Category: progressive tax

The “teal deal” is not going to happen, and it’s not the Greens’ fault

“National and the Greens should work together” sentiment seems to have reached an all-time high. This is not because the two parties have moved closer together in policy or philosophy. It’s because after the election, this is the only way—short of a Nat-Lab grand coalition—to lock Winston Peters out of any role in government.1

I can’t be bothered to list examples because I’m sure you’ve all seen or heard people calling for a blue-green government arrangement (or “teal deal” if you will). Perhaps you’ve even suggested it yourself.2

What I want to talk about is the suggestion that usually comes after “National and the Greens should work together”. This is how former National PM Jim Bolger puts it:

“the Greens might be quietly reflecting on whether they, unique in the world of Green parties, should only link themselves to left-wing politics, whereas the environment is neither left wing or right wing, frankly. The environment is the environment; it’s Mother Earth we’re talking about.”

The idea is that the Greens would be more effective in pushing environmental policy if they stuck to that, and got rid of their insistence on left-wing socio-economic policy. This way, it is suggested, they would have a better chance of being able to find room for compromise and cooperation with National. Other Green parties in countries like Germany have been willing to form coalition governments with right-wing parties.

The Greens’ usual response is to give reasons why environmental justice and socio-economic justice (or environmental sustainability and socio-economic sustainability) are inextricably linked. Ever since they were the Values Party they’ve pushed both, and they don’t intend to stop now.

Another response could be to say that New Zealand is not Germany. Germany has a democratic socialist party called The Left which pushes left-wing policy even if the centre-left parties (the Greens and the SDP) don’t—even if they form grand coalitions with the centre-right. In New Zealand, the Alliance and Mana have disappeared as left voices in Parliament. Moreover, Labour kickstarted neo-liberalism and haven’t really repented from it. Until Labour make a significant change from Clark/Blair-esque compromise to Corbyn-esque social democracy, the Greens are the only party significantly trying to push New Zealand in a leftward direction.

However, both of these responses to the challenge accept the terms of the challenge (like Labour accepted the terms of National’s “dead cat” “fiscal hole” challenge). These responses accept the assumption that it’s the Greens’ left-wing socio-economic stance that blocks them from working with National, and that they’d be able to find common ground on the environment.

However, I don’t think this is correct. Certainly the Greens’ socio-economic stances—making welfare more of a livable UBI and less of a punitive control mechanism; raising tax on the rich and introducing it for property investors; returning the minimum wage to 2/3 of the average wage; reducing imprisonment—are all basically the opposite of what the Key-English government have done. However, I think Bill English is actually more likely to accept these policies than to accept Greens’ environmental policies. If Bill could be convinced these socio-economic policies are good “social investment”, he could get behind them. Of course, he won’t. (This is largely because National’s vision of “social investment” is so limited by a pathologically individualist mindset, and so tantamount to Minority Report in its instinct to control the risk factors rather than healing the determinants.) But it’s not outside the realms of possibility.

The Greens’ environmental policies, on the other hand, would require National to actually seriously challenge farm owners, drilling/mining companies, and other capitalists. Currently the costs of these capitalists’ activities are largely falling on the environment, and therefore on the present and future public. The Greens want to stop these business activities destroying our shared home by preventing and internalising these external costs. They’ll ban some unjustifiably polluting business activities, such as drilling or mining or exploring for more fossil fuels at a time when even burning the fossil fuels already dug up will make the Paris target impossible. They’ll tax other business activities for their pollution—making those who produce the costs pay the costs, instead of externalising them. And they’ll use the tax revenue to clean up the damage and to subsidise farmers and other businesses moving to more sustainable ways of doing business.

Do you really see National doing that? The party whose base is farm owners and other capitalists? The party that think climate change is only an issue for “elites”, and that it’s not a “pressing concern”, and that we should adapt to climate change rather than mitigating it? The party who scaremongered on a small water tax for some big farms that are currently destroying the quality of Aotearoa’s awa and wai?3

So how should the Greens respond to this “helpful suggestion” to the Greens—and this implicit congratulation of National for their supposed hypothetical willingness to “green up”?

Well, I wonder if they should make an offer to National this election: If you let us have our way with the environment, we’ll give you confidence and supply to do everything else you want to do as the Government for the next three years. We’d pass a zero carbon act and introduce the Greens’ policies for actually getting to zero carbon. We’d follow the Greens’ ideas to clean up our rivers instead of pretending National and the “hard-working farmers4 already have the issue under control. We’d build sustainable transport instead of roads, roads, and more roads.

And maybe we’d have to tax the rich at least a little more to pay for some of this—and/or take slightly longer to repay the Key-era debt. Bill’s choice.

National would refuse this offer. And then maybe people would stop trying to make the teal deal happen. Or at least realise it’s not Green stubbornness stopping it happening. It’s National’s near-total lack of concern for the environment.

Footnotes

  1. Special votes are extremely unlikely to change the basic possibilities. 
  2. Someone who can always be bothered finding, listing and summarising examples is my hero Bryce Edwards who has subsequently done one of his legendary political round-ups on the teal deal. 
  3. These points I’m making are not new—here‘s basically the same point made three years ago on the No Right Turn blog. 
  4. It was shrewd of National to portray criticism of National’s record on rivers as criticism of farmers who are working hard to clean up rivers, because it’s deeply ingrained in the NZ psyche to pretend we’re really farmers at heart. We all lie about being the rural type. 
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Averages, intentions and inequality: more Key trickery

median vs mean

Graph from latest Household Incomes in New Zealand report; yellow and pink annotations are mine

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:

Mean and median over time

Graph from latest Household Incomes in New Zealand report; yellow and pink annotations are mine

It’s also worth noting that the increased average income Key mentions has accrued almost entirely to above-median earners:

income changes recession and recovery

Graph from latest Household Incomes in New Zealand report; yellow and pink annotations are mine

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:

Salmond Fig 8-2-01

Graph from Rob Salmond; yellow and pink annotations are mine

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:

income taxes NZ aust
income tax UK france
income tax US

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.

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.