There Is An Alternative

Written By: - Date published: 7:18 am, May 16th, 2011 - 66 comments
Categories: budget 2011, capitalism, class war, debt / deficit, economy - Tags: , ,

National have dug us in to a deep economic hole. We’re borrowing $380 million a week, and looking at a record budget deficit. Against this backdrop Bill English delivers his third budget this week. All the softening up and punditry so far has been about cuts. How many? How deep? Kiwisaver? Working for Families? What is going to go?

Like lemmings we’re accepting National’s framing of the budget, and marching even faster to our economic doom. Very few economists or commentators are questioning the slash and burn mind set, and looking at the alternative. Yes, there is an alternative. We can reject reductions in spending, and look at raising government income instead. Raise revenue how, I hear you cry?

1) Reform the tax system. Start by reversing National’s unaffordable tax cut bribe. It didn’t stimulate the economy, and it only benefits the very well off. It costs at least $2.5 Billion a year (or by some estimates $15 Billion over 4 years), and that is money we could well put to better use right now. In fact, go further, make the system more progressive up to and including matching Australia’s top rate of 45% for income over 180,000. Take GST down to 10%. Bring in Labour’s $5000 tax free. Hmmm, by the time we’ve done all that we probably won’t have increased government revenue will we. But we will have put money into the hands that need it, and will spend it here in NZ, thus “simulating the economy” much more effectively than “trickle down” nonsense ever did.

2) Tobin tax. The Tobin tax (Financial Transactions tax) is effectively just GST on on financial services transactions (which currently don’t attract GST – why not? ). We’ve covered it here before, when 1000 economists (including four from NZ) wrote an open letter to the G20:

This tax is an idea that has come of age. The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.

Even at very low rates of 0.05% or less, this tax could raise hundreds of billions of dollars annually and calm excessive speculation. The UK already levies a tax on share transactions of 0.5%, or ten times this rate, without unduly impacting on the competitiveness of the City of London.

The Tobin tax is part of the economic policy of both the Green and Mana parties. I’ve found it difficult to source an estimate of how much it could raise in NZ (any links much appreciated), but there is some talk of it replacing GST:

It’s time to drop our goods and services tax and adopt a financial transactions tax. This was not an option proposed by the 13 comfortable men on the Government’s Tax Advisory Group but it’s an idea whose time has come.

We all know GST disproportionately hurts those on low and middle incomes who work hard, live week to week and spend most of their income. An FTT, on the other hand, would impact most heavily on the likes of currency speculators and similar financial wheelers and dealers who gamble with wealth created by others.

This form of tax will be more effective if it can be imposed in all major economies, but it is the way the world is moving.

3) Crack down on tax cheats. Bernard Hickey tells it like it is:

Havens for rich tax avoiders will cripple NZ

Avoiding and minimising tax is almost a national sport in New Zealand. There has been a grudging admiration for those who can get away with sticking it to Te Tari Taake. Among the professional and entrepreneurial classes it is seen as par for the course to shelter assets and income in family trusts and company structures that help reduce or avoid tax.

Many of the multi-national companies operating in New Zealand funnel income, assets and debt through various tax havens and vehicles that keep tax paid here to a minimum. Most of our politicians, city councillors, bankers, accountants and judges use such vehicles to protect their assets from the prying eyes of Inland Revenue, creditors, ex-spouses and, ultimately, the courts. New Zealand now has up to 400,000 family trusts.

It means the vast majority of taxes are paid by the mugs on PAYE and by those who have to pay GST for their goods and services. The policy-making classes believe this dual tax system will not change because they run it.

But the game is coming to an end, and it must if New Zealand Inc is to have any chance of balancing its books and avoiding national bankruptcy. …

International pressure is growing on countries such as Ireland that are seen to be trying to “beggar thy neighbour” by offering tax havens. Companies such as Google that channel their GST-free revenues from the “cloud” and through low-tax vehicles in Ireland are now facing growing scrutiny.

So what are New Zealand’s policymakers doing? Our Government is about to quietly drop its tax on gifting assets into family trusts, which is expected to unleash a wave of transference of assets into these trusts. This week the Government agreed to try to set up a tax haven for the administration of pension funds.

Well worth reading the whole of that piece by Hickey. Why are the Nats taking us in exactly the wrong direction on this issue? Sorry, that’s a rhetorical question, we all know why.

4) Capital gains tax. Hello government – are you listening to your own advisors?

Background documents to the May 2010 Budget disclose that the Inland Revenue and Treasury consider that the tax base needs to be broadened, even beyond the reforms in the 2010 Budget. They concluded “at a theoretical level, there is a strong case for a comprehensive capital gains tax. It would broaden the income tax base and make it more comprehensive”.

According to those advisors a capital gains tax could raise $3.8 Billion a year. Wouldn’t that come in handy? Various myths regarding the capital gains tax are busted here.

So there’s four suggestions on raising government revenue. What they all have in common is that they take money from those that have money. But that’s National’s constituency, so don’t expect to see any of these in the budget. Ignoring a mountain of Keynesian economic theory and evidence, the budget will all be about cut cut cut, and driving us deeper into an economic death spiral.

66 comments on “There Is An Alternative ”

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  1. Peter 1
    16 May 2011 at 8:09 am

    Now sell it to the electorate? What are the benefits?

    • ZeeBop 1.1
      16 May 2011 at 12:56 pm

      A fair playing field means the skilled survive, whereas a unfair game means the less skilled are selected by the nature of the rules. The NZ economy does not have a broad tax system and is falling behind as a result. You see the right in OZ, UK, understand that a progressive tax system actually grows the economy, its the naturally rich nations like the US, NZ overflowing with resources, water, farm-able land where the profits can be concentrated in the hands of a few more easily (market dominance) that you start hearing the case for flat taxes, because an already far too favourable field has selected those more skilled at playing the rule book than the game itself.
      Kiwis love to avoid tax, and our economy shows it, people are tight, lack generosity and can ignore systemic child poverty because their richer, but their not, on average farmers are carrying over 2.5 million dollars worth of debt. That’s the joke, the parliament has managed the country into private debt toxic overload because people are far more congratulatory of those who beat the system than those who actually make real growth, hold key skills, risk their shirts because there is a welfare net to catch them. Why would anyone with real prospects, real skill advantage, and so many opportunities denied by fencing sitting parasites who protect their position by playing the loopholes in the rule book, stay in NZ, they won’t. We could tap the wealth generated by NZ and build a world class economy, but with so much wealth being created here those who hold it, the majority of it, don’t want a solid economy of competitors when that could mean their profit stream collapses, or they have to start carrying their fair share of taxation, or heaven forbid create a level playing field with the serf classes as equals.
      Don’t expect any change, John Key is the guy all those parasite landlords went to when exporting their profit.
      If you don’t want tax reform you don’t want change.

    • Bored 1.2
      16 May 2011 at 1:33 pm

      As a salesman I pick my audience so I am not going to try and sell it to anybody who directly benefits. Fortunately for me I have most PAYE payers on my side of the cost benefit ledger. What will make them buy is:

      1. Tax reform of the Nats tax cuts: the benefit is that current services (Health / Education / etc)that the Nats say are unaffordable are retained and made freely available at no increased charge. The implication that will sell this is that the services you need are merely being taken away so that the rich can have another holiday off shore whilst granny cant heat her house, or mum cant take her kid to the doctor. Easy sell to anybody who is adversely affected.

      2. Tobin tax: the benefit is that those who do the real work don’t have to have their incomes denuded by non functional transactions and consequently bail out finance with their tax dollars (eg SCF) The implication is that you the common man should not be burdened by tax help to the banks that would be better in your pocket, or paying for social services you use. Tobin tax might actually decrease what tax you have to pay. Easy sell.

      3. Tax cheats: The easiest sell, let’s face it we all hate them, and when we are at the bottom of the income scale they hurt us like hell because they already have more, and then they cheat us……

      4. Capital gains: Again an easy sell, try you the common man can’t afford anything because those who have are crowding you out of the market, and your taxes pay for this as they offset income….capital gains would claw this back…you can then afford and you will have to shoulder less of a tax burden that gave you no benefit.

      So Pete where’s the sales problem?

      • KJT 1.2.1
        16 May 2011 at 5:25 pm

        I would add another regulation. Once banks or finance companies they have sold the property they hold a security interest in the debt is then wiped. This would do a great deal to slow down asset appreciation due to overlending.

        A Guaranteed minimum income paid to everyone similar to our current pensions. Administered by IRD. The savings in admin costs and the plethora of agencies which administer benefits would help pay for it. Along with the tax changes suggested above. The pension has been successful in reducing elderly poverty to less than 3%. We could do the same with child poverty.

        The taxes suggested above shift taxes from producers to renters, as Adam Smith advocated.

      • Peter 1.2.2
        18 May 2011 at 6:43 am

        Thanks, you’ve got me thinking!

  2. Robert Atack 2
    16 May 2011 at 8:13 am

    “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”

    – Woody Allen

    • r0b 2.1
      16 May 2011 at 9:28 am

      I agree with you that the crash is coming. But I also think that the leftwards path will give us the better preparation and the better hope of coming through it, don’t you?

      • Bored 2.1.1
        16 May 2011 at 1:37 pm

        Thanks rOb, what we traditionally see as a “left” path may be the best way forward, I am not so sure about what iteration however that is another debate.

        What is certain is that the right hand path is so tied to the notions of property and control of other peoples labour that they will be highly unlikely to help themselves through social means as the resources run thin.

      • Robert Atack 2.1.2
        16 May 2011 at 7:44 pm

        Sorry Rob, to quote George Carlin “Fuck hope … don’t vote” http://www.youtube.com/watch?v=xIraCchPDhk (adult content)
        As the little add for CO2.org says ‘we’ are at 393.18 ppm now.
        We are locked into this for the next 100 years at best, but in reality (allowing for a miracle) it will be over 1,000 years before the planet sees a reduction in CO2, and as we plunge down Hubbert’s Curve everything is going to get worse, ether we are going to burn more coal – increasing CO2, or IMO more likely the global economy will go into permanent depression, and there will be no one with any reason to mine coal, as there will be no way of getting it to the power stations, or paying for it. This will lead to the global dimming we have been hiding under evaporating, as the particulates are washed from the atmosphere, the true effect of 390+ CO2 will be felt, this will lead to whatever land ice is left coming crashing to a shoreline near you. This is ignoring the worlds 400+ nuclear power plants going ‘Fukushima’.
        ‘They’ will keep fucking earth until ‘they’ can’t. We are 100% locked into this system, people do not want to know, people will keep demanding their ‘fare share’ until there isn’t anyone to demand it of, or they are living under military rule.
        The government has 2 choices, 1 path leads to a semi co-operative community (there will always be the ratbags) and the other to military rule with violence, starvation, etc.
        Choice #1 – Tell the people the truth, tell the IMF and World Bank to screw themselves “we will create our own money, for our own economy and people” The truth involves the fact we are pasted peak oil and are free wheeling like a Coyote, just waiting for gravity to take over. The problem is no one wants to know. They would rather attack people like me, and take the ‘hope train’, it is the ‘lag time’ that is the killer, humans aren’t made to worry about something over the hill, we worry about the brontosaurs shit we steeped on, when we left the cave this morning, and that is as far as we have progressed. So by the time the happily ignorant wake up … well enough of them to make a difference …. it will be just to damn late . As it is now.
        CO2 isn’t all the bad crap up there, when you add it all up we are at something like 450ppm
        This is way to much information for most, apart from the ‘hope’ crap in part 7 I think this guy has got it close http://www.youtube.com/watch?v=zKV7VfAQhs0
        And I would go with Jacques Cousteau any day
        “The road to the future leads us smack into the wall. We simply ricochet off the alternatives that destiny offers: a demographic explosion that triggers social chaos and spreads death, nuclear delirium and the quasi-annihilation of the species… Our survival is no more than a question of 25, 50 or perhaps 100 years.” ….. except he was being hopeful @100 years 😉

  3. Tangled up in blue 3
    16 May 2011 at 8:28 am

    Wait for the usual “all the rich people will move away taking their money & businesses – NZ will be doomed!!!”.

    • Tiger Mountain 3.1
      16 May 2011 at 9:42 am

      Well corporates already do whip their money away from the domestic economy.

      Re direct foreign investment Treasury says…
      http://www.treasury.govt.nz/economy/overview/2010/18.htm
      “There are no restrictions on the movement of funds into or out of New Zealand, or on repatriation of profits. No additional performance measures are imposed on foreign-owned enterprises.”

      “The stock of foreign direct investment in New Zealand stood at $92.8 billion as of 31 March 2009”

      So it is about time there were some meaningful restrictions on captial outflow. Even the Australian owned banks that masquerade as NZ banks rorted their tax obligations recently. The foreign account deficit has a large component of repatriated profit that seems to slip under the radar.

      • KJT 3.1.1
        16 May 2011 at 5:17 pm

        Germany slows this down, with reduced taxes, for income that is reinvested in companies for a set period rather than taken as dividends or profit.

    • Steve Withers 3.2
      16 May 2011 at 9:54 am

      They have already “moved away”. In fact, most of the people who own NZ’s major businesses don’t even live here…and a lot of those have never even visited the place.

      Using media as an example:” How many Sky, CanWest-Global, APN and Fairfax sharehoplders would live in NZ?

      Not many.

      The threat is an empty one now. In removing tariffs and selling off what businesses can’t be shipped overseas, a huge proportion of NZ’s capital-owning “rich” are already not here….and never have been.

    • the pink postman 3.3
      16 May 2011 at 2:16 pm

      The late Nye Bevan said way back in 1940 .”If all the workers left the country the rich would starve to death. However if all the rich left the workers would manage very well

  4. Colonial Viper 4
    16 May 2011 at 9:10 am

    An asset tax please, 1% to 2%p.a. on all personal and family holdings over $1M.

    • vto 4.1
      16 May 2011 at 10:09 am

      Credible ideas only CV. How many elderly who have lived in their homes since young and have paid them off only to have the hoards of baby boomers suddenly like their locale and arrive en masse consequently driving the value of their home through the roof so that they now have a $2million home on a pension income. Don’t be so mean as to impose a tax on people that they cannot afford.

      • joe90 4.1.1
        16 May 2011 at 12:00 pm

        Me, a 1989 investment of $23,000 in an acre of then undesirable coastal property has morphed into a wealth tax in the form of $4000p/a in rates on a land value of $475,000 and an improvement value of $120,000.
        For our rates wealth tax by stealth of $4000 we receive no footpaths or road crossing, minimal street lighting, no rubbish collection or recycling services and as a condition of our building permit we provide our own waste water, water, storm water systems.

        Contrast with the bloke across the road who recently built an $800,000 house on a $100,000 section without the sea veiw and has water, waste water and storm water services pays $3000 p/a in wealth tax rates.

        A wealth tax, yes please.

      • Colonial Viper 4.1.2
        16 May 2011 at 4:00 pm

        driving the value of their home through the roof so that they now have a $2million home on a pension income. Don’t be so mean as to impose a tax on people that they cannot afford.

        I’m not sure how many people totally reliant on NZ super fall into this category of now living in multi-million dollar houses. 50? 500? 5000? They still pay rates and insurance on their multimillion dollar house on NZ super, do they?

        You see these retirees in million dollar housing as living on the borders of society do you?

        A man can afford to park a new Porsche 911 Turbo in his driveway but does not have the cashflow to put petrol in it or buy tyres.

        How much sympathy should we give him since he is between such a rock and a hard place?

        • terryg 4.1.2.1
          16 May 2011 at 5:27 pm

          CV old chap, you might want to look a little bit harder. It really does happen. the ludicrous (fiscally cancerous?) growth in property prices has indeed forced elderly people out of their properties due to excessive rates.

          A fairer way would be to not charge rates until a house is sold, and take it all then. because lets be honest, what does it matter what something is “worth” unless you plan on selling it?

          for a pissant little country with less people than most cities, its astonishing how poorly we do strategic planning.

          • Colonial Viper 4.1.2.1.1
            16 May 2011 at 6:17 pm

            Well you’re right, a bit of flexibility can’t hurt.

            • vto 4.1.2.1.1.1
              16 May 2011 at 7:34 pm

              Yes that’ right.

              If some silly government wants people to pay cash for tax then they need to tax cash.

              If same silly government wants to tax non-cash forms like asset values then they should expect to receive payment in the same form, namely a piece of paper saying “this piece of paper is worth X dollars” just like a property valuation such as QV. It aint got no value until it is turned into cash.

              Recall Cullen had to back down when he proposed similar nonsense over taxing foreign shareholdings or some such (can’;t quite recall). Had to back down because requiring people to pay cash when they did not have it was simply ludicrous.

              An asset is not cash. Which also goes to heart of all that is wrong with the rating system.

              • terryg …
                17 May 2011 at 12:54 pm

                Vto, very nicely put. betcha IRD would jump up and down on your head, rip your face off and piss in the wound if you tried it though. And I’m not sure thats a metaphor.

          • KJT 4.1.2.1.2
            16 May 2011 at 8:40 pm

            Payment when the house is sold is called a Capital Gains tax.

            But it does not address the problem of people holding a lot of wealth who do not pay tax.

        • vto 4.1.2.2
          16 May 2011 at 5:31 pm

          You miss my point. These people have no interest in the value of their house. It is their home and has been for donkeys years. Just because other people come and live all around them does not mean they should have to move out.

          It is a situation imposed on them by others and suggesting that they should sell up and move out of their family home sucks. It is completely unfair.

          How many elderly in this position??? F…..g heaps. They struggle to pay rates as it is given their ridiculously valued homes and ridiculous rating system of paying for the sewers and roads and etc. Maybe you don’t know too many elderly but there are stacks in exactly this position.

          To say to someone “I don’t care that you live on the pension, your old house on the previously undesireable beachfront is now worth shitloads so we deem you to be a rich prick. Either pay up or go live in the backblocks.”

          Wrong CV. I had this argument with many at Kiwiblub too (you not a rwnj are you?). Better understand it because Winston Peters certainly does.

          These are low income elderly who live in a home that now everyone wants. It aint their problem. Piss off is their sentiment – and I completely agree.

          • Colonial Viper 4.1.2.2.1
            16 May 2011 at 6:27 pm

            I’m not talking about the average $650K Auckland home here mate. I am talking expensive real estate at $2M: 4-5 bedrooms, double garage, sea views, spa pool, and in a good suburb.

            Maybe you don’t know too many elderly but there are stacks in exactly this position.

            Yes a good number will be living in overinflated housing and suffering higher rates and insurance as a result; but relatively few of those would fall into into the multimillion dollar house price category, even in Auckland.

          • Draco T Bastard 4.1.2.2.2
            16 May 2011 at 8:20 pm

            I’ve considered for awhile that rates should be set as a percentage of your income. In two ways:

            1.) 1% of income for everybody collected by Te Tari Taake, paid to the council of the address the person says is their home.
            2.) 2% of income for every house owner collected by Te Tari Taake, paid to the council that address of the house relates to and it’s additive.

            Throw in some capital gains tax and I think you’ll find speculative “investment” in houses and home rent seeking will quickly become a thing of the past.

            • vto 4.1.2.2.2.1
              16 May 2011 at 8:31 pm

              Agreed, of a form. As far as I know the rating system is the last of throwbacks to the days when only the landowners paid any sort of tax, mostly because they were the only ones with any money (and the only voters).

              Now that basis has disappeared the rating system grinds along like some old dinosaur gobbling up everything in its path, fair or not, intended or not. It is time for change.

              Unfortunately changing the rating system is always painted by the left as a Thatcherite poll tax. Which it needs to be of a type. User pays to at least a bit more of an extent than it is now.

              So, yes Draco, I agree local authority revenues need to be based on income also. It drives me insane when I come across people on the pension having to pay a LUDICROUS proportion of their pension in rates.

              • Carol …
                16 May 2011 at 8:37 pm

                Some rates may indeed be too high. But not only landowners pay rates. In the place I currently rent, I’ve always paid the water rates for the property.

        • joe90 4.1.2.3
          16 May 2011 at 6:02 pm

          They still pay rates and insurance on their multimillion dollar house on NZ super, do they?

          No, in my case it’ll be legal extortion by the local body based on my perceived ability to pay and the insurance premium on a modest home.

  5. Rich 5
    16 May 2011 at 10:02 am

    Also, large companies avoid a lot of tax through transfer pricing, tax writeoffs and a whole range of other dodges.

    We should simplify this by imposing, for private companies with over $500mln turnover, a turnover tax at an industry standard rate, based on the companies sales in NZ.

    The other part of this, to inhibit companies from passing tax costs on, is to encourage the growth of worker-customer cooperatives in place of shareholder owned companies. These could be taxed at a much lower or zero rate. At the same time, that movement could be given a head start by converting SOEs into that form: so AirNZ would stop being taxpayer owned and would be owned (inalienably) by it’s workers and customers on a one person one share basis.

    • Draco T Bastard 5.1
      16 May 2011 at 3:04 pm

      At the same time, that movement could be given a head start by converting SOEs into that form: so AirNZ would stop being taxpayer owned and would be owned (inalienably) by it’s workers and customers on a one person one share basis.

      Nope, won’t work as you’d be maintaining the same ownership rules that are causing problems now.

      • Rich 5.1.1
        16 May 2011 at 4:19 pm

        No.

        The key difference is the one person/one share aspect which is the difference between a co-op and a company with employee shares.

        Each stakeholder would have a single share (workers and customers would be in different classes, so 3000 workers would each have 1/3000 of the firm while a million customers would each own a millionth).

        Profits would be distributed on that basis (in the above example, if the firm made $100mln profit, workers would get $33,333 each and customers $100). A worker has usually a lot more staked in a firm than somebody who just uses its services/products.

        The board would be elected by stakeholders on the same one person / one vote basis.

        That’s very different to a stockholder company where wealthy individuals and institutions vote a huge chunk of shares. It’s also different to an SOE where the Minister votes all the shares, but (especially in the case of the last Labour government) feels themselves under an obligation not to meddle, so the firm is effectively controlled by senior management.

        • Colonial Viper 5.1.1.1
          16 May 2011 at 4:27 pm

          Co-operative enterprises also need a cast iron shareholders agreement to prevent worker-owners selling their stock to other parties, and to make it difficult for the objectives of the co-operative to be undermined or usurped.

          • Draco T Bastard 5.1.1.1.1
            16 May 2011 at 5:12 pm

            CV gets it.

            As soon as you tell someone that they “own” something they’re going to be encouraged or even just to decide to sell. Sure, have the workers make the decisions about the way the company works, how much people are paid and what happens with profits but don’t give them ownership as that will undermine and eventually destroy the cooperative that was initially set up.

            Hmmm, that’s exactly what National and Act are suggesting with selling our state assets.

            And then there’s the fact that some things just shouldn’t be privately held. Telecomunications, electricity and water come to mind here. Having them privately owned, even if it is a cooperative, sets up a monopoly rent system that would allow the community to be held to ransom (See the actions of Telecom before LLU was forced on them).

            • terryg 5.1.1.1.1.1
              16 May 2011 at 5:28 pm

              indeed.

              markets are a piss-poor way of doing many things. e.g. using market pricing to signal to large electricity consumers that they need to wind consumption back.

              I would have used a telephone.

          • Rich 5.1.1.1.2
            16 May 2011 at 6:48 pm

            I think they would need a double-lock. An agreement with each stakeholder giving them the right to their shares (depending on their continued employee/customer status – with some sort of arrangement for retirees) and preventing the structure being changed (even if a majority voted for it).

            At the same time, legislation entrenching the same thing in law.

            So you’d not only have to change the law, but also confiscate the stakeholders property rights, for those concerned about such things.

            (And this wouldn’t substitute for regulation where needed, but would be about giving people real control over the organisations that dominate their lives),

  6. Lanthanide 6
    16 May 2011 at 10:15 am

    Bill English said a week or so ago, that with the budget deficit, the only things to do are cut core government spending or cut discretionary spending.
     
    Clearly he’s missed the obvious: raise revenue.

  7. todd 7
    16 May 2011 at 10:36 am

    Trickle Down is basically the rich pissing all over the poor.

  8. Zaphod Beeblebrox 8
    16 May 2011 at 12:08 pm

    All very admirable ideas Rob (as they always are) but what about a Carbon Tax? Our present ETS subsidizes big polluters to pollute at massive public expense- a problem Key is happy to put off for the next government.

    Tinkering with tax system and appealing to short hip pocket nerves is what this government excels at. The left don’t need to ape that behaviour.Arguing about who gets what won’t make any difference unless we look at the elephants about to stomp on us namely-

    1. CO2 emissions. What we are doing now is a crime against our kids and grand-kids. We need to develop alternatives now. Money raised from a carbon tax could compensate low income earners to adopt newer technologies and encourage our farmers to farm a bit better (thus giving them a competitive advantage over third world farmers who are rapidly cathching them).

    2. The massive amounts of income we waste getting about. This is about to get much worse. Auckland is becoming a thoroughly unpleasant place to live as it is becoming the norm to spend 2 hours a day commuting at great expense.The more money we pour into inefficient and expense transportation- the worse our national productivity becomes. The government needs to think about how we can make our cities livable or nobody will want to live in them (let alone be able to afford it).

    3. Our schools desperately need help with upgrading their IT systems so we can train graduates who can use the new systems which are being developed. Unless this happens our kids will be doing menial work for the South Koreans or Australians who are investing massively in IT.

    • Rich 8.1
      16 May 2011 at 12:27 pm

      I’m a senior IT person and I didn’t even *have* access to a computer at school until 6th form, and then it was nothing that would be recognisable now. I learnt computer science at university, in industry and by self-study.

      Did you know that most of the academic work in Comp Sci that todays systems rely on was worked out in the 60’s, typically using paper and pencil.

      Anyway, if these “new systems” you imagine are any good, surely they won’t need people to have studied since school in order to use them?

      • lprent 8.1.1
        16 May 2011 at 4:38 pm

        Yeah. When I started at high school the height of student level technology there was the 4 function calculators someone brought back from overseas. The most advanced computer at school was a HP21C with 49 programming steps that a teacher owned.

        At university I started with bloody punched cards and eventually moved to a teletype console on a machine that had less grunt and a lot less capacity than my cellphone, and was shared with 49 other terminals. As Rich says it doesn’t make that much difference for understanding the principles of computers. Most of the basis of what students get taught at university level these days is essentially the same that I got taught in the early 80’s. That was and still is largely based on work done in the 1960’s from the matrix algebra that underlies 3d graphics to the quantum engineering of integrated circuits.

        Actually using a computer for computing still isn’t that big a part of a uni compsci course even these days. You’d use it more for writing assignments than programming or setting up networks or the like. Most programming and operations is about understanding principles and structure rather than putting stuff together.

        Teaching people how to run packages is somewhat pointless. They will change radically over the years. Teaching them basic principles doesn’t require much computer grunt – it mainly requires teachers who know what they’re talking about.

        • terryg 8.1.1.1
          16 May 2011 at 5:38 pm

          Rich, Lyn – agree 1000!%

          I did have computers at high school – Poly computers, designed and built in Wellington IIRC (early this century I worked with one of the guys who designed them). but they really did not feature at all in our education. Just like today, they were a gimmick (but Oh, how I loved FLEX, and 6809 ASM)

          I, too, am horrified by the appalling overuse of computers in schools. Using computers to learn maths? When they (ie my 16yo daughter) cant spell, and is only able to do arithmetic and algebra because I taught her how, with a pen and paper.

          we are literally training a generation of microserfs, unable to do anything useful, but shit hot at powerpoint presentations. Unable to remember anything, but can google with the best of them.

          And in a few years, when the current software is changed beyond recognition, that knowledge will be useless.

          (says he who uses XP, and 10 packages written last century for all of my complex maths and circuit simulation/layout, along with about 35-40 1E5 schoolbooks per year, and stopped writing PC software when INT21 calls became obsolete)

        • Lanthanide 8.1.1.2
          16 May 2011 at 5:44 pm

          “Actually using a computer for computing still isn’t that big a part of a uni compsci course even these days. You’d use it more for writing assignments than programming or setting up networks or the like. Most programming and operations is about understanding principles and structure rather than putting stuff together.”
           
          Erm, not when I finished my degree in 2005. Yes, there were theoretical courses of the type you’re describing, but I’d say they made up less than 50% of all available courses.

  9. Dan 9
    16 May 2011 at 12:51 pm

    I think my ban is up, so here goes:

    1) Tax ‘reform’ can be executed without any actual changes to regulations. A well-funded tax authority can catch more untaxed dollars than a poorly funded one. The best thing about rigidly enforced tax law is that everyone wins. The tax department recovers more of the money that they should have done in the first place, and the legal eagles will get to charge more hours because people will want to hide more of those dollars from the tax man. Eventually it gets to the point where more money is lost through revenue that is hidden and untaxed than you spend funding the aggressive approach, but you can bring that back to square one by simply closing any loopholes. It’s a win/win situation provided somebody stays on top of it.

    2) Capital Gains Taxes are a great idea in theory, but hugely politically sensitive. Do you exempt the family home? Do you intrude on the persistently-relevant-despite-all-logic idea of kiwi batch ownership? Or do you reform existing provisions under the Income Tax Act and merely alter the exemptions? Finally, do you tax capital gains on shares and investments when we’re desperate to improve personal savings rates?

    3) Tobin tax is a fantastic idea that needs exploring in a specifically New Zealand context.

    4) Australia-style tax system: More brackets with a further reach. You’re better off in Australia until you earn $250,000 or more, in which case you pay less tax here. Adopting their system would allow for an income free tax bracket. Alternatively, I’d like to see anyone under the age of 18 have the tax they’d otherwise be paying put into an account that they can use to fund studies or apprenticeships, and if they do neither, be used to buy a house or transferred into a retirement scheme.

    5) Slash superannuation. It doesn’t have to happen now, but we need a plan soon. People who are leaving university now are struggling to find work, being paid wages that haven’t kept pace with inflation, -paying off student loans, facing record house prices, paying for their parents to retire and expected to save for their own senior years where it’s likely there will be no government assistance at all. If I had kids about to leave university, I’d be buying them one way tickets to Australia as a graduation present. This country sure doesn’t seem to want to keep them here.

    Personally there’s a lot of issues with things like spending that could be cut back on, and things like rail tunnels having to wait for a while. It’s a harsh reality, but unless we change some fundamental issues with our economy, then we’re just going to keep ending up back here with nothing to show for it but the debt we took out to fund projects we can’t afford.

    • Colonial Viper 9.1
      16 May 2011 at 1:00 pm

      going to keep ending up back here with nothing to show for it but the debt we took out to fund projects we can’t afford.

      Agreed – projects like bailing out rich investors, giving tax cuts to the already wealthy, and monies to corporate yacht races.

      To my mind a CGT is a no brainer, but it will take political will and education of the electorate to get through. How about organising the economy thus: your home is not an appreciating investment asset. No more asset price bubbles. A levy on all mortgages issued will help sort it as well. Say a 5% levy on all mortgages issued over $500K.

      The truly politically sensitive proposal would be a straight out asset tax. 1%-2% p.a. on all net assets over $1M.

      And a death tax. Say 25% of any assets held over $1M.

      The monies gained must be put into social services for all, and for encouraging small business and entrepreneurs.

      • Dan 9.1.1
        16 May 2011 at 1:54 pm

        Agreed CV, the bailouts were scandalous, and it’s a same that the yacht racing contract “appeared” to be a pre-existing obligation.I’m prepared to give them the benefit of the doubt on that one, but the bailouts anger me because they should have at least resulted in some serious regulatory changes in the retail finance industry, and they just haven’t. We’ll see it all happen again as people get more and more desperate as they approach retirement.

        I can’t agree with a death tax though, merely because I hate the idea of taxing someone after they die, regardless of assets held. For some of us, inheritance will be the only we can ever afford houses :(. A properly managed Tobin Tax would raise far more revenue than GST could, and make taxing the dead something we could probably avoid. I would, however, suggest that funds held in registered pension schemes or Kiwisavers that were transferred on death could only be transferred to another pension scheme, and not cashed out. That would also make lowering RWT on pension a less politically sensitive idea, which could also help get people at least saving for their retirement.

        In theory 😛

        • Colonial Viper 9.1.1.1
          16 May 2011 at 2:16 pm

          Well, estate taxes have a very long history even though some might be a bit squeemish about it; someone who dies with net assets of $2M would find their first $1M tax free and 25% tax on the second million dollars.

          So $2M assets becomes $1.75M assets. And the public purse collects $0.25M

          I think the heirs to the estate will still do OK in that scenario 🙂

          • Lanthanide 9.1.1.1.1
            16 May 2011 at 6:40 pm

            Except it’s not very nice on the family if someone dies asset-rich and cash poor, and you’re effectively forcing them to sell assets in order to pay the tax. Similarly it’s also difficult to agree on a market value for assets that you haven’t actually put on the market.

            Does this estate tax apply to all wills? What happens with a married person dies, leaving their valuable family-home (and little else) to their widow? Do they have to sell it and pay the tax? What about family trusts?

            It’s nice to simply say “estate tax”, but it has lots of niggles in practice.

            • Colonial Viper 9.1.1.1.1.1
              16 May 2011 at 6:44 pm

              US and UK have been running an estate tax for decades/century or more so I’m sure they’ve worked out a few of the niggles. I’m really not trying to reinvent the wheel here.

              Fact of the matter is, with an estate tax, there will be a need for estate planning BEFORE a person dies. And if they have two or three or four million in assets to start with, that’s going to be a necessary thing anyways.

    • Armchair Critic 9.2
      16 May 2011 at 1:11 pm

      You’re better off in Australia until you earn $250,000 or more, in which case you pay less tax here.
      Which raises the vexed question of why all the top CEOs aren’t flocking to NZ to take advantage of the lower taxation. Atlas, where are you?

      • Colonial Viper 9.2.1
        16 May 2011 at 2:13 pm

        Not that vexed; people go to where they can get better incomes, not where the taxes are lower.

        The only people who worry about taxes are the people who are already staying 🙂

    • Ed 9.3
      16 May 2011 at 10:42 pm

      Regarding ‘better off in Australia, I’d like to see a proper comparison using similar jobs. Taxes are one thing, but in Australia you also need to pay for health insurance, a bigger proportion of people with children feel they need to pay for education, they do not have as much state provided superannuation as New Zealand, costs are often higher – certainly with higher wages many services costs are higher for example – and there are probably other differences. I suspect that allowing for those differences our taxes are lower than Australia for a lot more incomes than most realise. The problem though is that in general incomes are higher in Australia – at least for the low and middle income people.

      Regarding NZ Super, even some supporters of the left are buying into the lie that we cannot afford NZ Super in its current form. Of course we can – it is just that National are not prepared to fund it. It is however fair to say that as people are living longer, it may be reasonable to not start NZ Super until a bit later than 65 – but that is a discussion that needs to be made as a rational choice – not one that starts from saying that income taxes on the wealthy are lower so we need to cut some benefits.

      Nationa and ACT are playing funny buggers with NZ Super – they are supposed to be telling us each year what contributions into the NZ Super Fund are required to cover future NZ Super payments for current New Zealanders as they fall due – but they don’t seem to be ding that – so much for transparency.

      If we got a bigger proportion of our population working again we would generate additional tax revenue that would avoid a lot of problems – and expenses of some benefits would be another gain. Instead National / ACT have slashed programmes to help people get into and stay in work – the small amount being done in Christchurch is as usual too late; they should have moved on that before last Christmas.

  10. HC 10
    16 May 2011 at 2:07 pm

    Of course there are alternatives, but who will vote for it?

    Sadly NZ (like the rest of the world) has become enslaved by economic conditions that have left most control, if not ALL control, in the hands a the small percentage that have substantial wealth and incomes. They pull the strings.

    For decades we have been conditioned to think “there is no alternative”.

    Any person born after 1990 has not much of any real life experience of what happened, before, what Roger Douglas, Ruth Richardson, Jenny Shipley and their lobbyist supporters of the Business Round Table, big business, large investors did to this country. They followed a neoliberal economic policy preached by Milton Friedman and his disciples.

    We have little information about alternatives, unless you may be studying politics, economics, sociology and history yourself and in-depth, thus getting an insight into past developments, alternative economic approaches and so forth.

    Who does though?

    And those that do only get taught what prepares them for a career in business.

    Everybody is preoccupied with her or his agenda. The new political developments in NZ show the increasing division, where more are thinking that extreme solutions are needed.

    And who wants to face up to the coming energy crisis, the urgent need to change policies to prepare for this?

    I see people en masse walking around with blinkers, licing in lala land and thinking that all will somehow come right eventually.

    Indeed most are like lemings and resigned.

    If we get no political shake up (which is rare or near impossible in NZ) we will all be in for an economic and financial catastrophy that will be huge.

    So alternatives must be looked at, despite of those screaming “my money”, “my savings”, “my efforts”, “I worked all my life”, “I don’t want to work for bludgers”, bla, bla, bla.

    This election will be so important, I wonder whether anybody really understands this.

    Good luck to those having some common sense.

    • Drakula 10.1
      16 May 2011 at 10:00 pm

      Yes HC I understand you 100% in fact you have just done my blog for me.

      I stand firmly against apathy and fully support a nation wide campaign to get young people to vote (preferably left, Green but Im biased) but to vote.

      To vote for a Tobin Tax and a Capital Gains Tax and put the money in building homes that will make housing affordable is in my view not radical.

      It’s just plain old fashioned common sense!!!!!!!!

  11. randal 11
    16 May 2011 at 2:15 pm

    turn off all the TEEVEE stations and raise the tax on petrol 50c a gallon and we’ll be out of the crap in about 6weeks!

  12. SPC 12
    16 May 2011 at 6:54 pm

    Bollard asked for the ability to place a surcharge on mortgages, rather than use the more blunt means of lifting the OCR, when trying to mitigate the inflationary impact of the property bubble.

    A 1% surcharge on mortgages would raise over a $Bpa. It could be brought in as an alternative to increasing the OCR from 2.5 to 3.5% with economic recovery.

    The only draw back would normally be that it keeps interest rates for savers lower, but if the RB is running a regime requiring local banks to increase long term deposits then interest rates for saving will hold up despite a low OCR.

    Politically there is the sense of being seen to increase costs for homeowners, but the total mortgage cost is no greater if it is OCR + bank margin mortgage rate or OCR – 1% + bank margin mortgage rate + 1%. The only issue is how the surcharge is introduced on existing mortgages.

    The simplest option would be a one off change instead of a 2.5 to 3.5% OCR, a 1% surcharge being applied in lieu of this – impacting on all floating rates and all new fixed term mortgages and all renewals of mortgages (as these occur).

    • Colonial Viper 12.1
      16 May 2011 at 7:04 pm

      Go to a progressive surcharge. 0% on mortgages of less than $250K say. Then slowly introduced from that level.

      • SPC 12.1.1
        16 May 2011 at 8:54 pm

        A major benefit of moving to a surcharge is a lower OCR and hence lower dollar (there is also a lower business borrowing cost), it realises the impact of an easing of monetary policy without reducing constraint on consumer led inflation.

        As there is no actual change in total mortgage cost to those on lower incomes there is no need to target its application for reasons of equity.

        It’s a way to raise over a $1B pa without adverse impact on anyone and much potential good for the productive sector (a lower dollar as a lower OCR reduces buy in to the currency).

      • Armchair Critic 12.1.2
        16 May 2011 at 9:31 pm

        0% on mortgages of less than $250K say
        Sure, I’ll have two, please.

  13. ZeeBop 13
    16 May 2011 at 9:10 pm

    Palestinians test Israeli borders! After oil how will Israel defend its borders?
    Abusing the Palestinians in a land known for its occupants long memory is
    not purdent.
    Its not that Israel fought and won the 6 day war, its what it did afterwards
    that could mean the end of Israel?
    As was seen in N.I when the protestant majority realized they would, on
    population trends, become the minority. They had the power and the need
    to resolve the dispute justly.
    Has Israel just received its last call?

    Given the right wing ascendancy due to cheap oil and cheap debt, removing
    checks and balances for profits, are we all now in the same situation.
    Abused by the wealth concentration, a global elite, challenged finally
    when their economic invincibility dissipates, their conservative revolution
    final sees reality. They were given the power, the money, and instead of
    building a more harmonious world they abused the planet, resources,
    and peoples. For their sectarian economic interest.

    And who is at the centre of the push to the right, all those years,
    who owned the microphone, who profited by spinning the rightwing
    with stories of the ‘rich need hand outs and government off their back’.

    The right wing ideology, idiocy, is a dead end.

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