I have undertaken cutting-edge statistical analysis of the Register of Pecuniary and Other Specified Interests of Members of Parliament, which has revealed some shocking information.
People of the following occupations are all extremely likely to own real property beyond the family home and Māori land interests:
Labour MP: 50%
National MP: 76.27%
Green MP: 50%
NZ First MP: 58.3% or 61.54%*
United Future MP: 100%
These rates are all extremely high – far higher than any ethnic or national group, for example. It is clear what we must do to curb property speculation and solve the housing crisis: Ban MPs from buying property in NZ.
*Info not available for new MP Ria Bond.
John Key is being a Spurious George again. In explaining why he’d love to cut taxes for (mostly) the rich, but just can’t afford to yet…
Key pointedly said that when National took office the average wage was $47,000 a year but had risen to around $55,000 today, and was expected to climb to $62,000 by 2017. This was creeping towards the top tax bracket, where salary earners pay 33c in the dollar for earnings over $70,000.
“I don’t think it was anyone’s intention that someone on the average wage would be paying the highest marginal tax rate in New Zealand,” he said, echoing arguments National has been making in private for months.
Well, Mr. Key, it also wasn’t anyone’s intention for the incomes of the rich to rise so much faster than those of the poor, pushing up the average (mean) income to a level less than 30% of people reach. (Actually it was some people’s intention: right-wingers who think inequality is a good thing)
Key is trying to give the impression that the average (mean) income is the income earned by the person in the middle. But mean doesn’t measure the middle of the people, but the middle of the money; and of course the money is weighted towards wealthy outliers at Mr. Key’s end of the spectrum, who push the average up with their exponentially higher incomes.
A far more useful statistic is the median income: the amount that half the people earn more than, and the other half earn less than. This truly represents the average Kiwi. The median individual income is almost exactly $30,000 p.a. – just under the middle of the third-to-top tax rate band.
It’s actually getting more and more misleading to portray average income as a reflection of middle-income earners: As inequality worsens, the “middle of the money” (average income) is moving further and further from the “middle of the people” (median income). My eye makes it less than 10% difference in 1980, up to about 25% now:
It’s also worth noting that the increased average income Key mentions has accrued almost entirely to above-median earners:
Another problem with mean income figures is they hide inequalities like these and portray a boon for the rich as a boon for everyone.
I do agree in principle with indexing tax-rate thresholds (in fact, all thresholds… *cough*student loan repayments*cough*) for inflation, but Key’s trying to use that principle as a smokescreen for more tax cuts to the rich, spinning this as a release for the average NZer from crippling over-taxation, which is not true on any level whatsoever. Taxpayers between the median and mean incomes actually pay the lowest proportional tax:
And in the context of a supposedly progressive tax system it’s the rich who are really best off:
“At very low incomes, New Zealand’s taxes are a little above the OECD average … But for high incomes, our overall “tax wedge” … is the lowest in the developed world.
Our tax system asks too much of those with little, and too little of those with much.”
This would only get worse under National’s proposed 2017 tax cuts.
In any case, if Key is really worried about too many NZers in the top tax bracket, there’s an obvious solution: Implement a new top tax rate(s) for the super-rich, like most similar countries have:
Soooooooooo: whatever people’s intention about who should be on the top tax rate, it’s clear John Key’s intention in referring to the mean income, rather than the median, is to mislead (or perhaps he simplify misunderstood statistics in a conveniently misleading way, as with child poverty at the last debate). Sadly he’ll probably largely achieve that intention.
The unholy trinity of National, right-wing blogs and the mainstream media are scaremongering about Labour et al’s proposed capital gains tax again. Because it’s new and because it’s a tax, it seems scary and there’s easy political points available in opposing it. But in fact most countries have capital gains taxes. New Zealand’s tax system is one of the most generous to the rich, and part of that is our anomalous lack of CGT.
The current scaremongery relates to inherited family homes of deceased family members. The impression John Key et al are putting across is that a grieving, struggling family will have to scramble to sell their deceased parents’ family home to avoid being stung with a hefty capital gains tax they can’t afford. IF that were the case, a one-month “grace period” certainly doesn’t sound like long enough to grieve, get organised & sell the house to avoid financial ruin.
But it’s NOT the case. Even without a grace period, only profit since inheritance – I repeat, profit since inheritance – would be taxable (and at a modest 15%). If a family inherited a house worth $400,000, and sold it a year later for $430,000, they’d incur tax of $4,500, but they’d get to keep the other $25,500. They’d still be $25,500 better off than if they’d sold the house straight away, and $425,500 better off than if they hadn’t inherited the house.
This is no different from inheriting any other profitable asset. Currently, if you inherit a company, and it makes $30,000 profit over the next year, you’ll be liable for 28% ($8,400) company tax on that profit. There’s no “grace period” there. And more importantly, there’s no “grace period” on the profits – 72% of which you’ll keep and no doubt enjoy.
So it’s extremely dishonest of Key to portray families inheriting profitable assets as somehow hard-done-by, simply because they’ll incur tax on those profits. Truly hard-done-by families are the families of (increasingly numerous) people who’ve never managed to buy a house (largely because of tax-free property investment). Those families will receive no inheritance (let alone profitable inheritance), and many struggle to pay for (increasingly exorbitant) funeral and burial costs.
Years from now, if my siblings and I inherit my parents’ house and it makes capital gains by the time we get around to selling it, we’re not hard-done-by if we incur tax on those gains. We’re lucky my parents own their home in the first place, and have something to leave us (in fact, something that continues gaining value until we sell it).
That said, I do tend to agree there should probably be a grace period of maybe six months, because the tax is supposed to target people who buy extra houses for profit, not people who gain an extra house by accident because a relative died. Besides, it may take some months to decide whether they’ll sell it, keep it as a rental, or have other family move in (in which case it remains a family home, thus exempt from CGT). But a grace period would be an act of compassion to people who don’t really need it; certainly not a demand of justice or need.
Of course, Cunliffe didn’t help his own cause by remembering the policy wrong and declaring unequivocally that the grace period will be one month. In truth, the length of the grace period is a detail that they’ll leave to an expert advisory group to work out. It was incompetent of Cunliffe not to know this.
Anyway, despite those two caveats: don’t believe the hype. Look into it, listen to David Parker’s explanation, think about it, etc. After doing so, no right-thinking person would think there’s anything to worry about.
One-word summary: Pathetic.
I’ve blogged before about National’s staggering denial of the housing affordability crisis. It seems they’ve now woken up somewhat, as they’ve released a housing policy as the flagship policy announcement of their campaign launch.
They claim to have “overhauled” the existing scheme (introduced by Labour in 2007) whereby you can withdraw from your KiwiSaver savings for a deposit on your first home, and many people can get a government top-up too.
In fact, they’re only making a few changes to the scheme:
1) They’re increasing the house price limits – you can now buy a house worth more and still be eligible for the top-up. This is good and necessary, given our skyrocketing house prices. But it will be generally wealthier people gaining eligibility.
2) That’s even more true for the second change: Currently, the top-up is $1,000 for every year you’ve been in KiwiSaver, to a maximum of $5,000. National will double these amounts, but here’s the kicker: only for those buying or building brand new houses.
3) Aside from the top-up, you can currently only withdraw your employee and employer contributions for your first home deposit. National propose to let you withdraw your annual government contributions (max $521/year) too. I’m actually 100% behind this, and don’t know why it’s not already the case – but, again, the people with the maximum government contributions will usually be wealthier.
4) In October, the Reserve Bank introduced Loan-to-Value ratio restrictions, meaning most buyers now need a 20% deposit for a home loan. This has slowed house-price inflation, but also priced poorer people out of the market. Under National’s proposal, first home buyers will now only need a 10% deposit. This will certainly help, but it’s only a partial backing-away from the Reserve Bank’s policy.
I agree with most of the above, and I’m glad the government have stopped ignoring at least one aspect of the housing crisis.
But there are at least five significant problems, which mean this policy completely misses the mark:
Firstly, it’s pretty small-fry. A lot of it is good, but “tinkered” or at best “expanded” is more accurate than “overhauled.” A couple with maximum eligibility will be able to draw $7,294 more of their savings for their house deposit. If they can afford a new house, they’ll also get $10,000 more from the government. They’ll also probably benefit from being able to buy with a lower deposit – let’s round up the total benefit to $20,000. But that’s still only how much house prices inflate in Auckland and Christchurch every few months. (If you’re buying on your own, all these amounts will be halved, except the house cost/inflation of course.)
Secondly, it helps the better-off the most. “Maximum eligibility” does not correspond to maximum need, but maximum privilege. This is already a flaw with KiwiSaver and the home withdrawal scheme – the people with the most to withdraw are those who’ve earned the most since 2007. But it’s compounded under National’s proposals.
Even more significantly, while the proposed expansions let normal buyers withdraw more of their own savings, they give an extra hand-out of $5,000 per person free money to those who can afford to build or buy new houses. How many people do you know who can afford a new house, let alone for their first home? If you can think of anyone, I’m guessing they either have parental assistance, inherited wealth or very high-earning jobs (you can earn quite a lot and still be eligible, btw). Acknowledging that even these privileged people need help buying homes is admission that our house prices are out of control. But it’s disgusting that the less-well-off are denied this generous and much-needed hand-out.
Thirdly, National’s numbers look impressive by themselves (90,000 helped! Thousands of $ of support! Only costs $218 million!), but if you actually whip out your calculator and analyse them, you’ll notice that only the 10,000 luckiest will be eligible for the big bucks, their mortgages will still be officially classified as 150% unaffordable, and even with these big benefactors pushing up the average, the average assistance is only about $2,000 per home-buyer.
Fourthly, this only helps people buy their first home; it doesn’t do anything about the investors with multiple homes, crowding the market and pushing both rents and house prices sky-high. Unlike in most other countries, you can still “earn” tax-free passive parasite income off other people’s poverty, and unlike Mana, Green and Labour, National don’t see a problem with this (not surprising, since many of them are property investors themselves).
Fifthly, the best National can offer is modifying an old Labour idea, which speaks volumes about their lack of vision. Labour thought up KiwiSaver in the first place, and now they, Green and Mana actually have new ideas to help people into home ownership – and, unlike for National, the most emphasis goes to the people that need it the most.
The two faces of National’s hitherto successful PR strategy
UPDATE (19 Aug, evening): Literally in the last few hours, National have unveiled some policy on their website. This renders the first two graphs and table out-of-date. But the second half is still relevant, and I reckon it’s worth leaving the first half online as a time capsule of what National’s campaign looked like until WhaleGate. Coincidence? What do you think?
Original blog (19 Aug, afternoon):
“the left have given up on the policy argument. They don’t think they can beat the National Government on the issues … so what they’ve decided is they’ll play the man, not the ball … but we’re going to keep talking about the ball.”
This is similar to his quip when Laila Harré announced she was running against Key in his local seat:
“we won’t be having much of a debate about policy – the only policy the Internet Party has is to make sure Dotcom isn’t extradited.”
In fact, I’ve been following and compiling the various parties’ policies, and the Internet Party have far more policy on their website than National do – even though the IP have only had a few months to formulate theirs. In fact, National have less policy on their (single) policy page than any other party – significantly less than most of them. On word count, they only provide literally 2.4% as much as Labour or 1.1% as much as NZ First:
It is true that some parties (notably Labour, the Greens and the Internet Party) provide fuller versions of their policies or additional documents, linked from their main policy pages. This is the main difference between National’s and the IP’s policy websites.
If we’re generous, we can include a couple of documents from January about their 2014 priorities in this category… the speech is largely not policy, but they do link to these documents at the bottom of their policy page. This time National manage to claw their way up to 2nd-to-last, because ACT only expand upon two of their policies – but they’re still left in the dust by the left-of-NZ-First parties he accuses of giving up on policy:
It’s also worth noting that Labour and the IP both state that even more policy is forthcoming, and the Greens are frequently updating theirs. I wonder if National’s are on the way, too? [update: I guess so! National also now say there’s more on the way]
Here’s the full data, if you’re interested:
While I spent an embarrassingly long time on this [update: now-obsolete! grrr…] number-crunching, we actually didn’t need these numbers to know that National try to run policy-free campaigns and policy-free politics wherever possible. They don’t engage with public questions like this, this or this. They don’t engage (openly) with blogs; certainly not opposition ones, and certainly not on policy questions.They don’t really put policy on their billboards – some people had to do it for them last election. Their flagship policies are generally pretty unpopular. They [update: still] have [basically] no policy about some of the biggest issues facing NZ (climate change, child poverty, inequality and the housing crisis) – in fact, they often deny that they’re issues.
Nicky Hager’s Dirty Politics has provided some alarming insight into what kind of politics they do instead of policy politics. I haven’t read it, but Danyl McLaughlin helpfully summarises the basic thesis thus:
John Key’s National government uses a ‘two tier’ communications strategy; positive communications, which are focused around John Key, who is presented as ‘relaxed’ and decent, and negative/attack communications, which are conducted covertly by senior staffers in Key’s office and fed to the media mostly – but not exclusively – through Cameron Slater’s WhaleOil blog.
Obviously, the emphasis of the book is on the negative ‘tier’; the positive ‘tier’ was already quite obvious… but in fact both strategies involve “playing the man, not the ball” … positively, they focus on “the man” of John Key, his smiling face [update: which emblazons 12/18 of these and 4/4 of these plus a bonus] and perhaps some content-free feel-good generalities coming out of it. Negatively – well, you can read the book or the excerpts or the leaks or the blogs yourself.
Playing the man in these two ways has been a winning strategy so far, and has kept National riding high since Key took over (they’re currently polling well over double their 2002 election result). Will Dirty Politics and Whaledump change that? I hope so, but I can’t say with confidence.
What I can say with confidence, though, is that Key’s latest accusation is the most brazen hypocrisy I’ve witnessed since I’ve been following NZ politics.
Post-script (21 August):
Here’s the updated first graph now that National finally have some policy (5965 words of it, to be precise):
They’ve also deleted the two documents they previously linked to, but they’ve added a whole lot of links on each of their policy pages (mostly past news stories about what they’ve done while in government, which is kind of cheating… but also some fuller policy statements). I can’t be bothered counting that up at this stage. My guess is it’s still much less than Labour and probably less than the Greens and Internet Party too (definitely if we only include policy announcements proper).