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.
But their own numbers show that’s working about as well as Brownlee’s “let the market sort it out” worked for the Christchurch housing crisis. Yes, the economy is growing again, but that growth isn’t making its way into the pockets of ordinary workers. From 2014-2018, they’re forecasting 14.2% GDP growth, but only 4% wage growth.
In fact, this supports Thomas Piketty’s inequality thesis quite nicely: the natural and inevitable movement of capitalism is for wealth to accrue to the already-wealthy. In other words, you can’t solve inequality and poverty just by growing the economy. You need more radical interventions, as Piketty suggests. Mana’s tax policy – shifting the tax burden from poor and middle-income earners to the unproductive, untaxed income of the 1% – is a good start. Another much-needed policy is a minimum wage that allows people to live with dignity in society – the calculated Living Wage. This would mitigate against inequality across the board and end working poverty.
We can no longer use tough economic times as an excuse. We can afford these measures; we just need to decide to prioritise them, instead of letting our economic growth accrue to the unproductive parasite 1%.
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.
Well, they’ve passed the youth rate bill… Certain workers aged under 20 can now be paid at 80% of the minimum wage; a pathetic $10.80 per hour before tax. This comes a month and a half after a living wage was calculated to be about $18.40 per hour.
One thing I’ve noticed from the Facebook arguments I get myself embroiled in… Every time a debate comes up about the minimum wage, somebody makes the same tired point: if you raise the minimum wage too high, employers won’t be able to afford to provide jobs any more, or people with no skills will be priced out of the market, or workers will be costing employers more than they’re earning them, etc.
That’s of course true, but all it shows is that that the minimum wage CAN be too high, it doesn’t show that (or when) it IS too high.
You can’t just point out that sometimes a minimum wage can be too high and conclude that NZ’s minimum wage in March 2013 is too high (or as high as possible). That’s not an argument, that’s just pure ideology without anything linking the theory to the present real life situation, therefore it can have no bearing on the present real life situation. An argument would need to demonstrate that this theoretical danger is likely to happen at current wage levels, here and now… using research and evidence from here and now.
In fact, the evidence shows quite the opposite. In the terse words of Treasury: the fear about minimum wage increasing unemployment “has not been true in the past. The balance of probabilities is that a higher minimum wage does not cost jobs”. Increases in the minimum wage have not increased unemployment in recent history (if anything the relationship is the opposite, though it’s not a causal one: minimum wage has been kept low and unemployment pushed up by poor economic conditions and neo-liberal economic policy).
If we accept that it is desirable to have a minimum wage, we accept that it should be high enough to provide a decent living, without being so high that it reduces jobs. The only matter for debate is where the balance is. The Living Wage research indicates that our minimum wage is currently failing to achieve that balance, but the problem is not that it’s too high for employers to pay, it’s that it’s too low for workers to live on (and, by the way, John Key agrees).
This blog is intended to be read whilst listening to the below song. The above picture made sense in my head, if nowhere else.
Generally speaking, I think it’s a pretty good idea to internalise externalities, by taxing activities and products that impose a social or environmental cost on the rest of the world, and subsidising those that deliver a social or environmental benefit. So I support petrol taxes, mostly as a way to off-set the environmental damages of burning oil (particularly if the tax income is used for that purpose), and as a way of bringing the price of petrol as close as possible to the real cost (personal, social, environmental; past, present, future). This will hopefully reduce the use of petrol, as people who have to pay for the full consequences of their transport choices will be more likely to use public transport, cycle, carpool, etc.
So the latest petrol tax increase may have some accidental environmental benefits. Emphasis on ‘accidental’, because Gerry Brownlee doesn’t mention it in his announcement. He openly admits what Julie Anne Genter from the Greens exposed last month; that this tax rise is primarily about covering the $1.7 billion short-fall for the so-called “Roads of National Significance” plan. This is why the Greens oppose this tax increase; it’s not about reducing petrol use, but encouraging petrol use by sinking $14 billion dollars into un-needed, uneconomical highways.
Brownlee probably knows better than to spin this as an environmental measure, because it would illustrate a stark double standard: it would be the opposite of their stance towards business and agriculture. For these other major polluters (and National’s main backers), they’ve shown compassion in these tough economic times, and given them longer before they have to start paying for the social and environmental costs of their emissions. The taxpayer can pick up the tab for a bit longer.
There’s another double-standard whereby this government, who “want to cut taxes, not raise taxes” according to the John Key quote in the above Home Brew song, are relatively trigger-happy when it comes to increasing GST and other sales taxes. Some of these do off-set (or over-compensate for) external costs of harmful substances. But if they’re just income-gathering measures like in this case, it’s worrying that they’d rather earn income this way than by putting income tax back up, or by introducing capital gains or financial transactions taxes. Sales taxes tend to be regressive; disproportionately hitting the poor, while the latter are progressive; disproportionately hitting those with disproportionately high incomes and wealth.
IrishBill at The Standard points out another double standard, particularly pertinent to Brownlee; they’re happy to levy the ordinary motorist to pay for their idiotic motorway plans, but they’re not willing to implement a temporary, progressive levy for the Christchurch rebuild (because of the fragile economic climate, of course… not because of their priorities, choices and philosophies).
Actually, all of these double standards reveal a lot about the political philosophy underlying this government… Ordinary people are able to tighten their belts, while the rich need financial assistance. We all have to make sacrifices, apparently, but on a religious level, these are sacrifices to the gods of the neo-liberal market capitalism, and on a material level, they’re sacrifices to the rich. “Socialism for the rich, capitalism for the poor” indeed.