Another obvious lie too many National supporters believe is that Labour are bad for employment (because they raise the minimum wage too fast), and National have “solved unemployment” (because they’ve made it harder to maintain benefits):
Now, it is true that Labour raise the minimum wage much faster, and that National cut welfare (in a recession!). But the unemployment rates have been more like the other way around,* and anyone suggesting National are better than Labour at keeping unemployment down is either believing or promoting a lie.
Actually, it’s a couple of lies… but they’re both obviously bollocks to anyone who’s spent five minutes looking into them:
“Raisng the minimum wage reduces jobs”
As usual, Gordon Campbell says it best:
If, as Key claims, Treasury has done research that shows major job losses would result from gradual increases in the minimum wage, then this amazing information would be world news – because the vast weight of academic research around the world ever since the groundbreaking David Card/Alan Krueger work in the US fast food industry 20 years ago, is that it would do no such thing.
“National have solved unemployment by making it harder to get the benefit”
I’ve covered this before, and so have many others. Basically, kicking people off the dole (or DPB/invalid’s/sickness benefit) doesn’t magically put them into jobs; it just increases the number of people lacking either work or welfare (which has hit a record 110,000 since National’s bennie-bashing “reforms”). Creating a desperate unemployed person doesn’t create a job for them to go into.
This confusion arises from a basic failure to understand the difference between individual problems/solutions and socio-economic problems/solutions, as sociologist C. Wright Mills pointed out 55 years ago:
* It started to get bad under the Lange (& Douglas) Labour government, which was actually more like a Bolger/Key National government than a Labour one. Of course, just like with debt, things are more complicated than one graph could show.
PS: Graph and truncated y-axis from tradingeconomics.com; annotations mine.
1) Even if Key is telling the truth (which is pretty far-fetched and increasingly unlikely given Snowden’s testimony), they still:
– legalised what they’d already been doing – spying on NZers;
– while it was still illegal, made a “business case” and got a plan underway for mass surveillance; and
– worked on it for a year until John Key (claims he) “limited its scope.”
(Note how he’s changed his story within a day from “there is no ambiguity – no mass surveillance” to “there was a plan but I scrapped it” to “the plan got underway and then I ‘limited its scope’ a year later”).
Key claims to have offered proof with his self-interested declassification of information, but in fact this information pertains to a completely different programme – the release served no purpose but to divert and mislead. Occam’s razor, international experience and reliability records suggest he’s not telling the truth, and the implications of that are huge.
2) Kim Dotcom completely screwed up his big reveal of alleged proof Key knew about him before he said he did, and opened himself up to accusations it was faked. Failing to offer water-tight evidence did more harm than good. In fact, the theatrical way Kim’s gone about this whole event has been self-defeating.
Nonetheless it still seems likely Key also lied about his knowledge of Dotcom, and put “political pressure” on Immigration to grant him residency so they could more easily extradite him to the US. If this is NOT true, they need to somehow explain why procedure and official advice wasn’t followed, what the “political pressure” referred to in the immigration e-mail was, and David Cunliffe is certainly right that “if Mr Key wants to show the email is a fake, he needs to release meeting records and all documents with correspondence with Warner Brothers dating from 2010 which needs to be “immediate and full”.” Something tells me we won’t get to see those records.
Unfortunately these revelations probably won’t end this government. They would only do so in a society where truth and government accountability were valued.
Key’s usual pattern is to simply disagree with the experts, banking on the fact that the general public have more trust in his smiling face and apparent financial nous than some tall poppy experts with their high-falutin “statistics,” “evidence,” “research” etc. It works spectacularly well in post-modern New Zealand.
“He’s one academic, and like lawyers, I can provide you with another one that will give you a counterview.”
Unfortunately, NZers’ trust in the man is such that he can say something like that, and the worst people will think is “Well, the other side are probably just as dishonest, so I’m going to disregard this. He still seems like a good bloke, and he and Bill English seem to be good with money.” Which is of course exactly what their PR is designed to make us think.
Please prove me wrong, New Zealand!
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.
John Key on raising incomes for low-income families, 3 News, 9 Sept 2014:
Prime Minister John Key says there’s no evidence that giving people money makes any difference.
“What really makes a difference is employment and employment opportunities,” he told reporters.
John Key on tax cuts, 3 News, 10 Sept 2014:
“Whatever the number was for an individual or a household, whether it’s $500, $1000, $1500 – you can pick your poison – I don’t accept the argument that doesn’t matter to a low- to middle-income family. I think it does matter.”
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.