largely tied to housing, that correction would have to be managed slowly to avert a financial disaster.

              Therefore, a UBI could be set at a high rate and reduced as the cost of housing slowed down. However, it would have to keep up with inflation.

              “Introducing a UBI without other significant change is unworkable”

              Indeed again. Hence, the consideration of new taxes and settings.

              As it’s a form of wealth redistribution, the cost of it has got to come from the top.

              The IMF claims that inequality due to growing high-end incomes is bad for growth, thus the upside of this UBI redistribution is the economy will better perform.

              • Brendon Harre -Left wing Liberal

                Good points both Pat and Chairman.

              • pat

                ‘Indeed. But as New Zealand’s wealth is largely tied to housing, that correction would have to be managed slowly to avert a financial disaster.”

                it would have to be managed, yes but it would by its nature have to be slow in any case….we cannot produce the required housing at anything other than an incremental rate as evidenced by the Christchurch rebuild(?) even with a large portion of imported
                labour.

                It comes with the additional bonus of resetting the investment drivers in the economy away from housing so addresses in large part the redistribution also required.

                • The Chairman

                  The Christchurch rebuild generally relied on the private sector, who lack the scale a willing Government has to build in bulk.

                  It’s not so much tax incentives that drives people to invest in housing.

                  First off, people require a home, therefore in that case it’s necessity that drives them.

                  Secondly, the risk factor. Productive investments are far more risky, hence it’s the reduction of risk driving investment into housing.

                  Thirdly, there is financing. Borrowing for productive investment is far more difficult as it is higher risk. Therefore, those that can secure a home loan and invest wouldn’t necessarily get the finance to invest productively. Leaving them little choice but to invest in housing.

                  Nations that do tax housing hard still face the same investment distortions. Highlighting, tax is not the major driver, if a driver at all.

                  • pat

                    “The Christchurch rebuild generally relied on the private sector, who lack the scale a willing Government has to build in bulk.”

                    beg to differ, take a look at the actual repair/construction stats for both the private ICs AND the Gov agencies….the majority are cash settled.

                    “It’s not so much tax incentives that drives people to invest in housing.”

                    Again I disagree, the driver in housing investment is the essentially tax free capital gain. match the supply to the demand and the capital gain will be by inflation and improvement.

                    “hirdly, there is financing. Borrowing for productive investment is far more difficult as it is higher risk. Therefore, those that can secure a home loan and invest wouldn’t necessarily get the finance to invest productively. Leaving them little choice but to invest in housing.”

                    On this i agree but point 2 addresses the bulk of the push to invest in non productive housing freeing more funds from individuals and banks to invest elsewhere…it is a question of return for both parties and with housing essentially removed from the equation investment must flow into other areas, likely productive or even offshore.

                    • RedLogix

                      Very quickly. Yes in all the other comment going on I overlooked seconding your original comment.

                      Absolutely the state must be a major player in the affordable housing sector, one way or another. All sorts of good reasons for this.

                      Cheers

                    • The Chairman

                      “Beg to differ, take a look at the actual repair/construction stats for both the private ICs AND the Gov agencies….the majority are cash settled”

                      You missed the point. Which is a willing government can build far more homes than the private sector due to its scale.

                      The Christchurch rebuild didn’t have a willing Government seeking to vastly increase housing supply. The restoration was largely left to the private sector.

                      There are basically three groups that invest in housing.

                      The increasing number of people requiring a home to live in. Capital gains for this group is generally a hindrance. It results in costing them more in rates and insurance. What’s driving them is the need to own a home and the security it provides

                      Next there are those looking to lease/rent out housing. Again, capital gains for this group is generally a hindrance, also costing them more in rates and insurance. What drives them is having a secure (as in bricks & mortar) long-term investment.

                      Then there are speculators, this group do seek capital gains.

                      However, a capital tax doesn’t prevent as much as it tries to cash in on those gains. While after tax gains remain, speculators will continue to pursue them. As the distortion in offshore markets (that do tax hard) highlights. And this is why most commentators agree, a capital tax is far from a solution in itself.

                      Therefore, to prevent capital gains from soaring, other measures are required. Once these other measures are put into place and soaring gains cease, there is really no need for a capital gains tax.

                    • pat

                      Sigh…
                      ” Which is a willing government can build far more homes than the private sector due to its scale.”

                      The capacity does not exist in the private sector (when i have time I’ll provide the links) and the government has zero these days so will be starting from scratch…..you don’t develop competent trades people overnight…..as evidenced by the problems in construction currently.

                      ‘Capital gains for this group is generally a hindrance. It results in costing them more in rates and insurance.’

                      Bollocks. The only aspect of CV that impacts rates is if your value increase exceeds the average increase….it is simply a method of apportioning the rates take, if all values increase then the proportion remains unaffected. IC premiums are calculated on rebuild cost and bear no link to market value.

                      ‘However, a capital tax doesn’t prevent as much as it tries to cash in on those gains. While after tax gains remain, speculators will continue to pursue them. As the distortion in offshore markets (that do tax hard) highlights. And this is why most commentators agree, a capital tax is far from a solution in itself.”

                      I made no mention of a CGT in my post so wonder if you have bothered to read it….my point which you have failed to grasp was the speculative capital gain is no longer available WHEN the supply meets demand.

                      “You missed the point.”

                      What point was that?

                    • The Chairman

                      “You don’t develop competent trades people overnight “

                      That’s correct. However, Government can hire the expertise required.

                      Rate calculations vary between council regions. In Wellington for example, rates are based on your property’s capital value.

                      Nevertheless, if ones property values are soaring, one will generally exceed the average regional increase.

                      While insurance premium calculations have not long changed to sum insured, one can still obtain full market value insurance. And a number do.

                      Nonetheless, the driving factor is the need to own a home and the security the property or investment provides. Not the tax free capital gain (speculators excluded).

                      Additionally, on a side note, sum insured is a misleading term in this regard. If a rebuild comes in under the sum insured, one is not paid out the outstanding balance.

                      Sorry, Pat. I thought when you stated (above) ‘the driver in housing investment is the essentially tax free capital gain’ – you were advocating a capital tax.

                      But yes, I agree, when supply meets (or better still) slightly exceeds demand.

                      The point you missed (twice now) was clearly stated in my post above, in which you copied & pasted into your post I’m replying to now. Therefore, I should be the one that’s sighing, lol.

                    • pat

                      you still appear to believe the capacity can be magic’d up from somewhere…
                      ‘That’s correct. However, Government can hire the expertise required.”

                      Hire from where pray tell?….the private sector haven’t got it and as you agree developing it will take time….therein is the method to transition and allow the market to adjust over time as previously stated

                      The insurance and rates issues you are focusing on are not driven by property speculation…..I agree that rates and premiums are an issue for those deemed wealthy due to property ownership but their causes are unrelated to the topic under discussion….and the recent insurance changes merely bring us back inline with the rest of the world and have no impact on premium setting…even a comprehensive policy of old only pays the cost of replacement….its basis is cost and risk, not forgetting what the market will bear

                      As to rates… price increases in a bubble are area wide (granted with variation but the biggest increases tend to apply at the higher end)….but unaffordable rates are going to have to addressed at some point in the not too distant future….particularly in less densely populated areas

                      The question was rhetorical…so sigh away.

                    • The Chairman

                      No magic required, Pat. Expertise and advance technology (speeding up the building process) can be brought in from overseas if required.

                      Insurance and rates issues raised were in relation to property value increases and why not all property owners welcome them.

                      Cost and risk. Yes, the cost part can relate to current market value. Sometimes cash payouts are required, hence the relation to market value (which is driven by speculation adding to demand) and the impact on premium setting which calculations take into account. Thus, the recent change to so called sum insured, it works out cheaper for insurance companies. Christchurch was a wake up call.

                      The biggest increases in property values and rates can also take place in up and coming surrounding suburbs.

                      I agree, the rate burden is becoming unsustainable for some, forcing people to move in an effort to reduce them.

                      Thanks, but I’ll leave the sighing to you, lol. It’s not in my nature.

                    • pat

                      I suspect we agree on many aspects of this problem however consider this fact….back in the day, (about 10/15 years ago) a three bedroom house would be built in 12 to 14 weeks…the average build time in CH CH for a standard 3 bedroom house now approaches one year……with all the ‘Expertise and advance technology (speeding up the building process) can be brought in from overseas if required.’….and the workmanship is crap

      • The Chairman 2.1.2

        @Foreign waka

        It’s still all under consideration, but they really do need a model that will give people a decent rate.

    • RedLogix 2.2

      I agree that by itself $11k is not enough to live on. I don’t think it’s intended to be.

      However it’s a mistake to evaluate that number purely in the context of our current system.

      First of all it applies universally. Think how this will positively affect many households with more than one adult. At present for instance NZ has a very low ‘partner qualifying income’ that effectively closes the door on any benefit for the unemployed partner in most low income households.

      Secondly I’d argue to extend it downwards in age to encompass a return of the Universal Child Allowance that NZ used to enjoy.

      Thirdly, and this is critical, most people on benefits are not entirely unable to earn other income. The current system punishes this with absurdly high abatement rates and effective marginal tax rates higher than 80%. Remove this big obstacle and I’d expect many people currently on unemployment benefits (with all the soul crushing bullshit, stand downs and form filling imposed on them) would happily find bits of extra income to bring the UBI up to a more comfortable level. This would especially apply in regional and rural areas.

      And fourthly, those who cannot work for reasons of disability should have access to top-up support and well funded assistance. I won’t try to speak on their behalf because the disabled know what they need better than I do, but with the bulk of the dollars flowing via the UBI, I would expect the extra needed for disability support to be well-directed and good value.

      • The Chairman 2.2.1

        It’s a mistake not to evaluate the number in the context of our current system.

        While you are correct, saying it will positively affect many households with more than one adult. It also has to benefit those living alone.

        The more we can benefit the struggling individual, the more struggling households with more than one adult will benefit.

        I also agree with your suggestion of extending it downwards in age to encompass a return of the Universal Child Allowance, but that still overlooks ensuring struggling individuals sufficiently benefit.

        If we set a low UBI rate with the expectation people will work Those that can’t work would be forced to continually seek top ups merely because their UBI rate is set to low to live off alone. Let alone giving consideration to their medical needs.

        Which, when all is taken into consideration, only reinforces why a higher UBI rate is required.

        • RedLogix 2.2.1.1

          Let’s go with the idea that say the level of the Super for a single adult at around $17k pa is a minimum liveable income. (And not forgetting that for couples, ie more than one adult in the household, Super is not twice this number.)

          Well if you already have $11k of this in the hand (tax free) then I’d argue that for able bodied people it’s reasonable to expect them to find another $10k pa of paid employment or added value to make up the gap.

          If you live in urban areas there are plenty of short-term gigs at all sorts of jobs that would achieve this.

          If you live in a rural town or area, it’s even easier. Heaps of contract labouring, picking jobs, or options to build your own food gardens, gather firewood, and so on. Sure they don’t necessarily pay much, but with a UBI to fall back on your not being forced to do that really shitty job if you don’t want to.

          Community based, collective enterprises suddenly start becoming a lot more attractive and viable. Bad employers would hate the UBI; it would force them to lift their game.

          And as I clearly stated at point 4 above, for disabled people who cannot work, I would absolutely expect a redesigned UBI system to ensure they have access to a well directed, well funded systems to account for their specific needs. When you’ve taken care of a large fraction of what is needed with a UBI as a of universal right, then I’d argue it becomes much easier to give quality attention to what is needed to address disability issues for each individual.

          • alwyn 2.2.1.1.1

            A couple of comments.
            “Super is not twice this number”. It is you know, pretax.
            Each person gets, pre-tax, $326.30 which is $17,000/year.
            After tax, on an M tax code you get $288.10 each

            ” Heaps of contract labouring, picking jobs, or options to build your own food gardens, gather firewood, and so on. Sure they don’t necessarily pay much,”
            Would you think it reasonable to lower the minimum wage. After all that would probably increase the number of jobs provided by a bit. This would probably help thos with intellectual disabilities who simply can’t justify being paid the minimum wage in what used to be called, I think, sheltered workshops.

          • The Chairman 2.2.1.1.2

            “Let’s go with the idea that say the level of the Super for a single adult at around $17k pa is a minimum liveable income.”

            OK.

            “Well if you already have $11k of this in the hand (tax free) then I’d argue that for able bodied people it’s reasonable to expect them to find another $10k pa of paid employment or added value to make up the gap.”

            First off, with a flat tax and capital tax, there is no guarantee people will get $11k in the hand. In fact, at this stage of the discussion, it’s unlikely they will.

            Nevertheless, that still overlooks the fact if we set a low UBI rate with the expectation people will work Those that can’t work would be forced to continually seek top ups merely because their UBI rate is set to low to live off alone.

            Moreover, work expectations robs us of other touted benefits.

            It may take time to find suitable employment, thus there goes the fiscal security that was being promoted. A low set UBI rate won’t provide enough to live off to sustain those looking for work while out of work.

            The reward for work not currently considered work, would be another lost.

            The ability to retrain/educate would also be negatively impacted.

            “If you live in urban areas there are plenty of short-term gigs at all sorts of jobs that would achieve this”

            Your expectation is also overlooking unemployment number suggesting otherwise. Moreover, the future changes of work, with many jobs destine to disappear.

            A low set UBI will force people into shit jobs because they will require the extra income just to live.

            $11,000 annually doesn’t even take into account accommodation costs, that most on benefits also currently receive. Hence, making it insufficient.

            It’s more conceivable to see bad employers upping their game with a decent set UBI rate.

            A higher set UBI rate will also benefit businesses, increasing demand, thus business returns.

            Finally, your point four and last response didn’t address the point I made.

            If we set a low UBI rate with the expectation people will be required to work to get by Those that can’t work would be forced to continually seek top ups merely because their UBI rate is set to low to live off alone. Can’t see to many top ups being granted for that. This is apart from their added medical needs.

            If we set a low UBI rate with the expectation people will be required to work to get by, we therefore can’t expect those that can’t work will get by.

            You are taking about top ups for their medical needs, which is another issue. We are require to give them a decent set rate first, then look at individual top up requirements for medical needs.

            Again, this all reinforces the need for a higher UBI set rate.

            • RedLogix 2.2.1.1.2.1

              First off, with a flat tax and capital tax, there is no guarantee people will get $11k in the hand. In fact, at this stage of the discussion, it’s unlikely they will.

              Please read the BK again. Absolutely a UBI is tax-free and guaranteed. So yes everyone does get the $11k.

              Nevertheless, that still overlooks the fact if we set a low UBI rate with the expectation people will work

              At present I believe that remains a reasonable expectation. Especially if you are trying to achieve sufficient bi-partisan support to ensure the UBI remains durable into the future. Maybe in several decades more the impact automation will diminish the expectation to work, but not just yet.

              A low set UBI will force people into shit jobs because they will require the extra income just to live.

              The present system is way worse at this, especially with all it’s mandatory job-seeking requirements and stand-down periods. The UBI is not a magic wand that will make the world a beautiful place, but with the future of work predicted to trend towards more of a gig economy, with more short-term work … then an UBI is a far more natural fit.

              Disability is primarily a health issue, and best worked with in that setting. Every disability is unique, and the best way to help each person is unique. Our current WINZ system is very ‘one size fit all’ and punitive; surely we can do better. We can basically organise disability support services to do whatever we like … it’s just a matter of imagination really. As I said above, I’m not trying to speak on their behalf.

              • The Chairman

                “Please read the BK again. Absolutely a UBI is tax-free and guaranteed. So yes everyone does get the $11k”.

                No, not in the hand after the accompanying taxes are applied.

                In fact, a number of low income earners would be left fiscally worse off.

                It’s disappointing you believe it remains a reasonable expectation, considering I highlighted the extra hardship it will create. Moreover, it doesn’t align with a number of the benefits Labour has touted.

                As previously explained, a higher set rate UBI is also of benefit to businesses. It increases consumer demand, thus business return. This helps achieve the support of the right, thus helps muster bi-partisan support.

                And once again, you are completely overlooking that $11,000 is less than what many currently receive now. Therefore, a low set UBI is worse than the present system in that respect, effectively placing mandatory job-seeking requirements on people as the UBI alone won’t be enough to live off.

                The UBI is not a magic wand, but it can achieve so much more if set at a higher rate. Therefore, maximizing the potential benefits should be its aim.

                People are struggling now. A decent UBI can assist them. Therefore, the sooner a decent UBI is in place, the better off many will be.

              • weka

                “Disability is primarily a health issue, and best worked with in that setting”

                Nope. The MoH in many ways is not much better than WINZ. Btw WINZ aren’t one size fits all when it comes to dealing with disability and illness, there is actually a lot of discretion in the system. It’s how successive govts have chosen to implement it that’s the problem, plus more recently National making structural changes via legislation.

                At some point I’ll put up some ideas re how to solve the disability topups but it would help in the meantime if people recognised their relative lack of knowledge and expertise in this area. It doesn’t help having a meme about ‘it’s fine, put it in health’ being promoted.

                • RedLogix

                  As it happens three close members of my family have significant disability. They are all quite different, and all have quite different needs. What I do know absolutely for certain is that WINZ with it’s endless rules and hurdles to leap over is completely the wrong place for them to get what they need.

                  So while I’ve twice stated in this very thread that I’m no expert on the topic and I don’t want to try and speak on behalf of disabled people … at the same time on behalf of my brother and two daughters … I want to see someone who actually has some expertise come up with some constructive suggestions.

                  Because if disability is not a health issue then what is it? It clearly has a human rights dimension, but then we all share equally in that.

                  • weka

                    So maybe we’re talking at odds here.

                    In the context of a UBI, disabled people have income security needs in the same way that everyone else does. If you put those income security needs into health they become health needs and the state will decide how they should be met. That’s bad because now you have state bureaucrats deciding what is a real need and what isn’t, how it should be met and by whom (I think this is what Morgan is suggesting too).

                    We can look at all sorts of examples of how Health is currently failing vulnerable people. There are also huge cultural issues to do with the paternalistic nature of medical models and how they get applied to people with disabilities.

                    The MoH doesn’t have the capacity to manage income needs (that would have to be created), and it’s limited experience of direct funding is pretty uneven.

                    Yes, WINZ is horrible. But as I said, the structure of the system itself is pretty flexible, it’s how it’s being managed that is the problem. For people with higher income needs due to illness/disability, there are at least three barriers. One is structural (Labour removed Special Benefit and replaced it with TAS which is limited in what it can pay). The second is managerial (governments control how policy is developped and implemented, and there is a huge variation in how different beneficiaries get on with applying for assistance). The third is cultural (bludger memes). None of those thigns will be solved by either a UBI or shifting topups to Health.

                    “I want to see someone who actually has some expertise come up with some constructive suggestions.”

                    I’d really like to put up a post about this at some point, and would love to have you share your experiences from your family’s perspective. I don’t want to do that yet because I think there isn’t enough understanding yet about what a UBI is or what it is for, but I agree that getting to those questions about how do we might solve the topups problem is pretty important.

                    • RedLogix

                      Fair comment. There’s nothing there I disagree with at all.

                      I guess my concern is that while I’m aware that a UBI of $11k pa is insufficient for vulnerable individuals who cannot work, I don’t think that raising the UBI to say $20k pa to cover their specific situation is reasonable.

                      After all the UBI is universal, so paying everyone a rate to cover the needs of maybe 5% of the population (that’s a wild guess, feel free to correct it) just doesn’t work politically.

                      So if we are going to totally redesign the tax/welfare system, and disability support needs a special work-around as a consequence, then I’m totally open to exploring this opportunity to do a much better job of it.

                      My first thought is that if we ask the disability community the right questions, they will likely have the right answers. Acknowledging the issues you mention, I still expect the Health system to play a role, but not in the usual form it’s delivered in. I just want the WINZ we all know and hate a zillion miles away from it.

                      Surely there are plenty of innovative community based models around the world worth exploring and learning from? That’s where I freely admit to zero expertise. Guest post on the topic would be totally welcome when the time is right.

                    • weka

                      Yep, I think arguing about the money is starting at completely the wrong end of the conversation.

                      Myself, as bad as WINZ is I’d choose them over Health easily. But better yet would be a Department of Social Security.

                      (disabled people have health needs like everyone else, but not all disability needs are health related. Check out social theories of disability if you are interested).

                      Surely there are plenty of innovative community based models around the world worth exploring and learning from?

                      One big issue is how to tory-proof whatever gets created. The other is that I’d say having the govt fund people with disabilities directly is preferable to most other models, but I know there are lefties, including on ts, that find that abhorrent on princple because it means that NGOs are involved and that goes against the ideologicaly commitment to the govt being best at providing services. There are also righties who hate it too (can’t trust dependent people to know how to spend money!). That’s part of the reason I don’t want to go there yet, until the other aspects of a UBI are roundly understood.

            • Tom 2.2.1.1.2.2

              Why are we even talking about giving the rich an extra $11,000 a year. I dont even understand why someone in a well paid job like a teacher in Southland needs an extra $11,000 a yearwhen so many need it more!

              • Andre

                Most UBI proposals also include changing the tax structure so the well-paid pay more tax. Which means that after the UBI/more tax, what they keep in the hand is roughly the same as what they get now.

              • The Chairman

                @ Tom

                I guess it makes it easier to sell. But, in the end, it will most likely be clawed back in new tax settings.

                Labour have to clearly identify a decent UBI rate. Who they perceive should attain this full UBI rate? Moreover, who is going to pay for it? For example, what tax bracket will be hit the hardest?

                As it’s a form of wealth redistribution, one would expect those at the top end would have to cover it and those at the bottom would retain the full amount.

          • Foreign waka 2.2.1.1.3

            I just sincerely do hope that you don’t expect me to pick apples when I am 70, do you? I mean the doctor bill will kill me….

    • greywarshark 2.3

      @The Chairman
      A tax on paper gains? Would that mean that govt would start charging tax on rentable value of homes which they could choose to regard as income foregone or something.
      I think Don Brash was keen on this idea. Another way of stealing the commons it seems to me. You get a little property but if the tax is steep enough, you might as well sell it and rent thus meaning a mass of property owned by a few speculators. Same old land-owning pseudo-aristocratic leanings we escaped from in Britain.

      • The Chairman 2.3.1

        Everything is still under consideration.

        But, yes, if such a capital tax was adopted, people could find themselves being hit with a tax on a perceived (and not achieved) annual paper gain. Leaving many struggling to pay the burden.

        Hence, the concern.

    • Tom 2.4

      How can you pay if you only make a paper gain? you would have to realize that paper gain by selling of part of your business !

      • The Chairman 2.4.1

        “How can you pay if you only make a paper gain?”

        That’s the problem, hence the concern.

      • Foreign waka 2.4.2

        In the same way the rates are being assessed… artificially increased by increasing the land value. Another hit for the lower income/pensioner… god forbid you made it and really have a house to your name.

        • Craig H 2.4.2.1

          Here in Christchurch, rates don’t go up when there is a general increase in property values, they go up if the value of a specific property goes up faster than the average increase e.g a particular suburb’s values go up faster than the general increase in city property values.

          • The Chairman 2.4.2.1.1

            That may be the case, but Morgan’s capital tax will hit you regardless if your property value increases or not.

  3. UncookedSelachimorpha 3

    His reasoning for a tax on capital is excellent – we need such a tax.

    Unfortunately the owners of capital also tend to own the political, media and legal systems, so there will be powerful resistance.

    • weka 3.1

      Isn’t he talking about an annual tax on assets? Imagine a pensioner or ill person on a benefit having to pay that on a house they own which just happens to be in a neighbourhood or city where property prices have spiked due to the investment classes’ greed?

      • Draco T Bastard 3.1.1

        The answer to that, and many other housing problems, is all housing being owned by the state.

        • Foreign waka 3.1.1.1

          Disagree completely. The hallmarks of democracy are that you can own what you buy – property law. The reality of such construct would be that women are once are the ones paying the price on so many levels. People have fought for this over centuries, I just hope you don’t mean we are to give it away without as much as a peep?

          • Draco T Bastard 3.1.1.1.1

            The hallmarks of democracy are that you can own what you buy – property law.

            Wrong. That’s the hallmarks of capitalism and capitalism is anathema to democracy.

            The reality of such construct would be that women are once are [again?] the ones paying the price on so many levels.

            That too was the result of capitalism.

            People have fought for this over centuries, I just hope you don’t mean we are to give it away without as much as a peep?

            What have we truly fought for?

            Think about that for a second. Have we truly fought to have a few rich pricks owning everything so that we then have no access to the necessities of life? That the rich then get to tell us what to do?

            I’m pretty sure that the revolutions throughout history have actually been against that.

            • Foreign waka 3.1.1.1.1.1

              @Draco – If NZ goes back to the glory days of yesteryear where women had no rights, neither in society let alone own property – I am so outa here!

              • Draco T Bastard

                Why would we do that? Guaranteed housing leads to women being oppressed?

                I’m really not following your train of thought here.

      • RedLogix 3.1.2

        Capital gains taxes can be structured so as to be paid on either realised or unrealised gain.

        As you rightly say, CGT’s on unrealised gains, ie an asset that you still own but hasn’t generated any positive cash flow, always generate difficult cases like the one you mention.

        In most cases the tax is paid on realisation of the value of the asset, ie when it’s sold and there is cash generated to pay the tax.

        Well at least I think that’s the basics of it; CGT’s are a complex area of tax I won’t pretend to be an expert in.

        Of course for homeowners the simply and logical answer is to so structure our domestic property market so that it stops being a casino and asset prices settle down in line with normal inflation. At that point large CGT liabilities stop being a concern.

        In answer to DtB’s response above, given that the Crown is the ultimate owner of all land (property owners merely purchase title), and that most capital gain is on the land value, not the dwellings or improvements, then it’s quite reasonable for the state to claim back it’s share of that gain. Alternatively, as I’ve argued in my more radical moments, I’d be very comfortable thinking about the idea of all titles being leasehold. Instead of paying rates, you’d pay rent to the local authority.

        Crucially then the banks could not use the land value as an asset on the mortgage, and this would instantly stop property speculation in it’s tracks.

        • Dv 3.1.2.1

          Rates are a form of a capital tax.

          • Foreign waka 3.1.2.1.1

            Rates are paid for services that are paramount if you want to be part of a civilization: Rubbish collection, water, wastewater, infrastructure, recreation and conservation etc. At no time is the cost of services delivered through a municipal entity a tax collection tool. Mind you GST is collected on those rates too.

            • saveNZ 3.1.2.1.1.1

              @Foreign Waka
              Unfortunately rates (which are a capital tax) from the council seem to be being used to paid for Stadiums, malls, contractor cronies in poor projects etc.

              Stuff like rubbish collection, in many places is an extra cost to rates and you pay for rubbish bags. You pay also for water and wastewater separately from rates (in Auckland).

              In the Auckland more than a billion dollars has been spent on IT to unify the supercity structure imposed by the government, but not a lot to show for it.

              So increasingly the previous essential things that rates were spent on, are becoming ‘user pays’ while grandiose schemes like stadiums and convention enters and shopping malls like Westfield are what the councils are putting our ‘capital’ into from rates. If they go wrong, the rate payers have to pay more and nobody is held accountable.

              • Foreign waka

                Yes, I know but this is not the mandate. We as rate payers should be able to hold back payment (ref below the reference to democratic) if we feel that it is used for purposes that are not part of the councils brief:

                To enable democratic local decision-making and action by, and on behalf of, communities
                To meet the current and future needs of communities for good-quality local infrastructure, local public services and performance of regulatory functions in a way that is most cost-effective for households and businesses. (Local Government Act 2002, section 10 (1)).

                Regional councils’ responsibilities include –

                Sustainable regional well-being.
                Managing the effects of using freshwater, land, air and coastal waters, by developing regional policy statements and the issuing of consents.
                Managing rivers, mitigating soil erosion and flood control.
                Regional emergency management and civil defence preparedness.
                Regional land transport planning and contracting passenger services.
                Harbour navigation and safety, oil spills and other marine pollution.

                I think this just about covers it.

        • The Chairman 3.1.2.2

          Yes, capital gains taxes can be structured so as to be paid on either realised or unrealised gains.

          However, the Big kahuna is clearly a model that seeks to tax paper gains (unrealised gains). Negatively capturing a number of those the UBI scheme is being promoted to help.

          There is also the concern Labour were supportive of a CGT, thus this can potentially give them a backdoor, enabling them another crack at it.

          “Of course for homeowners the simply and logical answer is to so structure our domestic property market so that it stops being a casino and asset prices settle down in line with normal inflation. At that point large CGT liabilities stop being a concern”

          A correction in house prices has to been done slowly to avert economic disaster/collapse.

          Therefore, correcting property prices will take a considerable time frame, making it an inappropriate reliance to base a low UBI policy upon.

          Moreover, the suggestion (in the Big Kahuna model) is to annually calculate gains at 6% regardless of the CPI (rate of inflation) and then tax that at the deemed flat tax rate. Once again, negatively capturing a number of those the UBI scheme is being promoted to help.

          This is why a an intellectual property tax and a financial transaction tax would be far more worthy of further consideration.

          It would be good to hear from Grant on how much consideration has been given to an intellectual property tax and a financial transaction tax.

          Moreover, how much revenue they are expected to generate.

          It would also help alleviate concerns Labour are once again attempting to slip in a CGT.

          • RedLogix 3.1.2.2.1

            However, the Big kahuna is clearly a model that seeks to tax paper gains (unrealised gains).

            One option a CGT based on the equivalent rental value of a property, not it’s paper ‘market value’. Rental value tends to track real incomes much better.

            It’s been a while since I read Morgan’s book, but I’d want to refresh my memory before commenting further. IIRC his proposals were a bit more subtle than you are suggesting.

            Certainly there will be instances where a retired couple might find their CGT liability has become substantial. In the long run the BK system should allow people to plan for their CGT obligations, but in the short term you’d need a work-around for people already in, or close to, retirement.

            One approach might be to simply let the CGT obligation accrue and then pay out from the estate.

            • alwyn 3.1.2.2.1.1

              I don’t think Morgan was talking about a Capital Gains tax at all. He was talking about a simple tax on any capital assets you own, including your house. You would be liable for the charge even if the value of the property was falling. Sure it would become a lower amount each year but you would still have to pay it.
              On his default numbers, 30% tax and 6% deemed capital return rate a $1 million dollar house would incur a tax of $18,000/year. This would stay the same if the value of the property never changed. If the value dropped to $900,000 you would only have to find $16,200 the following year.
              Tough if you were a pensioner and your only income was the UBI.

              • weka

                I linked to his bit on CCT (not CGT) below

                Hickey on the UBI

                • Andre

                  For what it’s worth, I’ve paid Capital Gains tax on a primary residence I owned in the US, and regularly paid Capital Gains Taxes on US mutual fund returns, While the paperwork is a minor nuisance, it’s not a burden because you have received cash in hand which causes the tax liability.

                  I also regularly pay the Foreign Investment Fund tax here in New Zealand (which is basically a capital tax like Morgan proposes), and it really pisses me off every time because it’s due even when there’s no cashflow to pay it.

                  Rates in New Zealand are also a bizarre hybrid form of capital tax separated from cashflow, but at least it is nominally paying for council services received.

              • The Chairman

                @ alwyn

                Morgan was talking about a CCT, which is effectively a form of capital gains. However, its far more wide reaching, capturing many other assets.

                On the figures you touted, a pensioner in that position would be worse off.

                Their tax burden would exceed their UBI payment.

                • Andre

                  Morgan’s proposed CCT is a yearly tax on the capital value of an asset, nothing like a capital gains tax.

                  http://www.bigkahuna.org.nz/comprehensive-capital-tax.aspx

                  It would be payable every year on the assessed capital value of the asset, regardless of whether the asset is gaining or losing in value. As you and alwyn identify, it would financially ruin pensioners, and even many regular wage earners such as a 55yr old bus driver that bought a home in Mt Albert 25 years ago. As a proposal, I think it kills the Big Kahuna stone dead.

                  On the other hand, a true Capital Gains Tax, applied when the asset is sold and the gain realised, is a totally viable proposition and is used in most of the rest of the world. Its only effect on pensioners is to slightly reduce the size of the inheritance after their grieving children sell the home.

                  • RedLogix

                    As you and alwyn identify, it would financially ruin pensioners, and even many regular wage earners such as a 55yr old bus driver that bought a home in Mt Albert 25 years ago. As a proposal, I think it kills the Big Kahuna stone dead.

                    In which case allow people the option, for a transitional period of many ten or twenty years, to shift their CCT liability onto their estate. Or any other number of constructive work arounds.

                    Besides right now your 55 yr old bus driver might well be making more untaxed capital gain on his old house than he is driving a bus. While his children struggle to think about getting into their first one.

                    The core problem here is that the median cash income for New Zealanders is still pitifully low, while asset prices have become a back door vehicle for making big money. It’s completely inequitable and distorts our economic incentives badly.

                    Now if we want to bring the free ride to an end, I’m happy to advocate we bring the bus to a gentle, planned and predictable stop so as not to hurt those already committed to it. But no more letting new passengers on board.

                    • Andre

                      I’m completely with you on your paragraphs 2,3,4.

                      But I have a problem with trying to fix those problems by forcing people to choose between 1: forced to move out of their long term home because of huge tax bills or 2: build up a massive tax debt that cannot get resolved in their lifetime. Especially if we don’t tackle hard other parts of the problem contributing to the property crazies going on, such as immigration, building constraints…

                      It also seems to me that in general, New Zealand has a bad dose of being unwilling to learn from the experience of others and often trying to reinvent wheels in different shapes, mostly with ugly unintended consequences. I don’t know of any jurisdiction that applies a CCT anything like Morgan’s proposal. However, there’s lots of countries that use conventional capital gains taxes that we could learn from in designing one here. Sure, it’s not a complete solution, but then problems with multiple causes rarely get solved by a single correction.

                    • The Chairman

                      One can only hope Labour are not as determine as you to introduce a capital tax.

                      Wanting to rob the next generation of their inheritance.

                      The objective here is to tax the well to do more, not seek to destroy the wealth of the low lying fruit.

                      “Besides right now your 55 yr old bus driver might well be making more untaxed capital gain on his old house than he is driving a bus. While his children struggle to think about getting into their first one”

                      The 55 yr old bus driver isn’t to blame for skyrocketing house prices. That merely costs him more in insurance and rates. And as for his struggling kids, they would get the inheritance if your ilk wasn’t so intent on robbing them of it.

                      You’re firing in the wrong direction if you want to address the skyrocketing cost of housing. The 55 yr old bus driver with his one home isn’t to blame.

                  • The Chairman

                    A traditional CGT applied when the asset is sold and the gain realised doesn’t generate much revenue as it relies on the amount of houses being sold that year, opposed to taxing all houses regardless if they are sold or not.

                    For a traditional CGT to be successful in generating revenue, it relies on house sales to surge on.

                    The more houses that are sold, the bigger the gain, the larger the tax revenue. Kind of setting the wrong incentive for slowing the housing market down.

                    Moreover, in areas in high demand a CGT can potentially be passed on, adding to the cost of housing.

                    Although fairer as it’s based on gains received, why would we want to further impoverish pensioners?

                    Home ownership plays a significant role in keeping many pensioners out of severe poverty. Therefore, we wouldn’t want to eat into that, running the risk of increasing poverty when the goal is to reduce it.

                    Thankfully, we have other tax avenues to pursue. Lets hope Labour take this discussion on-board.

              • RedLogix

                @alwyn

                And why would you want to defend this scenario? Basically your pensioner in the $1m house has made more capital gain than many workers earn in a lifetime … and paid no tax. What is in the slightest bit fair about that?

                Why perpetuate more of it? And why should the generation of young people with no chance of owning a home they need tolerate this?

                Now I get it that some people have fixed or very low incomes, and paying a CCT isn’t possible. By all means give people committed to the current system a fair path through via any number of transitional measures you can dream up.

                But at some point you have to recognise the current system is broken and unfairly privileges rentier capital over productive work.

            • The Chairman 3.1.2.2.1.2

              CGT based on the equivalent rental value of a property, is still calculating a paper gain.

              The rental value of a property is not the profit thus gain a property makes. Therefore, it’s largely taxing unrealized gain and not actual gain achieved

              Creating a fiscal disadvantage for those facing the burden. More so, if the home isn’t a rental.

              This problem impacts on far more than just retired couples.

              Any home owner on a low income will be negatively impacted by a capital tax and higher flat tax than their current lower rate.

              Which, once again, is why it would be good to hear from Grant on how much consideration has been given to an intellectual property tax and a financial transaction tax.

              Moreover, how much revenue they are expected to generate?

              • greywarshark

                Random thoughts. Seems like an ineffectual property tax, or an intellectual property tax. The UBI sounds like Communism, giving some stability to the peasants like me. There won’t be much chance of being able to acquire a house and leave it to your children, as was the past option.

                What about having an FTT. Possible?
                I do hope that government will pass some useful legislation for the people, like well written laws for euthanasia. At preent the trend is to interfere in the supply and quality of any available product that is useful for bringing death when wished by the citizen.

        • weka 3.1.2.3

          He’s not talking about a CGT.

          As well as reducing the level of basic income provided to retirees, the Big Kahuna proposal introduces a new tax on all capital – the Comprehensive Capital Tax or CCT. It applies to all economic capital – all real assets including land and housing. The tax applies a minimum ‘required’ return of 6% to the capital, permits the deduction of interest costs and taxes the balance at the flat tax rate. For an owner occupied home, with no mortgage, the CCT amounts to an annual charge of 1.8% of the home’s value.

          http://www.bigkahuna.org.nz/retired.aspx

          My brief readings thus far on how Morgan would solve various problematic aspects of his model UBI tell me that he definitely shouldn’t be the person to design one for NZ 😉 His work is still useful, but we really shouldn’t be treating it as the overall model.

          These combined policies would have a severe effect on retirees if implemented immediately. Various complementary policies or self-help strategies would modify the adverse effects on retirees and ease the transition.

          For some, sizeable Kiwisaver balances will be available, providing ample income to supplement the UBI and pay the CCT.

          The CCT payment can be delayed (but an interest cost would be added to the amount each year). This amounts to retirees eating their house. For an average house, if the CCT were rolled forward as an accumulating debt (incurring a 6% real use-of-money charge each year), it would take around 25 years for the loan to equal the value of the house.

          Retirees would have the option of downsizing their homes (which would, of course, reduce the ongoing CCT payable). They might choose to share accommodation with their family (or with others).

          • Tom 3.1.2.3.1

            So let me get this right. In Auckland where poor people and ordinary working men and women struggle the plan is to make them pay more? I wouldnt go to voters with that!

            • Andre 3.1.2.3.1.1

              Yeah, either Gareth Morgan really is clueless about real people’s lives, or he’s trying to play mind games again. Maybe both.

              • RedLogix

                Try actually understanding what is proposed before slagging it Tom. Poor people and ordinary working people will emphatically be better off under the UBI aspect of this plan. The exact opposite of what you have said.

                There will be of course some people who own substantial capital assets who would need to deal with the CCT aspect of the system. There are ways to mitigate this for them, but in the long run if you have a million dollar home, you can scarcely be described as either ‘poor or ordinary working men’.

                • weka

                  “Poor people and ordinary working people will emphatically be better off under the UBI aspect of this plan.”

                  Or they won’t. There are definitely low income people who will be worse off (DPB, disabled people, retirees).

                  Are you suggesting that a CCT would be asset/means tested?

                • The Chairman

                  That’s incorrect, Red.

                  Any low income earner with a modest home will be worse of when a higher flat tax and a capital tax is added to the equation.

                  Their income tax burden will increase, then not only would they be hit on their home, but many other assets they’ve accumulated over the years.

                  Which is why other taxes (an intellectual property tax and a financial transaction tax) or exemptions and a tax free threshold of some form will be required.

                  No sign of Grant yet for comment?

                  I see Grant was commenting on here the other night.

                  His input would be welcomed in this discussion.

                  • RedLogix

                    The point is quite simple. Why should someone with an asset worth many hundreds of thousands of dollars be considered ‘poor’? Sure they may have a low cash income, but they are sitting on a valuable asset.

                    That’s the core problem the current system has encouraged for decades, that people could make far more untaxed money on their homes than they could actually working or investing productively. It’s created all sorts of perverse outcomes and distortions. Why would anyone want to defend more of the same?

                    At some point we have to bite the bullet and accept that capital gets taxed in some form of another. And yes that will mean some people will no longer enjoy the free ride they’ve had under the current system.

                    • The Chairman

                      “Why should someone with an asset worth many hundreds of thousands of dollars be considered ‘poor’?

                      Ones income contributes to their wealth, thus incomes can’t be overlook and discounted.

                      Therefore, we have to acknowledge if home owners are cash poor and treat them accordingly.

                      Eating into their home will put them further into hardship. According to Morgan, in 25 years they would have eaten their home away in taxes.

                      What sort of message is that sending? Work hard, buy a home, only to have the state take it away in new taxes.

                      Labour need to distance themselves from this attitude quick smart.

                      Hope Grant shows up soon to clarify.

                      The tax is to wide reaching, failing to take into account ones ability to pay.

                      “That’s the core problem of the current system has encouraged for decades, that people could make far more untaxed money on their homes than they could actually working. It’s created all sorts of perverse outcomes and distortions. Why would anyone want to defend more of the same? “

                      This wasn’t done by the cash poor. Moreover,countries that do have a capital gains tax have also been impacted. So a capital tax is no panacea.

                      Opposing a capital tax to fund a UBI isn’t supporting or defending the mess our housing sector is in. There are other culprits, thus other solutions to better deal with that.

                      If Labour are going to push ahead with a capital tax one can only hope they don’t overlook the cash poor. If not, it would be another let down by Labour.

                      Where’s Grant to clarify?

                    • RedLogix

                      So you’re very concerned about those who’ve so organised their affairs under the current system so as they are asset rich (and untaxed) and cash poor (and so also remain untaxed).

                      I’m real keen to hear you defend all these people who pay no tax on their wealth, while effectively locking out their own children from ever owning their own home. I don’t suggest they did it deliberately; for the most part they were merely responding to the loud signals the current system was making to them.

                      But when the signals get changed, and the incentives corrected, then yes some people will get stranded unless we use our imagination and work out ways of transitioning to a CCT or CGT most people can live with.

                    • The Chairman

                      “So you’re very concerned about those who’ve so organised their affairs under the current system so as they are asset rich (and untaxed) and cash poor (and so also remain untaxed).”

                      No. I’m concerned about those who have found themselves in this situation.

                      Those that organise their affairs tend to have their assets tuck away in trusts.

                      The people I’m defending don’t generate any income from their modest home. In fact, they have paid most of their hard earned cash (while also paying their fair share of tax) into their home.

                      And the up keep (insurance, rates and maintenance) continues to eat into their income. Therefore, their homes cost them money. However, it’s a step up from renting and further impoverishment.

                      You may know some of them, they are the working poor. You know, people a Labour party is meant to look out for. Yet, you’ve deemed they deserve to lose their homes.

                      One way to avoid this is not to take a capital tax option. Luckily, there are other tax avenues to explore.

                    • weka

                      The thing that freaked me out about Morgan’s proposal was that he appeared to be saying that if the elderly didn’t want to pay a CCT they could downsize or have other people live with them. Having to sell your house to avoid tax because you are poor is not a good mechanism to build into social security. Encouraging people to live with others is great but you can’t do it by economic force and definitely not in a culture that’s just spend a couple of generations socialising everyone to not look after their oldies and to live with people other than their spouse. It’s all too devoid of understanding what is real for people.

                      Red – “Why should someone with an asset worth many hundreds of thousands of dollars be considered ‘poor’? Sure they may have a low cash income, but they are sitting on a valuable asset.”

                      I’ll tell you how. If you are on a long term benefit and can’t afford the CCT ($3,600/yr on a $200,000 house, for someone whose base income is $11,000/yr), according to Morgan you can sell your house. When you sell that house, WINZ will count the asset as cash after the first year. You will then lose all your supplementary income apart from if you get disability allowance. So no accommodation supplement, no hardship grants. You are expected to live off the money from the sale of the house until it is gone and then you can go back to WINZ for extra income support.

                      In the meantime you are now renting, so wherease before you had very small accommodation costs, now you have very large ones, plus all the insecurity that goes with renting. WINZ only pay part of accommodation costs, so now you are having to use your core benefit to cover the rent. Plus all the potential social disadvantages from having to move. The system could solve some of that, but I’m just pointing out that owning a home doesn’t stop one from being poor or in a precarious situation despite it making them better off than most poor people renting.

                      I also don’t think one’s home should be considered primarily a function of the economy, whether someone owns or rents. It should be considered a home (social security).

                    • RedLogix

                      So in essence you are telling us that organising your affairs so as to pay almost no tax is a fine thing that Labour needs to protect at all political costs?

                      Or maybe not.

                      Because you cannot tell me this is a fair or sustainable situation, it needs to change. And the tax system that enabled it needs dismantling.

                      In the meantime, as I said elsewhere, if we need to devise ways to protect those people who’ve taken advantage of the tax-free ride the current system let them get away with, then I’m all ears. Never suggested that selling their home should be their only option.

                      But no more new passengers.

                    • The Chairman

                      “So in essence you are telling us that organising your affairs so as to pay almost no tax is a fine thing that Labour needs to protect at all political costs?”

                      No. I was highlighting the total opposite. The problem is targeting them (those that organised their affairs to avoid tax) in the manner you are suggesting (a capital tax) also captures those that didn’t.

                      Hence, we need to look at other forms of taxes that are more direct.

                      Clearly you need fresh eyes on the matter.

                    • RedLogix

                      So your answer is leave untouched the one form of tax avoidance most damaging to the NZ economy?

                      Not convinced.

                      I think you need to take another close look at the numbers and read the Big Kahuna book. It was a while back when I read it, and I don’t have my copy at hand anymore. But in it Morgan did traverse this topic is some detail, and clearly identified a number of ways to deal with it.

                      Sorry but my memory isn’t clear enough to give any details.

                      However what I do recall is that the vast majority of people on or below median incomes were indeed MUCH better off. And it could be expected that as they passed through their working lives they would be in a good position to avoid the asset rich, cash poor scenario in retirement you are concerned about.

                      As time does it’s work, people would adjust to the new rules and plan accordingly. Yes there are issues around the transition period, but they are totally manageable.

                  • Andre

                    I don’t want Grant to come on here and tell us what Labour is thinking just yet. I want him to come here and read what we are thinking, and hopefully pull the good bits out of our different viewpoints to come up with something better than just what the caucus can come up with by themselves.

                    • Incognito

                      @ Andre 27 March 2016 at 8:59 pm:

                      Wise words!

                    • weka

                      Totally Andre!!

                    • The Chairman

                      Labour wanted a public debate, it would be nice to see them partake more.

                    • Incognito

                      @ The Chairman 27 March 2016 at 10:42 pm:

                      That’s a fair comment but we here on TS can rave & rant to our heart’s content but Grant Robertson and Labour are not quite in the same position, are they? The DP gang is always watching …

                    • The Chairman

                      Grant doesn’t have to come here to rant and rave. They do enough of that in the house.

                      But it would be in the party’s interest to help keep the discussion on course by putting an end to a lot of the speculation that is taking place from the lack of detail.

                      One would also expect he would want to put the concern that Labour are using this as a backdoor to have another crack at pensioners (and reintroduce some form of capital tax) quickly to bed.

                      Last election policies are still fresh in a number of voters mind.

          • RedLogix 3.1.2.3.2

            Thanks weka. Now it comes back to me.

            Gareth’s CCT is not exactly the same thing as a CGT. Most people will think of them as the same, but the CCT is a small tax on total capital paid yearly, while the latter is a large tax paid on the increase in capital paid on realisation.

            To be fair Gareth does realise that there will be some people worse off under his system. But mainly this comes about not because his system is inequitable, but because the present system is so very distorted and unfair. It’s inevitable that transitioning from one to the other will create winners and losers.

            Of course if we want to we can find plenty of ways to mitigate the impact. For those of you raising these objections, why not put your thinking caps on and come up with four possible ways to deal with these impacts?

            • Andre 3.1.2.3.2.1

              One real easy way to mitigate the impact is make it a Capital Gains Tax, due when the gain is realised. Then you’ve got the cash in hand when the tax comes due. Most countries do it this way so there’s plenty of examples of what to do and what not to do.

            • weka 3.1.2.3.2.2

              “But mainly this comes about not because his system is unfair, but because the present system is so very distorted and unfair. It’s inevitable that transitioning from one to the other will create winners and losers.”

              Who are you thinking of? Because I can’t see the point if it’s low income people that are the ‘losers’.

              “Of course if we want to we can find plenty of ways to mitigate the impact. For those of you raising these objections, why not put your thinking caps on and come up with four possible ways to deal with these impacts?”

              Yeah, working on that. I was a bit shocked to see how cavalier Morgan was with some aspects of his proposal. One really useful thing him or other high income/asset people could do is fund the involvement of low income people in designing a system. I don’t mean consulting (they did that), I mean enabling them to have power in the actual design process.

              • RedLogix

                A UBI absolutely works for the vast majority of ordinary people, most of whom own very modest assets. It baffles me to see so called lefties here slagging the idea to defend capital owners.

                Personally Morgans BK leaves me a lot worse off financially, but I support it because I would be living in a fairer country.

                • BM

                  And because you’ve made a ton of money and it wouldn’t have any effect on your lifestyle?

                • weka

                  A UBI could leave most people better off but Morgan’s leaves some vulnerable people worse off. I’m not going to support that and it has fuck all to do with caring about the assets of rich people. How about you acknowledge that some poor people would get screwed by the Big Kahuna? Unnecessarily so imo.

                  I’m pro UBI, I can’t see how you have missed that.

                  • RedLogix

                    How about you acknowledge that some poor people would get screwed by the Big Kahuna?

                    How about you stop whining about it and make some positive suggestions to work around these issues? The BK is as many people, including Morgan himself states, is a starting point, something to be built on.

                    Tearing it down before we’ve even got the foundations in place seems peculiarly daft to me. I really am all ears.

                • Foreign waka

                  RedLogix, it is simple.
                  If a person has a fixed income, it stands to reason that this income will – I would assert must- be worth less with every year that passes. Inflation adjustments in NZ is based on buying a fridge or a car each year for crying out loud. Hence, the disposable money available wont stretch to pay another tax “to make things fairer”.
                  Why not set these people out in the wilderness with a rucksack containing a tent, matches and a knife? I would say it would indeed would be a fairer deal on the issue of survival.

                  • RedLogix

                    Please read http://www.bigkahuna.org.nz/.

                    Then get back to us with more questions or ideas. Because honestly I’ve read your question several times and I just don’t understand it.

                    • Foreign waka

                      I think you know what I mean. By the time you hit retirement age, the income will be too little to live on and too much to die. If a retired couple has a house and hits hardship they first have to realize the money of the property before they get any further assistance. This may have been their home for many decades, with memories and a feeling of security. Now that they are basically “defenseless” they are being trotted on. These people are not just physically but also emotionally at a different place than they were just a couple of decades earlier.
                      To take from them what is left of most likely a life of work work work is not just cruel but anti social in its true form.
                      Hence my sarcastic remark about a tent, but hey it might be not possible as freedom campers are now not welcome either.

                      I personally think that any system change has to have a period where the switch is made from one generation to the next.
                      1/ system = generational contract if you will. The current taxpayer sustains the need of the older people
                      2/ You introduce a compulsory insurance “tax” that is held in trust by the treasury or a branch of the law/court fraternity under the rules of “public service”. Either has to be accountable to the taxpayer and NOT to the government of the day. Regular updates of trust holdings, contributions etc have to be provided to each individual person who pays into the trust. The only admin cost allowed has to be stipulated as a number of hours per year at a professional going rate, distributed fairly by number of trust holders. The person(s) looking after the fund can be voted for if need be.

                      I do not belief that any private insurance can provide any functioning civil service as the interest is opposite the intend of a profit seeking entity.

              • Andre

                One of the big problems with our current system is it really screws over beneficiaries that go out and try to earn a bit more. It looks to me like Morgan blithely assumes that if you remove that problem, almost all beneficiaries will suddenly be instantly able to go out and earn more than enough to cover whatever supplements they were getting, regardless of personal circumstance. What’s in the Big Kahuna website seems very anti paying any supplementary benefits for any reason. Which doesn’t seem realistic.

                On the other hand, if the UBI is set high enough to eliminate the need for supplements, say at current Superannuation levels, it really does look like a “license to laze” for the fully fit, and would be politically unsellable.

                So the only solution I can come with that truly covers people’s needs and is politically sellable is a UBI for absolutely everybody at about the current unemployment benefit level, plus a much reduced WINZ dealing in supplementary benefits for the disabled, ill, elderly etc.

                Pretty much as RedLogix argues starting at 2.2.

                • weka

                  I’m still in two minds on which is the best way to go on that.

                • The Chairman

                  “On the other hand, if the UBI is set high enough to eliminate the need for supplements, say at current Superannuation levels, it really does look like a “license to laze” for the fully fit, and would be politically unsellable.”

                  A number of retirees continue to work on, disproving the theory it would be a license to laze.

                  Moreover, while one could live off the super, the lifestyle isn’t that great for the young, fit and able.

                  Thus, a number would want to work and grow their wealth, giving themselves a better lifestyle, attaining a home etc…

                  But not if it’s going to be taxed away as Red is advocating for.

                  • Incognito

                    I thought that one of the issues is that there won’t be enough work to guarantee everyone full-time employment; this is already the case and will get worse with time. So, if some choose to “laze around” on a UBI because they can then others will fill the gap. I am not convinced that competition for paid work will all that dramatically shift in the early years and similar notions were made in the Discussion Paper (Section 3.3) and there is not much evidence to support this risk to be as major as some think it might be.

                    • RedLogix

                      While changes in the availability of paid work as we currently know it may well have a real bearing on the justification for a UBI, it’s not the core issue for me.

                      Personally I think people work for two main reasons; to achieve mastery and excellence in their trade or profession, and to contribute meaningfully to a collective or social goal. From this many of us gain a sense of self-worth and respect.

                      But equally there are many people who do these things outside of paid employment, and their achievements frequently go unrecognised and unrewarded. Our communities are all the poorer for this.

                      To my mind a UBI is one of the critical components towards restoring vitality and energy to our community life, so eroded after 40 years of neo-liberal madness.

                  • RedLogix

                    But not if it’s going to be taxed away as Red is advocating for.

                    Dishonest. That scenario can only happen if you already have substantial capital assets. And that debate has far less to do with a UBI than the equally pressing need to treat income from capital the same as income from work.

                    Exactly how we deal with a CGT, or Morgans CCT, is a fascinating topic in it’s own right. But conflating it with the UBI is stupid.

                    • Incognito

                      I’ve got some ‘dangerous’ thoughts on CGT/CCT, which I might be able to put into intelligible words tomorrow, hopefully. I am already struggling to understand the link with a UBI; is it real or perceived?

                    • The Chairman

                      That scenario can happen if you merely own a home. Therefore there is nothing dishonest about it.

                      As Morgan himself highlighted, it would take about 25 years for a home to be eaten away by taxes.

                      Treating income from capital the same as income from work is flawed

                      A lot of capital doesn’t generate income unless its sold Therefore, in an attempt to tax that capital (on paper gains) the tax will generally end up coming from incomes.

                      Such a tax captures too much of the low lying fruit, creating financial hardship in the process. The goal here is to improve lifestyles. By redistributing the wealth from the top down.

                      Therefore, tax settings are a part of a UBI, someone is going to have to pay for it. Hence the two are totally intertwined.

                      Fortunately, a capital tax (whether a CGT or a CCT) are not the only tax avenue to explore when it comes to a UBI.

                    • Incognito

                      @ RedLogix 27 March 2016 at 11:53 pm:

                      Although I am in favour of a UBI my comment was not meant as a “justification for a UBI” but rather a counter-argument against one of the oft-raised criticisms against a UBI, i.e. it would encourage laziness. The sub-text is clear: “just like (unemployment) benefits do”.

                      However, I think you have missed out a whole ‘galaxy’ of reasons why people work. People are conditioned and indoctrinated from a young age to find suitable (!) paid employment (“get a haircut and get a real job”) and make a career. This adds to status and increases the chances of finding the ‘right’ mate, and to raise a family, etc. You know that stuff, right? Although you don’t have children IIRC.

                      In addition, people work for money! How could you forget this one?

                      People work for the social interactions although not many would see it this way – it is a huge factor and how many haven’t found their spouse/partner via work? Paid work is one of the cornerstones of our society – it is crumbling though.

                      I agree 100% with the other statements in your comment.

                    • RedLogix

                      @incognito

                      Look forward to your thoughts.

                      @Chairman

                      And the scenario you are so worried about only occurs if, in the interests of avoiding tax, you’ve been silly enough to put ALL your capital into your own home and leave yourself with only the UBI as cash flow to live on. That’s nuts.

                      Well the purists answer is to downsize and put the surplus into cash flow positive investment.

                      Morgan’s answer is to let you opt to defer his CCT and pay interest until either you or your estate can pay.

                      Or you could stick it in trust and let the beneficiaries pay the CCT.

                      Or you could reverse mortgage the CCT. Maybe even KiwiBank could offer a really low interest rates on these.

                      Or we could devise an elegant scheme with an entry date that introduced the CCT at some fraction of a percent per annum over say twenty years.

                      Or … hell I could dream these up all night. Plus I might add the Australian’s would be scratching their heads wondering why none of this discussion mentions income from a Superannuation scheme. Most middle class Aussies retire with anything from $300k upwards in their retirement funds.

                      The point is there are plenty of avenues to explore as you say. But treating income from capital is essential to the idea of horizontal equity. The idea that the tax system should treat all forms of income the same.

                      And because we have failed to do this for so damned long NZ has become a weird, under-performing economy where everything is farmed for capital gain rather than cash flow.

                    • The Chairman

                      The scenario can happen to anyone that has worked hard, paid their taxes, managed to buy a home and are on low incomes.

                      The wealthy can sustain the tax burden through their high incomes. Therefore, it’s the poor that will be forced to sell their homes and their kids that will miss out on their inheritance. Putting those families at risk of becoming further impoverished

                      Thinking Labour will gain support wanting to force poor people to sell their home to then invest in far more risky productive investment is nuts. A number of them will lose their money as investments go bad.

                      Deferring the burden adds to it (as interest is also incurred). And again, it’s the poor that will have this extra burden forced upon them. And their children that will miss out on their inheritance

                      What is been overlooked here is that not all home owners are well off, but such a tax treats them as such.

                      The goal here isn’t to destroy the wealth of low and minimum income earners that have manged to buy a home. Putting them at further risk of becoming impoverished .

                      The goal is to improve inequality by redistributing the wealth from those at the top – down.

                      You seem to want to force homeowners (whether rich or not) to pay for this, hence the flaw and my concern.

                      We require tax settings that will identify and target the truly well off, distributing the wealth down accordingly. Not tax settings that capture the poor.

                    • RedLogix

                      Thing is TC, if you own a million dollar house you aren’t poor. You are actually quite well-off but in order to avoid paying tax you’ve put all your dosh into a poor investment which generates no cash flow.

                      Even here in Australia everyone instantly recognises that as wrong. Only us stupid kiwis have been lulled into a false sense that this is somehow ok. It’s how we can have a median adult income around $30k and a median Auckland house price closing in on $900k. Nuts.

                      It’s totally disingenuous to talk about ‘forcing poor people to sell their homes’. Not when first of all they are not actually poor, they’ve made heaps of capital gain in their property, and secondly when at no point has anyone actually suggested that.

                      I’ve made at least four different suggestions to mitigate your concerns; here’s another one. Exempt the first say $500k of capital from the CCT for a period of 20 years to allow the current generation of retirees who cannot rearrange their affairs to remain unaffected. Then slowly ramp the exemption down over time.

                      At present the very wealthy escape the system because we’ve never grasped the need to tax wealth generated by capital. Arguing against a CGT or CCT merely continues to privilege the wealthy over the poor, which is the exact opposite of what you claim.

                    • The Chairman

                      “Thing is TC, if you own a million dollar house you aren’t poor. “

                      More rubbish. If you paid cash for a million dollar home out of your several million dollar salary you aren’t poor.

                      Not many homeowners have.

                      Our distorted housing market has left many poor owning homes now excessively overvalued.

                      It’s not disingenuous to talk about forcing poor people to sell their homes when that is what you are advocating through a tax burden that requires they do.

                      People haven’t made anything out of their homes until they are sold. In which case, they generally will be required to buy another overvalued home, due to the distorted housing market.

                      Forcing people to sell or defer doesn’t mitigate my concerns.

                      I have stated exemptions and tax free thresholds would be required. But they would have to be ongoing. I’ve also pointed to other tax options.

                      By insisting you want people to transition implies you still want paper gains on personal homes, further robbing those on low incomes of the ability to own a home.

                      Not only do they have to cover the cost of the home, but also the tax burden you want to introduce.

                      This defeats the purpose, driving home ownership numbers further down. Further impoverishing while providing the wealthy with a larger pool of renters.

                    • RedLogix

                      Nope what you are talking about is asset-rich and cash-poor. That’s not the same thing as ‘poor’.

                      And all the way along you neglect the fact that the vast majority of assets are owned by a small minority of very wealthy people. By letting asset wealth off the hook, you simply perpetuate their privilege.

                      In the end the free ride that the current generation of homeowners is enjoying … largely at the expense of the next generation who are locked out of the market … is completely indefensible by any measure of social well-being or justice.

                      A modest CCT would be entirely affordable by ordinary people in an economy where asset prices were sensibly in line with ordinary incomes. It’s only where you have the absurdity of pensioners living in million dollar homes, with only $20k of Super as their sole cash income does this become a problem.

                      Allow a nice generous period of transition and people will happily rearrange their affairs to suit.

                • Craig H

                  The book (which I got out of the library, so have available for a few weeks) is a lot less blithe about what happens to beneficiaries etc. That aside, there’s no requirement to follow that part of the scheme – increase one of the tax rates and pay supplementary income as required.

      • The Chairman 3.1.3

        Exactly, weka.

        +1

      • UncookedSelachimorpha 3.1.4

        True. However one of Morgan’s aims for such a tax is that a capital tax will oppose asset bubbles, because the actual earning capacity of an asset will become more important, because real earnings will be needed to cover the tax.

        So the tax may force property to be priced according to its actual return (and its actual utility, e.g. shelter etc), rather than priced according to speculation on future capital increases. Thus property will lose value relative to more productive assets – and thus attract less capital tax.

        At least that’s my understanding of what Morgan is saying.

        • Andre 3.1.4.1

          I’ve got the same understanding of Morgan’s thinking. It looks like purist economist thinking, try to force investment into money-making areas and screw the social consequences. Unfortunately, our fucked-up property situation has a number of causes, not least of which is too many of our managerial and financial elites seem to view small investors as cash cows to be drained. Meaning there really aren’t many other investment options for small investors that look more attractive and secure than property. And tackling that problem needs to be one of a bunch of changes.

  4. Steve Withers 4

    We’re going to have to do something about a UBI at some point. When more jobs are automated and the rest are mainly low-paid (while a few pile up the cash and assets) the ability to blame the lazy workers for their lot will be more or less exhausted because so many people will be “lazy workers” who can’t get jobs at all or jobs that pay more than a legislated pittance…..with no security or prospects of anything better.

    At that point, the National Party would deserve to be the natural party of opposition…assuming they were able to remain at least the second largest party. No guarantees there.

  5. Aaron 5

    The way we discuss the economy in this country is so profoundly stupid I struggle to find the words to describe it.

    No one should ever talk about what the government “can’t afford” because the government isn’t a little thing like a household with a fixed income. The government is in fact the dominant element in our economy and the more it spends the more it earns. This is because money is always on the move and every time it moves the transaction is taxed.

    A great example is the $26 million that we all love to say was “wasted” on the flag referendum. Now while the whole flag thing was ineptly handled and was probably a waste of time, it was not a waste of money – because the 26 million was spent into the NZ economy. Well, I’m assuming it was, if some of it was paid to foreign companies then we won’t be seeing it again, but I’m guessing most of it was spent on kiwi companies who have paid their staff and suppliers, who in turn have been out shopping and so it goes.

    So while it’s true a UBI would cost the government money, it would also act as a stimulus to the economy – and instead of high income earners getting the money and spending it on overseas trips and flash cars, poor people will spend it locally on getting their beat-up car fixed, or if they don’t own a car they’ll spend it at shops that are within walking distance.

    Again I’m simplifying things but we also need to remember that it’s every nation’s sovereign right to make it’s own money. So – and this is the mind numbingly stupid part – we don’t need to borrow money from overseas banks (like the 9 billion borrowed the from a private company in the US called the Federal Reserve) we can control actually control the money supply ourselves.

    • Draco T Bastard 5.1

      No one should ever talk about what the government “can’t afford” because the government isn’t a little thing like a household with a fixed income. The government is in fact the dominant element in our economy and the more it spends the more it earns.

      The government is, as a matter of fact, the source of all wealth in the country. If we can’t afford a UBI then we can’t actually afford all the people who live here.

      And I’m talking actual wealth there, not money. Our wealth is our resources – metals, nutrients, life and land. It’s the government that controls the availability of these things.

      That said, the UBI should be looked at as the source of money in the system along with other government spending. Taxes then take the money out of the system to maintain balance.

      Again I’m simplifying things but we also need to remember that it’s every nation’s sovereign right to make it’s own money. So – and this is the mind numbingly stupid part – we don’t need to borrow money from overseas banks (like the 9 billion borrowed the from a private company in the US called the Federal Reserve) we can control actually control the money supply ourselves.

      QFT

      • Murray Simmonds 5.1.1

        Draco T

        The point is this: The 26 million COULD have been spent in the economy on providing the economic (fiscal) stimulus that you are talking about while AT THE SAME TIME providing something more useful than the flag debate. In THAT sense it was a wasted opportunity.

        Anything that provides fiscal stimulus at the moment while inflation is so low, is a move in the correct direction.

        The UBI is in a sense another form of fiscal stimulus. the USA has provided to date, with quantitative easing, a “helicopter drop” equivalent to the size of the German economy. The only difference between QE and a UBI is that America used it all to prop up Wall Street. UBI is a helicopter drop that benefits everyone, rather than a helicopter drop just over Wall Street but nowhere else.

        And to forestall the argument that injecting printed money into the economy causes massive inflation – well the evidence so far from the economies where it has been tried seems to indicate that it is not particularly inflationary.

        And hey, isn’t a rise in inflation exactly what the RBNZ has been trying to achieve for months – so fat without success.

        • Draco T Bastard 5.1.1.1

          And to forestall the argument that injecting printed money into the economy causes massive inflation…

          You won’t see me arguing that the state creating money creates inflation. Sure, it needs to be done properly but it shouldn’t produce inflation. No, what the rich are really scared of is that they’ll lose all their power once people realise that we don’t need rich people, that they are, as a matter of fact, the problem.

          Once the government becomes the sole creator of money and makes it available without interest then having large amounts of money sitting in the bank is useless.

          • Craig H 5.1.1.1.1

            Well said – there’s a limit to how much money can be created without massive inflation, but $5B – $10B annually is unlikely to be over the limit, so done intelligently, it would be of great benefit.

            • Nic the NZer 5.1.1.1.1.1

              The debate should really be in terms of the real govt spending constraint. The attempts to discuss this in terms of govt finances leave no clues about what that constraint is of course. The real financial constraint being the govt can afford to buy up anything available for sale in NZ $, including work. That makes the real financial constraint full employment once everybody is fully employed then the govt can’t buy more resources without raising the price. If the govt wishes to spend more in that case without raising the price it will need to also raise taxes to confiscate spending and bring resource usage below full employment (creating space for its spending). On the otherhand if there is not full employment then the govt has failed to take advantage of its budget constraint. Either its over taxing or under spending presently.

              This is the figure which must be estimated to determine if 5 billion is not enough or too much of a shift. It also explains why technology is destroying jobs rather than making work less onerous over time. The UBI will of course fail on these grounds to resolve any of this if its coupled with fiscal responsibility.

        • Nic the NZer 5.1.1.2

          It’s probably a good idea to understand the differences between QE and fiscal policy. The basis is actually why QE (a monetary policy operation) has been implemented while fiscal policy has been off the table in most places.

          QE is actually an exchange of financial assets. Various interest bearing assets (for example govt bonds) are exchanged by the central bank for a more liquid but not interest bearing asset (money). This doesnt then provide the private sector income, in fact it marginally reduces its income when considering the yield the private sector would have received from the interest yielding financial assets.

          On the other hand fiscal policy (probably what Friedman had in mind with his helecopter drop analogy, and a related one involving throwing money into a furnace) involves an increase in the private sectors income.

          Its pretty obvious to most people of course that increasing bank reserves does not increase their propensity to borrow or spend. So it should be clear why QE fails to cause increases in spending or inflation.

    • BM 5.2


      A great example is the $26 million that we all love to say was “wasted” on the flag referendum. Now while the whole flag thing was ineptly handled and was probably a waste of time, it was not a waste of money – because the 26 million was spent into the NZ economy. Well, I’m assuming it was, if some of it was paid to foreign companies then we won’t be seeing it again, but I’m guessing most of it was spent on kiwi companies who have paid their staff and suppliers, who in turn have been out shopping and so it goes.

      Labour knew that, but preferred to spread lies and nonsense because trying to get a hit on John Key was so much more important.

      They then wonder why the voter has no trust in Labour.

      • Stuart Munro 5.2.1

        Rubbish – the mass of voters were so disgusted by Key they deserted him.

        • Chuck 5.2.1.1

          43% did not desert Key. I think we can all agree as well that a reasonable number of Nat voters would have voted “keep the flag” to boot. This vote (flag) will not define who most vote for, come 2017.

          Now if the vote for change was say 25%…then you have every right to say what you did.

          • Stuart Munro 5.2.1.1.1

            So we need a supermajority now, to get rid of this vile non-performer and his shoddy henchman? Sez you! 50.1 percent or one very disgruntled punter and the dark reign of Key is over. The mass of voters were so disgusted by Key that they deserted him – as well they might be.

      • Gangnam Style 5.2.2

        & National are saying a UBI is not affordable.

      • Craig H 5.2.3

        Wait, the party that has very little positive coverage in the MSM, and polled not much more than half National’s total at the last election, is now so influential and powerful it managed to rain on John Key’s parade?

        No wonder the MSM are so worried – Labour is clearly going to thrash National in next year’s election…

    • weka 5.3

      Aaron, the waste isn’t the money being spent, it’s what it was spent on. Presumably the same amount of money spent addressing child poverty would also have benefits to the economy at the same time as helping vulnerable kids. See the difference?

      • Nic the NZer 5.3.1

        Or both? This is the essence of what aaron is saying and he is correct.

        • weka 5.3.1.1

          Or both what?

          • Nic the NZer 5.3.1.1.1

            Both child poverty and a flag referendum for example. There is a great passage written by Keynes on this theme,

            “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

            • pat 5.3.1.1.1.1

              all perfectly true in an isolated system…..we are not an isolated system, we are a small part of a very large interconnected system…..and the large part of that system is opposed to that method.

              • Nic the NZer

                The problem you face here pat is that what you are claiming is supported by scant evidence that it happens in the real world. Your other problem here is this line of thinking is getting in the way of people assembling a convincing position around a UBI or other social spending programmes the left would like to support.

                • pat

                  no, the problem is what you are proposing though likely functional is unacceptable to those that have the ability to destroy it….think Venezuela, Greece, Cuba, Chile et al.

                  The one percent will not sit back and allow their privilege to be removed without a fight

                  When enough of the world agree that what we have is not working and are willing to adopt something other THEN it may be an option…. we arn’t there yet.

                  P.S. besides its looking increasingly likely it will collapse from within

                  • Nic the NZer

                    The evidence which I cited previously, showing a diverse range of countries (including NZ), come from many countries and shows what happens every day. It also shows that govt spending does not lead to inflation (through foreign exchange channels which we discussed).

                    On the other hand if you maintain a belief in this mechanism then its very easy to talk yourself out of spending initiative which might create a deficit (as is being demonstrated in several discussions).

  6. Andre 6

    Guaranteed Minimum Incomes seem to get mentioned quite a bit, but don’t seem to get explained much.

    If I understand them correctly, the idea is if someone earns an amount below the guaranteed minimum, the government tops them up to the minimum line. Have I got that right?

    If that’s the proposal, it seems to me there’s no point in going out to work at all for an amount below the guaranteed minimum, since you’ll just get topped up just to the minimum anyway. Which really discourages workforce flexibility, and adds the administrative hassle of calculating and paying top-ups.

    Whereas with a UBI, anything you earn makes you better off. And if it’s coupled with a flat tax, it really simplifies administration.

    • RedLogix 6.1

      Your last paragraph is the correct interpretation.

      One way a UBI is sometimes described is ‘negative taxation’. Essentially IRD gives everyone a ‘negative tax’ of $11k pa (using the BK example) as a UBI.

      If you do nothing more then you keep this 100% untaxed.

      Then in the ideal UBI system every dollar earned is ‘positively taxed’ at a flat rate of some number usually between 30 – 40%. This means whether you are a kid earning their first dollars on a junk mail round, or the CEO of Spark, every dollar you earn is taxed exactly the same.

      This is called vertical equity, in other words whether you are big or small, the tax system treats you exactly the same.

      Then Morgan adds in other forms of taxation capturing wealth gained by capital, financial transactions and the like. The idea here is that you pay the same rate of tax regardless of what form the income is earned in.

      This is called horizontal equity, in other words no matter how your wealth is earned, the tax system will treat you exactly the same.

      Now there is considerable room to modify this core idea, but for the purposes of this discussion I’ve promoted Morgan’s Big Kahuna mainly because he has written the ideas down clearly and coherently. And he’s shown how the books can be made to balance if that is what is important to you. But that doesn’t have to constrain the options either; what I want to hear are constructive ideas.

      • Andre 6.1.1

        Yeah, I think most of us are relatively clear on the Universal Basic Income broad concept.

        But it seems to me there’s a different Guaranteed Minimum Income concept also floating around. Some people seem to think UBI and GMI are interchangeable, Others (such as the lost sheep, or Roger Douglas) have a different GMI concept. I would like to clarify what that different GMI actually is.

        • Craig H 6.1.1.1

          You’re right on the money with the GMI, and have identified the obvious flaw with the concept.

          • Draco T Bastard 6.1.1.1.1

            Yep. Never liked the GMI. Always seemed to complex and just another way for the rich to rort the tax system.

  7. joe90 7

    Jacobin cautions.

    While leftists share the hope that a broad political constellation can help win a basic income, caution is in order. The desire for such an outcome should not compel us to obscure our aims and risk ending up with a program that reinforces existing class hierarchies.

    At a time when support for a basic income is garnering increasingly more mainstream consideration, it is essential for the Left to make explicit the anticapitalist rationale for a UBI. Below are five important considerations.

    https://www.jacobinmag.com/2015/08/universal-basic-income-socialist-libertarian/

  8. BM 8

    Personally, I think discussing the UBI at this point in time is ridiculous and unless Labour distances itself from it, it will become a millstone around Labours neck and drag Labour down to it’s death.

    • maui 8.1

      Hah, its got you in a tizz so I think that definitely means they’re on the right track.

      • BM 8.1.1

        Not at all, I actually think Labour has completely fucked it up be mentioning it.

        The UBI will come back in election year and sink any chance of a left victory

        Maybe that’s why Grant Robertson brought it up?

    • millsy 8.2

      The smart move would be to kick the issue to a royal commission, with hand picked experts after the election and have them report back with recommendations after a lengthy consultation process.

  9. Macro 9

    To my mind there are more important things to fix before any introduction of a UBI.

    Firstly we need to address these matters (in no particular order):

    a. Ending the poverty trap so many in NZ are currently experiencing.

    b. Repairing the Health System.

    c. Restoring our Education system and free education to tertiary level, including the abolition of student loans.

    d. Ensuring all our people were adequately housed.

    e. Legislating a proper living wage for all, and returning our employment law to a more fair system of collective arbitration, not individual contracts which are divisive. The introduction of a 30 – 35 hour week, and any hours worked past that time to be at double rates of pay and an absolute maximum of 45 hours per work for any employee.

    f. Ensuring that all products which can be produced in NZ are produced in NZ and restricting the importation of cheap alternatives from overseas.

    The following principles should be at the forefront of all Policy:

    No child should grow up in a home in poverty.
    Every child should have its own bed and not be forced to sleep in a car because there is no where else.
    No child should go to school hungry, and every child should be well clothed.
    No person should be forced to sleep outside because they cannot afford shelter or there is no where for them to go.

    • Draco T Bastard 9.1

      Ending the poverty trap so many in NZ are currently experiencing.

      Legislating a proper living wage for all…

      A UBI actually addresses those points by making it so that, no matter what, people have an adequate income to live on.

      b. Repairing the Health System.

      c. Restoring our Education system and free education to tertiary level, including the abolition of student loans.

      d. Ensuring all our people were adequately housed.

      Those are political. We could do it and it really wouldn’t cost that much but the government has, since the 1980s, been to terrified of taxing properly to do so.

      f. Ensuring that all products which can be produced in NZ are produced in NZ and restricting the importation of cheap alternatives from overseas.

      This too is political and it requires that the government get in and do the R&D (just like the US does) and build the factories and raw resource processing which our entrepreneurs then use to produce their product. Th UBI would help here as well as our entrepreneurs get disconnected from the corporations.
      The private sector will simply leave our economy undeveloped.

      It’s not that these things need to be done one after the other – it’s that they need to be done all at the same time.

      • Macro 9.1.1

        Actually draco Establishing a ubi at a living income for all would be so mind blowing for most that it would never be politically feasible. We are not talking the Big Kahuna here – $200 odd per week would make a solo mother with 2 kids on less than $35,000 per annum around $6000 worse off.
        http://thedailyblog.co.nz/2016/03/26/must-read-jam-tomorrow-jam-yesterday-never-ever-jam-today/
        http://www.bigkahuna.org.nz/calculator/personal.aspx

        • Draco T Bastard 9.1.1.1

          The Big Kahuna is probably the worse way to implement a UBI as it’s all about keeping things the way they are rather than making the necessary changes. And we can do those changes – just look at the 1980s under the 4th Labour government and the 1930s also under a Labour government.

          Now, I doubt if Labour got the chutzpah to make the necessary changes because they themselves are still looking to be rich. To properly implement a UBI means getting rid of the rich.

          • Macro 9.1.1.1.1

            I’m not opposed to a UBI
            I just think that there are more urgent and do-able things to be tackled by the left first.
            Good to be thinking about it – but we need to keep our minds on the goal and not be distracted.
            The goals for the left must surely be a just and equitable society where everyone has a place and is supported.
            Yes a UBI maybe the way to achieve some of those outcomes – but first we must ensure that the poor are not worse off because of it – and at the moment I’m not sure we have the mechanisms in place for that to happen.

            • Draco T Bastard 9.1.1.1.1.1

              Good to be thinking about it – but we need to keep our minds on the goal and not be distracted.

              Think of the UBI and the necessary changes to the tax system and other parts of society as being the goal. Right, now what do we need to do to bring it about?

              Yes a UBI maybe the way to achieve some of those outcomes – but first we must ensure that the poor are not worse off because of it – and at the moment I’m not sure we have the mechanisms in place for that to happen.

              A well implemented UBI will leave the bottom ~90% better off, the next ~9% will be about the same while the top 1% will have considerably less. Part of it is curing the massive inequality that we have now that is a result of our present failed system.

              The mechanisms are in place if a political coalition gains enough voters. Parliament in NZ is supreme. They can pretty much do anything that they want so the mechanisms are there. The problem is getting enough people to show the political parties of the Left (because the RWNJs won’t do this) that we want this (although they didn’t bother asking when they imposed Roger Douglass and his failed system upon us).

    • KJT 9.2

      Macro. A UBI addresses so many of these things with one policy.

      Or we can continue to fight for crumbs.

      • Macro 9.2.1

        Not if it impoverishes those at the bottom of the income stream such as a solo mother with 2 children on a benefit, or earning less than $35,000, a la the big kahuna.

        • KJT 9.2.1.1

          I do not agree with the minimal amount in the big Kahuna. To be a game changer both for NZ small business, our society and our economy, it needs to be at a realistic figure.

          Enough to exist on.

          A recognition that everyone is entitled to the human right, to have enough to eat, house themselves and be healthy, Not just a token amount.

  10. saveNZ 10

    I’m supportive of an idea of a UBI.

    A UBI will be unworkable without the tax income to support it. Therefore it is important that the government looks at the tax system and why so many corporations and rich listers (often legally) do not have to pay the top tax rates.

    Many people are advocating a capital gains tax on property extra to rates. My issue with that is that it does not affect buyers and at present there are so many ways to avoid or minimise it, it will not work and also tie up resources at IRD (and the idea of UBI is to reduce bureaucracy).

    In the NZ situation for example you have farmers selling off their farms. A capital gains tax will tax the out coming farmer often holding land in multiple titles (who may already be bankrupted) not the incoming seller (foreign corporation) who may just asset bank the farms (therefore no taxes payable) or when selling just manipulate the asset to pay less or zero tax on it. For millions of dollars it is clearly in someones interest to hire consultants to minimise the taxes. Therefore it may tax middle NZ who can’t afford tax consultants more than the rich listers (the problem in our current system).

    In my view taxation has to be changed to be unavoidable so that the tax laws make everyone pay as much as everyone else. Stamp duty, transaction tax etc. Like GST taxes need to be made and collected at source so people and corporations don’t have a year to manipulate their affairs so that the profits ‘disappear’ and therefore nothing to tax while having multimillions if not billions in local turnover.

    On the other hand, I think Labour should be very cautious about advocating more taxes in particular on property. It backfired last election.

    The left also need to look at ways to create sustainable wealth in NZ. We should also be concentrating on food security which I think will become much more important. Having food and livestock largely free from diseases should be protected.

    The left coalition should also start staging a war on products like P, which are causing massive misery to those who get addicted, those victims of crime from those seeking to fund their addiction or those who have their houses contaminated and so forth. The national government has failed on P.

    Maybe instead of wasting money on spies and mass surveillance systems, the government could actually crack down on P drug importers and offer more assistance to victims? You have to wonder about priorities.

    • Draco T Bastard 10.1

      A UBI will be unworkable without the tax income to support it.

      Wrong position. The UBI is actually needed to support the entire economy.

      Therefore it is important that the government looks at the tax system and why so many corporations and rich listers (often legally) do not have to pay the top tax rates.

      Because the tax system has been designed that way. This is the main reason why I say we need to throw the entire present system out and build a new one from first principles. First question: What is our tax system for considering that it’s not needed to fund the government?

      A capital gains tax will tax the out coming farmer often holding land in multiple titles (who may already be bankrupted) not the incoming seller (foreign corporation) who may just asset bank the farms (therefore no taxes payable) or when selling just manipulate the asset to pay less or zero tax on it.

      Which is why a capital tax is actually a better option than capital gains. You pay tax on simply owning the capital. This gets rid of land banking for instance.

  11. The lost sheep 11

    Why the assumption that a UBI/GBI must be linked to a significant redistribution of wealth?

    I’ve been looking at the Finnish, Dutch, French, and Swiss moves on UBI*.
    None of those Countries have included a significant redistribution of wealth as part of their discussions / experiments, or plans for implementation.

    In the country with the most advanced planning, Finland, KELA, the Social Security Agency responsible for the trial is saying that the scheme will be fiscally neutral, funded by the elimination of current Social Welfare payments and the logistics to support them, and the ‘modulation’ of taxes (clawing back the UBI from higher earners).

    Interestingly, the UBI is being trialled by a Finnish Centre Right Govt that has recently lengthened annual working hours, lowered holiday bonuses, frozen wages, raised pension contributions for workers and lowered them for employers.
    To be honest, the more I read about the Finnish Governments views on the scheme, the more I began thinking it was a case of being careful what you wish for. Depending on the details of the scheme, a UBI could easily be something that might be more attractive to the Right than it was to the Left.

    But. No one talking about a significant re-distribution of wealth. I’m picking that is because even in those Socialist leaning countries, such a suggestion is simply not going to be politically acceptable.
    As it won’t be in NZ.

    *Important to note, none of those Countries are anywhere near committing to a UBI.
    Finland is going to run an initial ‘pilot’ program involving about 2000 people to test the idea.
    The Netherlands are experimenting in conjunction with The University of Utrecht, involving a few hundred people currently on benefits – with an initial purpose of merely gathering some data on aspects of how the scheme ‘works’.
    France has merely recommended the Govt. investigate the idea.
    Switzerland has a referendum on coming up, but currently it does not look like having much chance of success.

    • One Anonymous Bloke 11.1

      *Important to note: Labour is nowhere near committing to a UBI. At most they’re “considering a limited trial of a universal basic income-type system in a town or region.”

      Your only problem with the idea is its source.

      • The lost sheep 11.1.1

        I’ve been commenting on the idea itself OAB, and specifically, offering my opinion on how this could be a genuinely sale-able idea that could help Labour get back into power.
        Not sure how you interpret that as me having a problem with the source of the current debate?

        In fact I welcome Labours initiative, and the whole 10 big ideas platform and the Future of Work initiative.
        I have said many times on this blog that IMO the Left needed to stop making National / JK the central topic of a negative debate, and to shift the point of discussion to things that were positive and constructive.
        I think Andrew Little is leading things in a very encouraging direction at present.
        I just hope he doesn’t get undermined by the Looney Left hijacking every idea and dragging it off into territory the swinging voters simply will not buy.

  12. Incognito 12

    Last night I had a few wild thoughts regarding UBI and taxes that may not withstand the scrutiny of daylight (or darkness, for that matter) but I decided to post them here anyway. So, here goes.

    IMO taxes ought to be paid only by those who can afford it. If it leads to financial hardship something is very wrong. Similarly, taxes ought not to inhibit productivity, in a very broad sense, or the general functioning of society.

    Any tax system ought to be fair & equal.

    In discussions about CGT/CCT we always seem to run into the brick wall of asset-rich and cash-poor people, the so-called retired old lady living in a high-value property, the “55yr old bus driver that bought a home in Mt Albert 25 years ago”. These people should not be bled dry by any taxation (incl. council rates).

    However, there’s something not right about owning a high-value asset and not being taxed at all. In fact, clinging to a tax-free capital gain, because that’s what it generally amounts to, just to pass it on to your descendants, again completely tax free!

    There’s something intrinsically unfair about people inheriting an asset without having to lift a finger for it. But this is the way it is right now.

    So, to be able to afford any taxes/rates and collect these and at the same time paying a UBI and/or universal Super the State could take a slice (annuity) of the asset, like a reverse-mortgage. But the title/ownership would not revert to a bank (!) but to the State. Nobody will suffer financial hardship and nobody will be forced out of their home because they cannot afford to live in it. In return, the State provides everything it does now and a universal UBI/Super.

    When the owner/occupier decides to sell up or passes away the descendants/heirs have first option to ‘buy it back’. For example, this could happen through one single lump sum transaction or again through instalments (e.g. deferred UBI payments) depending on circumstances and/or preferences.

    A domestic home can only stay in the family as such and not on-sold. This would prevent inevitable value distortions between nominal and actual/market value.

    If the ‘estate’ is declined the State is free to do whatever, within the bounds of law, of course.

    The above may be highly controversial but it is partly prompted by the recent uproar about the affordability of potentially life-saving anticancer drugs. When people want to potentially gain a few (?) more years of life they will re-mortgage the house (with the bank). In contrast, when people are living a relatively healthy life and don’t endure a terminal disease/condition they cling on to their non-productive tax-free asset for dear life. [pardon the pun] This seems inconsistent to me.

    Any merit in this?

    • The lost sheep 12.1

      Your idea may well have merit, if NZ’ers accepted the principle of a property tax on private family homes.
      I don’t see that happening any time soon.

    • weka 12.2

      I have a couple of problems with this. One is that a home shouldn’t be defined as a high-value asset. It has far far more value than that. The only valid reason I can see for defining it as a financial asset is if you believe making money from property sales is a good thing. When we make the value of a home monetary rather than social we undermine families, communities and society as whole. True we are already far down that track, but I would be resistant to structurally entrenching that further rather than trying to roll it back.

      So in that sense I have no problems at all with someone who owns their home not paying taxes on it (concurrently or deferred) while they are alive and living in it. If people are making money out of property ownership, that’s a different thing (so, yep, some version of a CGT, tax on rental income etc), and if the property value has increased by the time they die then sure (estate tax on the increased value). But it’s still based on valuing the property market which is pretty immoral and unproductive (house prices go up by magical thinking, not because the house is actually worth more).

      I also don’t have a problem with family homes or savings being left to offspring or non-related family. If the problem here is the unfairness that some families have wealth and others don’t, then I’m completely on board with doing something about that. I’m not sure that taking a base position that all inheritance is somehow wrong or depriving others or the state is the best way to go about it.

      “There’s something intrinsically unfair about people inheriting an asset without having to lift a finger for it.”

      That is true if you believe in the nuclear family and the Protestant work ethic 😉

      I agree there is huge unfairness in how some people and families build wealth. But I think the principle should be how to increase wealth for those that need it rather than decreasing wealth from those that have it (except where people are rich/have far more than they need).

      I’m the only person in my family who has dropped out of the middle class over the course of my life time. I think the only way that my life will improve is when my parents die and if there is any of their estate left after they’ve paid for being elderly and dying. The values in my family, going back generations, are that the wealth accrued is not individual wealth but wealth that is shared down the generations. My forbears worked knowing that I could benefit from that. It’s still very much in a Western values context (they’re not helping me out much at the moment which is when I really need it), but still, there is value to society in them being able to leave some money to me when I’m approaching my own old age. So from my perspective, some taxes are legitimate (my parents pay tax on earnings from their trust, a CGT seems fair, as does an estate tax on investment wealth), but I think we have to be really careful of not disenfranchising people who stand to have their lives improved because of a principle that says wealth is individually owned and is wrong. I think there are cultural issues here too, in how families share wealth.

      btw, one of my siblings lives in the same town as my elderly parents and does most of the mahi when it comes to attending to them. I find your idea that they will inherit from my parents having done nothing to earn it pretty offensive (not that that is why they do what they do).

      I’m talking about accrued wealth in the sense of things we need to live an ok life eg a home, a car, enough money to have a holiday etc. Some of those things are going to change eg car ownership in an age of climate change should be relooked at if we ever sort out public transport.

      btw, good ideas to put out there even if I do disagree with them 🙂 I think what you are getting at is how can we make accrual of wealth equitable, and that is very worth talking about alongside the UBI debate.

      • Incognito 12.2.1

        Thank you weka for your thoughtful and critical response; it invites a reply but I’ve run out of time today. My apologies.

      • Incognito 12.2.2

        I’ll give it a try to respond to your excellent comments weka although I’m not wedded to my own ideas.

        Houses/domestic properties are high-value assets; the purchase of a house is likely to most expensive purchase people will make in their lives. On the other hand, a home has emotional and social value that cannot and should not be expressed in cold hard $$. That said, what is a home to one or to a family is a gold-mine to an ‘investor’ or developer. In reality, they are both homes and financial assets.

        I believe making money from property sales is neither good nor bad; it depends on many factors, but in NZ it is the Number One scheme to ‘get ahead’ financially. This has created societal distortions but is also threatening economic stability if/when the bubble bursts. The problem is that the housing bubble underpins and even stokes our domestic economy, which is one reason why past, current, and future (?) governments are between a rock & a hard place to tackle this problem – it comes with huge risks to the national economy.

        In this sense, I think it is overdue to apply a tax to all properties regardless of use or ownership, particularly if it helps to part-fund a UBI, simplifies the tax system (e.g. flat tax) and legal structures around property, and creates a more equal and fairer system for all New Zealanders.

        We already have a tax in the form of council rates on every property, which funds necessary infrastructure and services, etc. This is based on the much-loved & loathed valuation every 3 years. A CCT may have to be implemented along similar lines IMO. I don’t think morality comes into this!?

        We already hear anecdotally of people who cannot afford the council rates, e.g. in certain Auckland suburbs. To leave these people stressing about this is immoral and I made a suggestion how to avoid or at least minimise it. After all, some of those people have yet-unrealised wealth and I cannot think of a good reason why this should be ring-fenced and exempt from taxation. An added advantage is that it might get rid of a few tax loop-holes and management & administration costs of a complex system.

        Should a family home be allowed to be safe-guarded just for the sake of ‘keeping it in the family’? That’s a tricky one where emotions & sentiments easily creep in and start to dominate even. I doubt that banks gives this much (maybe some?) consideration when dealing with loan defaults and mortgagee sales. Therefore I suggested that when people have to ‘eat away’ their family home (or farm) because of taxes & rates they and/or their descendants have first option to keep it for future generations or allow the State to maintain ownership, if it got to that stage.

        I am specifically talking about the exceptional cases of asset-rich and cash-poor people. In all other cases the family home (usually mortgage-free) gets passed on to the next generation, which is then free to do whatever it likes with the home, i.e. live in it, rent it out, or sell it.

        I agree that families build wealth over generations and share this wealth amongst themselves. However, in my opinion the focus on material wealth is often too domineering compared, for example, to family values & traditions – in the end (!) nobody can take their money with them, which terminal cancer patients realise all too well when re-mortgaging to fund expensive treatments. A re-balancing of attitudes if not taxation laws would not go astray and this could be a part of the debate on UBI.

        I personally think material inheritance is intrinsically unfair – life is unfair! – but this doesn’t mean I would want to eradicate it. What I indeed object to is making exemptions because of some people’s perceived ‘rights’ or sense of entitlement to inherit wealth to which they themselves often made little or no material contribution.

        Your example of your sibling looking after and caring for your elderly parents is not inconsistent with anything I said, I believe, but I apologise if I caused any offence. Arguably, a UBI would regard this as decent work too. People get mentioned in wills for all sorts of reasons and equally somebody who did not lift a finger nor expressed any kind of love (!) is currently entitled to a fair share of an estate purely because of kinship.

        It is good to discuss these things and get much-needed clarity about meanings and possible consequences. That said, I doubt that a CCT/CGT on family homes will be introduced any time soon in NZ. I also doubt that Labour will make a UBI part of their election campaign. But this doesn’t mean we and Labour should shy away from a proper discussion about it.

    • Andre 12.3

      I think the idea that taxes should be paid by those who can afford it is broadly accepted, if only vaguely and implicitly. Taxes are almost always levied when some kind of transaction is taking place, so the fact that cash is changing hands is used as a very crude (and inaccurate) proxy for “can afford it”. So taxes like income tax, GST, capital gains tax, financial transaction tax, greenhouse gas tax etc will never bleed someone dry on their own. They will just make some transactions less worthwhile.

      In contrast, Morgan’s Comprehensive Capital Tax would be levied independent of any cashflow. So it could easily bleed someone dry, or cause a business going through a rough spell to go under when it might otherwise survive.

      I think it’s really unhelpful to put Capital Gains Tax, which is levied at time of sale and therefore has cashflow to support it, into the same basket as a Comprehensive Capital Tax. They are very different in how they affect economic activity.

      Once upon a time, it was broadly accepted that it is inequitable that some people get income/stuff without lifting a finger and without contributing to society. So most jurisdictions have some kind of Capital Gains tax, New Zealand being a notable exception. Estate taxes and Gift taxes used to be widespread and used to have real teeth, but over the last 30 years or so, have been defanged, and sometimes outright abolished. I think there’s a lot of merit in bringing them back.

      When it comes to family homes, there’s a lot of social value in people owning their homes and forming ties to their neighbourhood, and there’s a lot of value in people having the security of knowing no-one else has a claim on their home, not even the state. Most jurisdictions recognise this, which is why many have some kind of exemption/reduction in capital gains taxes for the family home. But it’s a point that seems to escape purist economists such as Morgan.

      All up, a capital gains tax tax addresses many of the inequities around the tax-free gains currently enjoyed by property owners, business owners and shareholders. Particularly if it’s implemented without the loopholes and exemptions that plague many other schemes.

      In the case of our hypothetical pensioner or bus driver, the capital gains tax falls due on sale of the home. If our bus driver wishes to cash in his gains in his Mt Albert house and move to a cheaper life out of town, the state gets its cut at sale. If our deceased pensioner’s family wants to keep the old family home, then they will have to stump up the capital gains tax when it is transferred into the new owner’s names (as well as estate tax if I had my way), similar to your proposed deferred CCT. If we had had a capital gains tax when Stefan Lepionka and Marc Ellis sold Charlie’s juice company, they would have paid CGT, instead of the $100million plus sale price being largely tax free (as far as I know). All of this is how it worked in the US in the 90s (I’ve simplified a bit).

      Unfortunately, Labour’s poor result last election with a CGT in their platform has allowed the meme to be created that CGT is electoral poison in New Zealand. Although polls seemed to show the CGT was in fact a popular policy and the poor result was not due to their policies, I have no idea how to combat the meme. Cunliffe’s stumbles on the topic really didn’t help, either.

      • Incognito 12.3.1

        Thank you Andre, unfortunately I cannot now reply.

      • Sacha 12.3.2

        “Unfortunately, Labour’s poor result last election with a CGT in their platform has allowed the meme to be created that CGT is electoral poison in New Zealand. Although polls seemed to show the CGT was in fact a popular policy and the poor result was not due to their policies, I have no idea how to combat the meme. ”

        Yes, harder to reframe than to frame in the first place. And it would be unhelpful for our common future if they similarly muffed this proposal due to poor handling.

        • The Chairman 12.3.2.1

          The problem with a CGT (apart from the inconstancy in revenue it generates) is it fails to distinguish between rich and poor. Not all home owners and their descendants are well off.

          A UBI is meant to improve poverty redistributing funds from the top down. Therefore, we require a tax structure that identifies and targets the rich.

          A CGT fails in that respect, thus shouldn’t be considered to support and accompany a UBI.

      • Incognito 12.3.3

        Hi Andre, I can find a lot of common ground in your comments.

        I’d also like to see a reinstatement/reinforcement of Estate and Gift Tax.

        One issue with CGT is that it is only paid at the time of transaction; council rates, for example, could never survive this way as it does not guarantee a steady (and predictable!) revenue.

        Taxing or touching the family home is a very hot potatoe. However, home-ownership is falling and there will be a tipping point in future at which it may become more controversial to not introduce something.

        BTW, I don’t regard Gareth Morgan as a “purist economist” but rather ‘brutally blunt & honest’.

        I am surprised that nobody has tried to shoot out of the water the idea of transferring private property to the State; I thought this might cause a real uproar.

        To be honest, I’d favour a progressive over a flat tax, but I think there is so much merit in making it as simple as possible (but no simpler); exemptions always lead to unintended consequences such as evasion, loop-holes, etc. Businesses also pay a flat tax possibly for the same reason? (NB except multi-national corporations)

        If a CGT (or CCT) were to be part of a total system overhaul to introduce a UBI and a flat tax system together with a completely revamped social welfare system that would disincentivise abuse and lifelong benefit dependency perhaps some of the objections to and resistance against it might dissipate?

        • Andre 12.3.3.1

          Rates; I don’t know of anywhere that doesn’t use some kind of rates/property tax to fund local government. So I think it would be way too hard to design and implement some alternative at the same time as a major change in central government funding.

          Family homes; I’m strongly in favour of CGT fully including family homes, with the only possible exemption being a rollover provision for when people change homes. The only problem with full CGT on family homes in the US was there were a few weird loopholes that people would do weird stuff to take advantage of.

          Morgan isn’t a purist economist, but his CCT proposal has the motivations and flaws of a purist proposal, with a “tough shit” attitude to the social problems it would create. Another flaw I haven’t mentioned yet, the “worth” of many modern businesses is in intangibles which would be quite difficult for a CCT to capture. App development, for instance, has very low capital requirements. I suspect Charlie’s value was mostly in the “brand” and distribution arrangements, and relatively little in the capital value of physical plant and other traditional “capital” items. An intellectual property tax would capture those, but how do you value intellectual property?

          There’s already a certain amount of property going to the state at present. Just ask Penny Bright. I don’t have a problem with the state getting equity in people’s homes in lieu of unpaid taxes, but I suspect I’m a very small minority on that one. I’d be very surprised if a proposal like that made it into Labour policy, let alone getting broad popular support.

          Progressive tax rates on personal income seem to be on the principle that people shouldn’t be taxed heavily on what they need to live, and that taxes should kick in more and more heavily as people get to enjoy more of the discretionary things. In the US for example, there’s “personal exemptions” which mean the first $8000 or so of personal income is not subject to federal income tax. Similar in Oz. GST runs directly counter to this principle, which is why it gets called a regressive tax. Businesses don’t have “basic living expenses” so there’s no justification for progressive business taxes.

          Personally, for the sake of getting a UBI implemented, I would be willing to forego a CGT (as much as I really think New Zealand needs one, but right now it would need too much political bravery), and raise the extra needed by a new Greenhouse Gas tax and a new Financial Transactions tax. I would be dead against a CCT, because of the social problems it would cause, and because nowhere else in the world uses one so we can’t learn from anyone else.

  13. Michael 13

    “We should do some proper work on it.”

    Completely agree. However, please no reduced benefit for young people, flat tax, and having sole parents live in communes like Mr. Morgan would like.

    I like the idea of a UBI of $11k (and a lower amount for children), funded by progressive taxation, with additional top-up benefits like accommodation payments, disability payments, pension top-up, family payments, etc.

    The UBI should never be intended to replace the welfare system entirely, but to complement it. If it is going to replace the system entirely, then I would be opposed.

  14. Craig H 14

    In BK, the 6% CCT rate was based on the 10 year rolling average of NZ 10 year bond rates, because government bonds (theoretically) are risk free, so any capital being used should be used more efficiently than that. If the tax is used, this rate should probably change annually to reflect the updated 10 year rolling average of 10 year bond rates. Currently, it’s closer to 4 % than 6 % as rates have dropped substantially since 2011 (they recently hit the lowest rates in NZ history – rates are currently just over 3%).

    All non-current assets would be liable for CCT – this includes property, IP, plant, equipment, to name some examples, but would not include cash or term deposits, for example (neither of these lists are exhaustive).

    When working out CCT, the calculation deducts interest, so, for example, a $1,000,000 property with a $900,000 mortgage and interest of 5% would pay (approx.) $45,000 in interest. Going with CCT rate of 4% as the current 10 year average of 10 year bonds. The CCT here would be:
    $1,000,000 x 4% = $40,000 – interest $45,000 = -$5,000, so this would carry forward in future years to be offset against CCT when it eventually becomes positive.

    As an aside, personal assets aren’t really covered that well in the BK – it makes sense, to me, to include big assets like land, buildings and vehicles, but including someone’s mobile phone, for example, seems a bit pointless, and a lot of effort for minimal gain. I’d personally be inclined to have a threshold for personal assets somewhere around $50,000 for adults and $5,000 for children, with any assets owned in trust being liable in full (they have to account for them in full anyway), but that would be something to work through.

    The best thing about the BK is that the taxes proposed hit wealth, not just income, so the wealthy can’t avoid them the same way, and that the universality and flat rate of everything means that there are no tax loopholes or anomalies to exploit.

    There are obviously other tax models and I look forward to discussion on them, but this one is coherent and has a lot of thought behind it, so it will get a lot of consideration.

    • The Chairman 14.1

      “When working out CCT, the calculation deducts interest…”

      That overlooks most pensioners and a number of other low income earners are freehold.

      It’s only a mater of time before it becomes positive and starts (after the negatives are used up) eating into incomes.

      This tax (a CCT) fails to genuinely distinguish between the rich and poor, largely treating all capital the same. Therefore, will put more into fiscal hardship. Not all property owners are rich.

      Moreover, it will put upward pressure on rents as the tax burden will largely have to come from incomes because the gains calculated have yet (if they ever) come to fruition. Creating more hardship.

      Additionally, it will add to the cost of owning a home. Not only will people have to buy and pay off their home, now (if this tax is introduced) they will also have to pay this new ongoing tax burden. Making it fiscally more difficult to own a home.

      The less disposable income people have (due to higher rents or higher home ownership costs) the less they have to spend. Negatively impacting consumer demand, thus business returns. Making the hardship more widespread.

      Therefore, this tax model isn’t that coherent. Clearly a lot of variables are not taken into account, thus the model shouldn’t be taken into consideration at all.

      Be good if Grant could tell us how much consideration is being put into other tax avenues?

  15. KJT 15

    Obviously a very scary policy for the right wing.

    All of them including Key, The Herald, NBR, Hooten have come out instantly, lying in unison about the costs.

    May stop the model of a few getting very rich, off the poor.

    • Incognito 15.1

      Either as very scary policy or just a welcome distraction for Key & Co from other disasters of their own making?

  16. Sacha 16

    Union activist Kate Davis praises Labour for daring to raise the topic: http://thedailyblog.co.nz/2016/03/29/must-read-2017-a-labour-odyssey/

    • The Chairman 16.1

      A crucial point from your link.

      “The $211 that Labour have proposed is a joke. That amount is not a UBI. It is a UBB. A Universal Basic Benefit. Instead of achieving and changing society in a meaningful way this paltry amount will merely entrench the precariat class in servitude to insecure work demands. It will do the opposite to what a UBI can do. Instead of buying us freedom, it will serve as a welfare backstop that ensures we continue to compete on the race to the bottom of workers’ rights, as conditions continue to deteriorate.”

      Labour have the opportunity to do something great or they can fall short and merely cement the deterioration, hence how a UBI is structured is vital to its success or failure.

      • KJT 16.1.1

        Agree. A UBI needs to be at least equivalent to about $350 a week at current rates.

        • The Chairman 16.1.1.1

          It would have to be at least the equivalent of the rate of super if they are planning to replace it. With increases going forward tied to the national average wage as super currently is.

          In the next phase of the debate (hopefully soon) it would be good to see Labour put forward a range of possible of costing options. The weekly rate of a UBI and the different range of tax settings (or new taxes) required to pay for it.

          Perhaps get BERL to do the analysis.

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    1 week ago
  • Asking for it …
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    1 week ago
  • New Zealand’s Poor Pandemic Preparedness According to the Global Health Security Index
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    1 week ago
  • Climate Change: Thank Winston
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    No Right TurnBy Idiot/Savant
    1 week ago
  • Illicit markets and Bali Booze
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    1 week ago
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    No Right TurnBy Idiot/Savant
    1 week ago
  • Spain’s failed electoral gamble
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    No Right TurnBy Idiot/Savant
    1 week ago
  • The astroturf party
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    No Right TurnBy Idiot/Savant
    1 week ago
  • How to cheat at university
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    1 week ago
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    2 weeks ago
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    2 weeks ago
  • Chosen To Rule? What Sort Of Christian Is Chris Luxon?
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    2 weeks ago
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    2 weeks ago
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    2 weeks ago
  • 1000 of these now
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    2 weeks ago
  • Climate Change: As predicted
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    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Let this never be forgot
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    2 weeks ago
  • Too Late To Change Capitalism’s Flightpath?
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    2 weeks ago
  • Whooping cough vaccine works well despite its imperfections
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  • Climate Change: Passed
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    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Retailing of vaping products – New NZ Research
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  • Justice for Bomber
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    No Right TurnBy Idiot/Savant
    2 weeks ago

  • Cowboy clampers will be stymied
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    22 hours ago
  • Mental Health Commission back on track
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    23 hours ago
  • New Zealand’s key assets are not for sale: national interest test delivered
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    2 days ago
  • National interest test added to protect New Zealanders’ interests
    The Coalition Government is delivering on its promise to protect New Zealanders’ interests by applying a new national interest test to the sales of our most sensitive and high-risk assets to overseas buyers. Under current Overseas Investment Act (OIA) rules, assets such as ports and airports, telecommunications infrastructure, electricity and ...
    2 days ago
  • Electoral law breach allegations
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    2 days ago
  • Wayne Brown hits back at critics: Ports of Auckland has to move
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    3 days ago
  • Week That Was: Supporting our schools
    We're setting our young people up for success, investing in education around the country.  ...
    3 days ago
  • Kiwis to have their say on End of Life Choice
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    7 days ago
  • Addressing miscarriages of justice
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    1 week ago
  • Week That Was: Historic action on climate change
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    2 weeks ago
  • Tax-free deployments for Kiwi troops
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  • A balanced Zero Carbon Bill passed
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    2 weeks ago
  • Paramedics’ status to be recognised
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    2 weeks ago
  • Week That Was: 2,000 teachers in two years
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    3 weeks ago
  • Winning an election one conversation at a time
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    3 weeks ago

  • APEC 2021 Bill passes first reading
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  • Making progress for our kids
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    20 hours ago
  • Māori women in business contribute to our economy, whānau and communities
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    21 hours ago
  • Two schools on the way for Omokoroa
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    22 hours ago
  • Families Package helps over 1 million New Zealanders in first year
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  • Clamp down on wheel clamping passes third reading
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  • Mental Health and Wellbeing Commission Bill passes first hurdle
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  • Boosting border security with electronic travel authority – now over 500,000 issued
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    2 days ago
  • Plan of action to protect seabirds
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  • National interest test added to overseas investment rules
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  • New housing part of support for Kaumātua
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  • Forestry helps prisoners into jobs
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  • Reform of public service a step closer
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    3 days ago
  • Donations scheme to relieve pressure on families
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  • Further support for Samoan measles outbreak
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  • Speech to the Child Poverty Action Group 2019 Summit
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  • Speech to the New Zealand Thoroughbred Racing Annual Conference
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  • Fairer rules for tenants and landlords
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  • Two decades of marine protection celebrated at Te Tapuwae o Rongokako in Tairawhiti
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    5 days ago
  • Food industry asked to step up fight against obesity
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  • Modern emergency care for Queenstown area
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    6 days ago
  • Contraception important for New Zealanders
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  • NZ medical staff and measles vaccines going to Samoa
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  • Disability Action Plan 2019 – 2023
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    7 days ago
  • Joint Statement – Third Singapore-New Zealand Defence Ministers’ Meeting
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  • Sexual Violence Legislation Bill has its first reading
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  • Streamlined business invoicing a step closer
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    7 days ago
  • More frontline biosecurity officers protecting NZ
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    7 days ago
  • NZ space economy worth $1.69 billion
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    7 days ago
  • New Chair for Royal Commission into Abuse
    Judge Coral Shaw has been appointed as the new Chair of the Royal Commission into Historical Abuse in State Care and in the Care of Faith-based Institutions, Internal Affairs Minister Tracey Martin announced today. "Judge Shaw, who is currently one of the inquiry commissioners, is extremely well qualified for the ...
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    7 days ago
  • Better mental health facilities for Palmerston North
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  • Bowel Screening hits halfway point
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  • More vaccines for meningococcal disease
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  • Fisheries innovation projects supported
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    1 week ago
  • Government fixes culturally arranged marriage visa issue
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  • Extension for Royal Commission into Mosque attacks
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  • Terrorism and Trade on agenda as Foreign Minister visits the United States
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  • Hoiho get extra support alongside 168 community conservation groups backing nature
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  • New safety measures for modified pistols
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    1 week ago
  • Minister of Defence to visit Singapore and Thailand
    Minister of Defence Ron Mark will travel to Singapore today to conduct a counterpart visit and to co-chair the third annual Singapore-New Zealand Defence Ministers’ Meeting with his counterpart, Minister for Defence Dr Ng Eng Hen. “Singapore is one of our most important defence partners in the region, and our ...
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    1 week ago