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More Tax?

Entry 872, on 2008-10-20 at 22:06:14 (Rating 2, Politics)

A headline in the Herald this morning quoted a tax expert from the accounting firm, Pricewaterhouse Coopers New Zealand, saying that tax could have to rise to cover the worsening financial status of the country due to the global economic crisis and extravagant election promises. This might include an increase of GST to 15% and an increase in the top personal income tax rate taking it up to 45%.

Well isn't that helpful? We all know that its possible that tax might increase. Its also possible that it might decrease or stay the same. The reality is that now that we are fully exposed to the global economy its difficult to say what might happen.

Maybe the statement is designed to scare people at the upcoming election. Of course, Labour has said it will never let GST increase and National made a somewhat less certain response but still indicated an increase is unlikely. I can't imagine that any party brave enough to increase GST would be very popular at the election which followed.

I don't tend to have a lot of confidence in economists' and accounting professionals' opinions because I don't really see their work as having much academic credibility. I hate to harp on about it, but the financial crisis has also dented many people's confidence in financial professionals too. So what was the point in making this statement? There doesn't seem to be one to me.

But getting back to the original idea about GST. Would it be a good idea to increase it? As someone with a somewhat socialist emphasis you might think that higher taxes which would allow greater services might be something I would support and maybe I would normally, but not through GST.

I think tax should be paid by those who can afford to pay it. GST is paid by everyone for items which aren't really optional: food, rent, power, etc. Some people might say that everyone should pay the same tax and those who make more (through their own hard work) should be allowed to keep it. I don't think there's a strong correlation between hard work and high income for a start so that theory doesn't hold up. Also, do we want an underclass of people driven in to subsistence living by paying high GST?

Even if flat tax was fair (it isn't) there is still the practical point of affordability to consider. I would be quite happy with the Green's idea of eliminating GST on food. I know it makes the system complicated and can lead to weird inconsistencies (like they have in Australia) but those disadvantages might be outweighed by the advantages of reducing poverty. Its at least worth considering.

Comment 1 (1757) by SBFL on 2008-10-20 at 23:58:51:

You forgot to admit you were ranting this time!
Out of interest, who is advocating a flat tax?

Your statement "I think tax should be paid by those who can afford to pay it." is somewhat incongruous. Why don't you define it or else it just sounds like silly rhetoric. Being able to afford it depends on two things: 1) personal income minus expenditure - the IRD can easily define income, but who is to say what people should spend their money on. I mean if people spend more on booze & alcohol they have less left over - so should they pay less tax than someone who doesn't since it is harder to afford tax for them? And 2) how much total tax is needed from the people? This depends on Govt expenditure of course. The more the Govt spends, the less people there are that can afford tax. By your rationale if the Govt spends less then more people will be able to afford to pay tax (hey! maybe it does have some merit but somehow I don't think this is what you were intending). Personally I would prefer the approach where we get to the position where everyone can afford some tax, and the tax demand is minimal (ie well spent with good value, no wastage). This means getting the lower income households out of unacceptable levels of disposable income (be it via education, social programs, economic growth etc). This is real wealth creation. People like you are wealth destroyers. Guess which one alleviates long-term poverty? You should have a read of Kerre Woodham's piece in last Sunday's Herald.

Comment 2 (1758) by OJB on 2008-10-21 at 09:04:44:

I didn't think this one really reached the exalted heights required to be called a rant!

ACT were talking about flat tax at some point, but no one will ever introduce it, of course. Its just one extreme in a scale of tax policies, obviously other policies approaching that ideal are almost as bad.

I'll answer your other points later.

Comment 3 (1764) by SBFl on 2008-10-25 at 12:15:58:

Yeah, no surprise really that ACT might discuss a flat tax. In fact I see they recently released their tax policy and it is indeed almost flat. An extract:

Progressively reduce New Zealand tax levels as follows:
 Personal taxes by 2018/19 will be 12½% on up to $20,000 income.
 Personal taxes by 2018/19 will be 15% on income over $20,000.
 Company taxes by 2018/19 will be 15%, the same as the top personal tax rate
 GST rates by 2018/19 will be 10%.
 Petrol tax cuts of around $500 million.

Comment 4 (1767) by OJB on 2008-10-25 at 14:12:00:

Few people want to pay more tax and there is certainly a good case to make it as flat as possible. But that can only work if everyone gets a fair income. The sort of policies the right have been supporting seem to be doing the exact opposite (the rich get richer, the poor get poorer) so they are doubly unfair.

Comment 5 (1768) by SBFL on 2008-10-27 at 18:47:44:

"Few people want to pay more tax and there is certainly a good case to make it as flat as possible. But that can only work if everyone gets a fair income." - Yes but I would say 'that can only work if the less well-off get a fair income'. You may have meant the same thing.

Well the second point is a bit egregious though. It's the sort of thing I'd expect from some student full of ideology and short on real-life experience. It would be well worth your time to try and learn something about right-wing politics. I don't expect you to change your mind of course, but it would be good for you to actually know something about the subject matter before spouting off!

Comment 6 (1770) by OJB on 2008-10-27 at 19:52:13:

I guess it depends on exactly what you mean by "right wing" politics but the sorts of policies I mean are those introduced to New Zealand 1984 by the "new right" (who were ironically operating in the Labour party at the time). Those certainly lead to greater inequality.

Comment 7 (1771) by SBFL on 2008-10-27 at 20:23:06:

That's one view. Others would say that it lead to much needed reform, and the catalyst to the better living standards we have today. The 'left' have been in power for the last 9 years and by and large they have not reversed those reforms. That indicates a tick of approval by the majority of NZers and only the radical fringe still harp on about them being bad for NZ. Yes, there was some short term pain, I'm sure you can roll out a few stories, but that's the cost of change for long term good.

Comment 8 (1773) by OJB on 2008-10-27 at 20:36:51:

We can debate forever whether the changes were the right thing to do or not. We could also debate over whether the current Labour party is genuinely left or not. We all know how hard it is to reverse major decisions made by previous governments so that argument doesn't really apply. And none of these points change the fact that those right wing economic moves have increased the gap between rich and poor which was the original point being debated.

Comment 9 (1774) by SBFL on 2008-10-27 at 21:02:34:

Heh, once again you miss the point. The question should not be whether or not "those right wing economic moves have increased the gap between rich and poor", but rather whether or not the lot of the poor have increased. If the gap has increased relative to the rich does this mean that the poor are worse off? Of course not. However we know envy drives those on the hard (and not so hard) left - that's why none of them will be happy until everyone is in poverty - i.e. the gap no longer exists. Plenty of examples of this, Eastern Bloc for starters.

That is why I will never vote for the Green Party as it is known today. They prefer the redistribution of wealth, even if it means bringing everyone down. They know little of creation of wealth (so the pool for that wealth redistribution shrinks) but the creation of wealth of course brings everyone up. Now of course it doesn't bring everyone up at the same rate - since as individuals we are all different - but 'a rising tide lifts all ships'

Comment 10 (1776) by OJB on 2008-10-27 at 21:39:46:

But the question was whether the gap had widened. That's what we were discussing. If you wanted to change it to whether that was justified that's fine, but I wasn't aware that was the issue. Anyway, tell me, how do the directors of Contact "create wealth" or make the world a better place compared with how the electricity system was managed before?

Comment 11 (1777) by SBFL on 2008-10-27 at 21:59:54:

Was it? I don't see the gap mentioned specifically in your post or comments. We have been discussing tax and nothing has really varied from the main thrust of your post. When I said "once again you miss the point" I was in essence referring to the gap, because you're focus on the gap misses the point of the improving the lot of the poor. You measure against the rich of the present, not the poor of the past. You haven't actually measured like for like and therefore you can't say things haven't improved. So the gap is a poor measurement of performance, though it is convenient for those filled with envy and resentment.

I am disappointed you go off on an ill-directed bluster (classic Winston Peters tactic when he's cornered!) when I expected a decent line of argument. And in fact it seems you're the one going of on a tangent now, since now you're referring to a different post (directors of Contact). Perhaps you should understand my point in that post before making assumptions here.

Comment 12 (1779) by OJB on 2008-10-27 at 22:10:36:

Does the following not criticise the "gap"? The sort of policies the right have been supporting seem to be doing the exact opposite (the rich get richer, the poor get poorer) so they are doubly unfair

I've seen an awful lot of highly paid executives get huge salary increases recently and I really can't see how any of them make any difference to the overall good of our society. Our wealth comes from farming, tourism, forestry, etc, not from parasites sitting in offices.

Fair enough, you are right. I did confuse the two posts. Sorry about that.

Comment 13 (1780) by OJB on 2008-10-27 at 22:14:08:

And going back to comment 9, what specifically, don't you like about the Green's partnership criteria?

Comment 14 (1781) by SBFL on 2008-10-27 at 22:53:03:

And that is exactly where my comments stemmed from! I think on looking back we are discussing the same issue. Lets not split hairs okay, and lets get back to the issue. I refer you to comment 9, also restated in comment 11.

Anyone can find anecdotal "evidence". Like I said, not everyone raises at the same rate. Ask a Lotto winner. Yes our wealth comes from farming, tourism, forestry, etc, but you need directors, leaders and managers to guide those organisations to growth. Unfortunately some individuals - like in any organizational or societal grouping - are parasites. Welcome to the real world, it ain't perfect. There will always be opportunists because we as humans have free will, but why destroy the farm just to prevent a few bad eggs?

I don't like their partnership criteria because economic growth is not one of them. Economic growth is what diminishes poverty. Go and have a look for yourself (I linked to it above) and tell me one that focuses on how to generate the income to pay for the spending. They live in a pipe-dream man.

Comment 15 (1782) by OJB on 2008-10-28 at 11:39:08:

I accept that in this imperfect world we have to have people who essentially do nothing so that we can fit in with the global financial system. But I have a few points I would like to make...

Many of these people don't actually appear to be very competent. Look at the huge bonuses paid to the directors of the banks and financial institutions in the US just before they went broke. Clearly the amount a person is paid often doesn't reflect their real worth. In fact capitalism actually encourages the wrong type of people to get high pay. People who are devious, greedy, dishonest, and self-serving tend to do well.

Look at the gross incompetence of the previous director of Telecom. How much was she paid for ripping off the customers and sending the company into decline?

Look at the directors of Contact. As managers of an important public facility they should be keeping the price down. But no, they push the price up then hire more of themselves and give themselves bonuses to celebrate!

I know that these are anecdotes but it was these specific cases I was discussing.

Should we accept that managers are there just for the money? If a person is prepared to move to another company just to get paid more does that really indicate much commitment? I don't think so. If we have to pay these people a fortune just so that they will stay with a particular organisation I think we should just let them go.

I agree that the Greens don't have a strong commitment to traditional economic growth. But I think the issues they are strong on are also important. I would want to see them with some influence in government so that those issues can be pursued. Whatever other party they would be in a coalition with would likely be pursuing a strong economic path anyway.

Comment 16 (1784) by SBFL on 2008-10-29 at 22:46:47:

Okay so you like to bang the "company directors get paid too much" drum. I really can't comment on what these individuals get paid unless I know all the facts surrounding their remuneration, and increases in remuneration. Yes, many of them get paid very large incomes when compared to us, but then they make decisions that yield value many more times than what we could do. For the vast majority of cases someone decides their pay. Theresa Gattung was a CEO not a director if I recall correctly meaning the Board would have determined an offer. They must have seen the offer as worth it. Ask them about it first before damning it. Now switch the playing field to sports starts and other celebrities. Are they worth their pay? If so, why? If not, why not? How is their pay determined (talent, gate sales, box office, you and me watching them on the box)?

I am not justifying huge pay packets, I am just saying: have a think about why it might come about? (rationally, don't just necessarily blame greed, that's lazy), and find out the full story first before passing judgement.

I agree with you on this though: "If we have to pay these people a fortune just so that they will stay with a particular organisation I think we should just let them go.". That is always an option. If someone gets too big for their boots, give them the flick.

As for your concern about power prices rising and not decreasing....well just you wait for the prices to rise once the ETS is in full swing! You'll yearn for today's prices!

On the Greens. I actually agree with your paragraph. However there is a problem. They are of a distinct socialist nature. They are clearly left of Labour. Now if they got rid of their socialist agenda, and stuck with environmental issues, they could work with someone like National and pursue environmental issues with the government of the day. As you will be aware, they have ruled National out already, even a National that is described as merely centre-right. People on the right support environmental issues as well, so in essence the Greens have put their socialist agenda ahead of their environmental one. Shame in my view, they would have more impact (for conservation issues) if the environment was still their core belief.

Comment 17 (1785) by SBFL on 2008-10-29 at 22:50:03:

Take this nifty quiz which first asks you to allocate 20 points to about 10 key areas (the more points you allocate the more important) and then it asks you about 20 simple questions where you rank if you oppose or support it. It then tells you how well aligned you are to the poltical parties. I dare you to publish your results!
http://pundit.co.nz/content/election-quiz

For me, I scored:
69% similar to National
61% to ACT
60% to UnitedFuture
58% to NZ First
56% to Labour
51% to Greens
49% to Progressives

Comment 18 (1786) by OJB on 2008-10-30 at 05:21:45:

Generally highly paid parasite's pay is determined by other highly paid parasites who share the same anti-social personalities. Therefore value judgements about how they are paid seem irrelevant. That's why truly useless scum like Gattung get to hang around too long and aren't "let go" even when they fail.

I believe there will be compensation for increasing power prices under the ETS. I don't support it in a simple form but the world does have to do something about global climate change and I'm not sure what else there is.

The "socialist agenda" is part of green policy as much as the environmental stuff. I certainly don't support all of their policies but I do think they give good balance to the more right wing parties, including Labour.

For the quiz...

The Progressive Party 81%
Labour Party 76%
The Green Party 76%
NZ First 75%
United Future 66%
National 56%
Act 36%

Almost the complete opposite of you. No wonder we don't agree on anything!

Comment 19 (1788) by SBFL on 2008-10-30 at 19:02:48:

Re ETS - uneven playing services are going to cause all sorts of unintended consequences. Have you compared our ETS to Europe's? I doubt ETS is the only option to tackle climate change, and in its current form it appears a bit of an overkill.

Re Quiz - Indeed almost an exact mirror image on the order. I notice I am centre-right when you take into account the %'s though, which sounds about right to me. Where do you think your results put you on the spectrum?

You might be interested in this piece: Apple, Obama and gay marriage

Comment 20 (1789) by OJB on 2008-10-30 at 20:38:11:

I don't like the ETS. For one thing, the biggest polluter in NZ are farmers but they aren't included initially. Why? But the question is: what should we have instead?

Not sure where I would be on the spectrum, but I always thought I was center-left. I don't think you can tell very precisely from that survey. From other ones I have done I am definitely moderately left of center.

Not sure what our point is regarding the link.

Comment 21 (1790) by SBFL on 2008-10-30 at 22:25:44:

Too big a question for tonight. Plus I had a brain explosion with the grammar at start of comment 19. Don't know how that came about.

I think you mean "modestly left of centre..." . Haha. I wouldn't say you're extreme/radical or anything but from your posts I would definitely put you comfortably left; slightly left of Labour. Subjective viewpoint of mine of course.

Just thought you might be interested. Your favourite global corporate getting involved with politics....

Comment 22 (1791) by OJB on 2008-10-31 at 09:51:25:

I guess from the perspective of current politics I am more than moderately left, but from the perspective of the classic definitions I am far more centrist. Where the center is changes with the cycle of current political beliefs. But these labels are only rough guides anyway and I prefer to avoid them.

I admire Apple for the products they create but I am neutral regarding their business practices (like some, dislike others) and I don't like Apple legal much. In comparison with other corporations Apple is great - at least they make good and innovative products - but I still don't necessarily admire them apart from that. Whether corporations should be making donations to political parties is another issue altogether.

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