Category: GDP

A quick word on tax cuts

coma cartoonNational has announced their first budget surplus, after plunging us into debt for the last five years.

They’ve also hinted that at some stage before or after the election campaign, they may announce what makes all our hearts instinctively leap, at least before we think about it: tax cuts. This would mark the first changes to tax since 2010, when they shifted the tax burden from the rich onto poor and middle-income earners.

Mana’s John Minto has an interesting reaction. He says tax cuts are a great idea, and suggests shifting the tax burden back again: abolishing GST and tax on the first $27,000 of income, and paying for this by finally taxing the unproductive untaxed income of the 1% – capital gains and financial transactions.

Something tells me a party of property magnates and investment bankers is not going to propose those kind of tax changes – any recovery-era tax cuts will presumedly be along similar lines to their recession-era tax cuts.

Does this strike anyone else as a little strange? Not just because they’re promising tikka masala before the chickens have hatched (the surplus is tiny, and only a projection based on fudged numbers, disguised cuts and abandoning Christchurch).

The main reason it’s strange is that when we were heading into rough financial times, they thought the appropriate thing to do was to cut taxes on the rich. And now in healthier financial times, they again think the appropriate thing to do is to cut taxes (presumedly again on the rich). Never mind the fact that they haven’t paid off their debt from the last tax cuts and tough economic times yet.

The truth is that they’re not responding to the economic climate at all. In tough times or healthy times, they’re pushing a philosophical agenda to let the rich continue getting richer while paying lower taxes, and reduce the social safety net to pay for it. Bill English recently let this agenda slip in a recent speech to the party’s Southern Region conference. They’ve already let public goods and services drop from 35% of GDP to 30% – one of the lowest rates in the OECD – and they intend to reduce that even further, to 26% over the next six or seven years. This is not what NZers want.

The obvious solution is not to let them rule for the next six or seven (or three) years.

On worshipping money and thanking the rich for being rich

doublefacepalm

Just when I was thinking corporate media was starting to say some good things about inequality, I saw this infuriating defense of inequality from Damien Grant.

Grant writes off Max Rashbooke’s book, and indeed all concern about inequality, as “the zero-sum fallacy; the idea that there is a set amount of cash in the economy.”

This is one of the worst straw man attacks I’ve seen in a while.

In fact, Rashbrooke et al understand better than our government that money is a relative measure, only meaningful insofar as it represents access to wealth/resources. It doesn’t matter how much total cash there is in the economy… what matters is:

a) how much resources/wealth there are in the economy, because that’s what determines how big the pie is.
b) how much cash you have in relation to others, because that’s what determines how big or small your slice of the pie is.

Total cash doesn’t affect the pie at all (if it did, Zimbabwe would be the richest country in the world).

Total cash and total resources are not ‘zero-sum’ phenomena. But percentage of access to cash and resources is (that’s the whole point of a percentage – it always sums to 100).

Rashbrooke (and, like, actual evidence and stuff) are concerned with inequality because when one person’s percentage of cash goes up, someone else’s ability to access available resources necessarily decreases. And when that’s too unequal (even when the pie’s huge) it causes numerous health and social problems across the whole society.

Grant is the one guilty of a fallacy: the idea that money is an absolute, not just a relative measure; so if there’s more total money in an economy, that automatically means there’s more wealth/resources available to people. This is more than just a fallacy, it’s a properly religious phenomenon – idolisation of money.

Post-script – extra responses to a few of Grant’s stupidest comments

“There’s no evidence that rising social and health problems are a result of income disparities.”

I’m actually astonished to see this much wilful blindness, even in corporate media. Huge amounts of research – very widely available – offer compelling evidence that inequality causes many social/health problems – from murder to community breakdown to high teen pregnancy rates. A journalist doing their job would acknowledge this evidence even if they disagree with its analysis. Grant doesn’t indicate whether he disagrees, whether he’s ignoring it, or whether he doesn’t know it exists … he simply says there’s “no evidence.”

The fact that the next sentence peddles an evidence-free stereotype (“Poor people get diabetes because they eat junk food, not because Sir Peter Jackson is rich.”) is the icing on the bullshit cake.

“Key to the inequality fantasy is that New Zealand is a neo-liberal rich-man’s paradise but the facts do not support this. Bill English said… [bla bla bla] Half the population are net beneficiaries.”

He goes on to uncritically parrot Bill English’s dishonest press release that I addressed a couple of blogs ago. If Grant was doing his job as a journalist and applying some critical thinking, he’d realise English’s figures show the opposite of what he claims.

Grant thinks workers should be grateful for being “net beneficiaries” of state assistance… grateful for a situation where their subhuman wages mean they don’t contribute much to the tax coffers, let alone to their own families, and Working for Families subsidises their employers to keep paying these sub-human wages. How much more grateful should the rich be for being “net beneficiaries” of a system that facilitates and supports such grossly unequal wealth?

“Economic growth is driven by innovative entrepreneurs adding to the total economy. They sometimes become rich by retaining some of the extra wealth they created.”

I don’t even know where to start with this statement, except to note that it’s pure ideology. He equates economic growth with ‘wealth,’ ignoring the fact that economic (GDP) growth doesn’t just include productive, wealth-producing activities, but destructive ones like crime, pollution and credit card debt. And he simplistically suggests ‘wealth’ is created by “innovative entrepreneurs,” rather than by the contributions of all workers; those who’re given the opportunity to utilise their creative/innovative skills, and those who aren’t.

The next sentence, where he uses a doctor as his archetypical example of a rich wealth-creating entrepreneur, reveals his ideological assumption that the rich become rich by doing good for the world. A better example of the very highest income earners would be a currency trader who makes much more than a doctor by producing nothing, just manipulating pieces of paper and numbers on computer screens.

Later in the article he again waxes lyrical about how much wealth the rich create, and how grateful we should be for their work. He also mentions how hard-working they are – predictably failing to provide any statistics linking hard work to high income. In fact, income and wealth distributions are way out of proportion to how hard people work… (unless the richest 1% percent work 10-16 times as hard as the average NZer).

“Poverty has many causes, welfare dependency amongst them, but blaming the hard-working for the failings of the indigent is not a solution.”

Grant is doing even worse – blaming the hard-working poor (like people working two jobs cleaning toilets on minimum wage to feed their families) for their own poverty. Despicable.