Taxation in 2020: my thoughts on a socially taxing matter


Tax. A three letter word of a thing whose collection was the job of someone Jesus apparently had sympathy for when nobody would. A thing loathed by libertarian and right wing parties, but seen as essential by many on the left. So, about this interestingly controversial thing called tax, that gets peoples hackles up for different reasons without fail at every election. I believe New Zealand needs to revisit that Tax Working Group report and make some serious decisions.

But before then, we have an election campaign approaching and I think in light of the Green Party tax announcement on Sunday, it is time to state my thoughts.

Goods and Services Tax (G.S.T.) is one tax that people from all parts of the political spectrum seem to agree is a hindrance. For the low income earner the few extra dollars that is paid as a result of G.S.T. is possibly the difference between being able to afford an essential item and having to scrounge around for a couple of extra dollars. Lower income earners also as a result find it much more difficult to invest and/or save. I personally believe G.S.T. should be cut to 10%. I will explain later where I believe the other components of the tax system can make up for the subsequent loss of revenue.

Every election, National and A.C.T. have campaigned on doing something about lowering income tax. One can be fairly confident that the 2020 election will be no different. Not surprisingly they will target the upper income tax brackets – shown below – and say that the tax cuts will benefit all New Zealanders. The current brackets are:

  • $70,001+ = 33%
  • $48,000-$70,000 = 30%
  • $14,001-$48,000 = 17.5%
  • <$14,000 = 10.5%

Instead of further cutting the top tax bracket and giving higher income earners an even bigger slice of their incomes, I propose broadening the income range across which the tax brackets are applied. I would support something similar to the brackets below:

  • $150,000+ = 37.5%
  • $67,001-$150,000 = 30%
  • $33,001-$67,000 = 20%
  • <$33,000 = 10%

But simply fiddling around with the income and goods and services taxes is not imaginative and ignores other potential tax instruments that may assist this country. At this point, I give New Zealanders four options from which one needs to be chosen:

  • A Capital Gains Tax. Prime Minister Jacinda Ardern has already ruled it out under her watch, but would she have second thoughts if Labour found themselves reliant on the Green Party for support or in the improbable position of governing alone? And this is certainly not to say there are no supporters for a C.G.T. The New Zealand Herald explored some of the arguments they were putting forward.
  • A Wealth Tax. Graeme McCormack of the Human Rights Commission wrote an article for Noted last year in which he explored how a wealth tax might work in New Zealand – his suggestion was for a 1% tax on citizens net assets (excess of assets over liabilities), exceeding say N.Z.$10 million
  • A Land Tax. Bernard Hickey wrote a column for Newsroom which looked at how a land tax could work in New Zealand. He envisaged a low level broad-based one as being the fairest method. Mr Hickey thought that it would cause an immediate 10-20% drop in land prices. Thus if a section were worth $200,000 land only before applying a land tax it might now be worth $160,000-$180,000.
  • A Luxury Goods Tax. I would assume luxury goods to include vehicles worth over say $150,000; boats worth more than $100,000; any privately owned helicopter, aircraft that is used for non-work related; jewellery worth more than $100,000.

I acknowledge a C.G.T. is a double-edged sword and even if one did get introduced, if it was poorly planned then the wrong parts of the tax payer spectrum might be unfairly targeted. Having a politician no encumbered by coalition partners might be a prerequisite as well. Whilst for reasons of levelling the playing field enough that low income players enter drive a C.G.T., its complexity may be its undoing. The McCormack article article examines a wealth tax, which could be set on net citizen assets exceeding $10 million. This along with the potential land tax explored by the Bernard Hickey article seem to me like the most promising ways in which tax reform could contribute to a fairer society. A luxury goods tax is perhaps the most vulnerable tax to critics who claim it is about envy since the chattels involved will be specifically items that the lower and middle class can only dream about, never mind trying to save enough for one.

 

Concerns I have about Waikato River diversion to supply Auckland


A plan to divert more water from the Waikato River is the subject of renewed political attention as Auckland continues to battle a drought. But it may not be as straight forward as National and New Zealand First want.
Some people will be concerned about the attempt to take water from the Waikato River and send it to Auckland. I am too. But not for reasons you might think. The Waikato River discharges an average of 340,000 litres every second – 1 cubic metre is 1,000 litres. This attempt at diverting water from the river and sending it to Auckland will take a bit more than 0.5% of the river’s daily discharge. The media deliberately used the number 200 million litres because it sounds big. Hydrologists measure river flow in cubic metres per second.
My concern does not stem from the water being taken, but from the fact that Auckland really needs to learn to be more economic with its usage of its water resource. I am also concerned that fast tracking this through the Resource Management Act process sends the wrong signals about water use. It is also likely to further challenge Tainui’s Treaty of Waitangi settlement with the Crown about the conditions of use of water from the Waikato River – in January Tainui accused the Crown of breaking the Treaty settlement.
 A lot of people south of the Bombay Hills will find it frustrating that Auckland is applying to accelerate the Resource Management Act process, when this is not so much about creating new jobs as saving ones that might be lost from inept water usage. It is also irksome because other provinces such as Canterbury, Otago and Hawkes Bay are used to much drier climates and have learnt to manage their water use. And with climate change, those provinces are expected to dry out further.
We are one of the least efficient users of water in the western world. We take it too much for granted. The decline of our natural water ways in significant part stems from excessive diversion of water for irrigation, from our urban penchant for nice green lawns and so forth.
I am no fan of privatizing a resource that fundamentally I do not believe can be privatized. However one of the negative things we are at risk of inflicting upon ourselves is having to develop a market for water. No one owns water and I believe nor should anyone try to. The water cycle and the common characteristics of the cycle, as well as the universal need of every human being for clean drinking water, mean like the air we breathe.
But before I support Auckland’s bid to make the R.M.A. process go quicker, Auckland needs to have a hard look at its water usage. There are things it could do more immediately such as look for system leakage; people can check their shower nozzles to see if they are working properly; check whether their water mains are at an appropriate water pressure.
 

Dear Jacinda: The weather is a metaphor for our current politics


Dear Jacinda Ardern,

It is a grey old kind of day here in Christchurch as I type this. Looking out the window at the dreary overcast drizzly weather wafting past, it seems to be a bit of a metaphor for the world at the moment. Grim. Dreary. No sign of getting better any time soon.

No doubt as you watch other countries including some that New Zealand is meant to be great mates with struggle, you must be counting your lucky stars that you are Prime Minister of New Zealand. You must be extremely grateful not to be having to manage the unravelling nightmare of COVID19 in the United States or quietly despairing in Down Street at the sight of huge numbers of people at the beach, without any regard to social distancing.

But going back to that metaphor, compared to the world, it is relatively sunny in New Zealand. Big powerful cumulonimbus clouds might be roving around on the horizon with their wild volatile problems, but thus far thanks to your leadership we have managed to avoid them. I hope you keep that way, and I am sure most of New Zealand want you to keep it that way too.

But Prime Minister, we have some lumpy cumulus clouds overhead that threaten to spoil things a bit, and they are ones that you can control as Prime Minister. One of those clouds is David Clark, trying to accidentally blot out the ray of sunshine that is Dr Ashley Bloomfield. I know you said you were annoyed with Mr Clark and said that if it were not for COVID19 and the need for a stable leadership team, he would be gone. Fair enough. But that was then. That was before Mr Clark threw Dr Bloomfield under the bus a few days ago.

I am sure Mr Clark is a nice guy in person, but he is going rain on your parade unless you take the Health portfolio of him, like now. New Zealanders don’t like that ray of sunshine being blocked and have noticed the cloud that is blocking it. The cloud needs to move along.

As for the grey old dreary kind of weather that is afflicting Christchurch at the moment, it is fortunately not as volatile as the thunderstorms that have been crossing Auckland and the Bay of Plenty of late. But as a rental car groomer at a service yard near Christchurch Airport, the dreariness in the sky is startlingly appropriate in terms of describing the global outlook. Planes are coming and going. I hear their engines as they disappear into the cloud from the runway a few hundred metres away. The complete absence of foreign tourists, being a reminder that the COVID19 storm is raining heavily in many countries. The constant drizzle is a metaphor for the single figure COVID case numbers being caught in isolation – the fact that it has for the most part not turned to rain, hopefully trying to tell us that the strategy of isolation is working.

My American friends can hear thunder. It is the thunder of a COVID19 storm that is far from finished and reminds every time I hear of a new rumble through the media of just how lucky we are in semi-sunny New Zealand. Now if you do not mind, we would love for you to please move that cloud along for us.

Cheers.

 

New poll still shows Labour in the lead


A new Colmar-Brunton poll that came out yesterday still showed Labour maintaining a lead strong enough to form a Government on its own.

No one should be too surprised that the polls have narrowed. I expect that they will narrow further in the coming weeks, before being determined by how well the individual parties perform on the campaign trail; how good their policies are and whether any high profile Members of Parliament make a damaging gaffe.

Yesterday’s Colmar Brunton poll had the following results:

  • Labour = 50% or 62 seats
  • National = 38% or 45 seats
  • Greens = 6% or 7 seats
  • N.Z. First = 2% 2 seats if an electorate seat won; out of Parliament if no electorate seat won
  • A.C.T. = 1% / 1 seat if David Seymour holds Epsom
  • Maori = 1% / 1 seat if it wins Maori electorate
  • New Conservative = 1% / Out of Parliament

National has made some inroads because that peak of 59% for Labour was never going to hold up, much as the left would have absolutely loved it to. But National are still a long way behind Prime Minister Jacinda Ardern’s Labour Party. Adding seven Green seats would give them enough to push through some of the more controversial measures that would help improve the gaping social inequality in this country. I imagine though that polling will tighten further in the next two months assuming National do not make any really big mistakes.

For National to make inroads into Labour, Michael Woodhouse needs to be put in his place quickly, because he is shooting off claims that have no substance and smack of desperation. Nikki Kaye needs to be reassigned to another role – perhaps as Senior Whip and perhaps given Education or something significant to keep her occupied. Todd Muller needs to come up with an original policy platform that does not involve the same tired old tricks, that would have worked long ago if they were going to work at all. Failing that, Labour will be the closest it has ever been to forming a stand alone Government.

For the Greens, whilst they would still be in Parliament, this might be another reminder of how far they have fallen since Metiria Turei admitted to benefit fraud. The party that I thought might – prior to the admission – pick up 16 or 17 seats in 2017 – has not really been the same since. The admission was one thing, but failing to be able to say it had already been addressed with Work and Income New Zealand cost the Greens thousands of voters who they might not get back.

For New Zealand First, a party I used to have a lot of time for, all the current poll is doing is continuing to show that its toxic combination of internal politics and divisive Members of Parliament, are undermining the good work done by the grass roots. Winston Peters might be the person no one should write off, but what if people decided that New Zealand First is really Winston First, as a National party member I once had a debate with, suggested?

As for David Seymour, A.C.T.’s vote have pretty much terminally collapsed outside of Epsom. He is pretty much a one man band trying to do everything. As such he has to get the party to help him chose which battles to fight and which ones to steer clear of. If in the unlikely case he does pick up extra votes, you can think his work around euthanasia and a decision to support the abortion legislation for that.

With this in mind, here is how I envisage an election today would have gone:

  • Labour 47% = 57 seats
  • National 38% = 46 seats
  • Greens 7% = 8 seats
  • N.Z. First 5% = 6 seats
  • A.C.T. = 1% = 1 seat
  • Maori = 2% = 2 seats – I do not think Labour will hold all of the Maori seats

New Conservative will most probably suck up the conservatives who have lost faith in National, but the 5% threshold or a seat in Parliament will be too much for them. Any disgruntled Green members may look at Social Credit, which has been placing expensive colour adverts in the Sunday Star Times.

Why I trust our COVID19 plan more than I trust the Opposition


A few days ago National Member of Parliament, Michael Woodhouse made a stunning allegation. A homeless man had apparently talked his way past security and into a hotel in Auckland where COVID19 quarantine patients were being held. Who was he; why was he there?

The Government launched an investigation because such allegations are not to be trifled with. In making the allegations, National was alleging that there had been a significant breach of the containment facility that the hotel had been converted into; that the Government had no idea where a potential super spreader who could have gone on to infect hundreds of people had gone.

Except that there is a problem. There is no way of verifying it and Mr Woodhouse has not provided additional evidence.

National are plain desperate. It is a significant allegation to make, and I am not the first to do so, but it seems to me that National actually want the COVID19 pandemic to come back to New Zealand because that would give their claim that the Government does not know what it is doing, credence.

Despite having heard of some silly stuff in New Zealand politics, I find the idea that a political party could want a pandemic for their own ends quite unbelievable. Wanting a pandemic that might be only weeks away from overwhelming the United States medical system to come back and start raising merry hell here, just so National can get back into power. And yet, that is precisely what other commentators, not able to really believe their own eyes and ears are seeing and hearing too.

All this does is give me confidence that New Zealand is for the very most part on the right track in dealing with COVID19. Right across the emergency from when New Zealand realized it was going to have to enact measures unseen in this country before, through to today, the communications between the Government and the people have been outstanding. At all levels of society – from video updates aimed at children to the daily 1300 hour briefings for other parts of

Sure we are having new cases announced daily, but New Zealand was told quite clearly to expect an eventual second wave. Whether this is the star of that new wave, I do not know but that is mute. My point is the Government understood in its contingency planning that when the restrictions are lifted and people become mobile again we would probably see a spike in cases.

In terms of the people who have come through the border and gone on without appropriate checking, Prime Minister Jacinda Ardern and Dr Ashley Bloomfield gave instructions in good faith. As such they had every reason like the rest of New Zealand to expect that those instructions would be duly implemented. And that anger displayed by the Prime Minister last week was not for show – it was an actual reaction to someone not doing a completely essential job and potentially letting down the entire country. My guess is that someone in middle management either made a bad judgement or was someone who thought that they knew better and exceeded the authority delegated to them. And if this is the case, middle management is an internal matter for the appropriate ministry or department and not something the Director General or the Prime Minister need to know about.

It was a good call getting the military to become involved in quarantine management as their logistical system, chain of command and resources has a clarity and structure sometimes missing in civilian organizations.

Do I have concerns? Yes. And so should everyone else, because COVID19 is anything but finished. It is incomparably more dangerous than the “minor flu” that Brazilian President Jair Bolsonaro insists; the epidemiologists and all those other people working in the medical sector are far more in tune than the politicians seek to undermine each other on the subject of COVID19. New Zealand might be doing well, but as a small nation, we have to be honest that our economic ability to fight a major COVID19 resurgence is limited; that our I.C.U. capacity is not great (and never has been) and that no one really knows when a vaccine will be ready – never mind available in quantities that means New Zealand and our Pasifika neighbours get a fair use of it.

So, why do I have confidence if I have concerns? The answer is simple. Because the Prime Minister and the Government have put their trust in the medical profession who are dealing with the crisis. They are not trying to play down the danger at all and know that a move back up to Level 2, 3 or – heaven forbid! – 4, would be horrendous for everyone. The social cost would, like the economic cost, be something few would want to contemplate.