Practical response to child poverty

This week a Bill in my name which would help end child poverty was drawn from the Members’ Ballot.

The purpose of the Bill is to extend the In Work Tax Credit to all low income families. The issue is urgent because one quarter of all children are growing up in poverty. As a country are we comfortable with that level of deprivation?

Are we relaxed that the Human Rights Tribunal agreed with “Child Poverty Action Group” that the current tax credit regime is discriminatory against at least 270,000 children?

The Greens have long been committed to changing this policy so that the tax credit will be an extra $60.00 per week for families where the parents are students, working less than 2o hours, or on a benefit. We think this support should go to children who need it most, irrespective of the nature of their parents’ income.

Investing in the most disadvantaged children is saving everyone money in the long term as well as being fair. International research  puts the economic cost of not acting to address child poverty at three percent of GDP, or 6 billion dollars a year.

It is not rocket science that all children need enough food, adequate clothing, housing and health care, but the Bill is already under attack by those with punitive instincts towards people not able to find a job or enough work to afford these things.

The myth is that people have to be incentivised to work and that living on the minimum which the benefits amount to is somehow a comfortable option. At a recent presentation to MPs the leaders of the “Kids Can” charity who provide food, raincoats and shoes to schools told us they had yet to meet parents who didn’t want the best for their children or wouldn’t like to provide that.

However, the deep and easily manipulated contempt for people without sufficient income may mean the Bill will receive more attacks. The evidence is clear that the best way to help the children is to raise the income of the parents, rather than punish them in a flat job market.

We have calculated the policy change will cost about $300 million per year but the pay back will huge. If we prioritise the children who need it through a targeted tax mechanism that doesn’t discriminate we will all be better off.

Maybe it is more important than roads of national insignificance or tax cuts to the top 10 percent of people who are very comfortable already. Will all political parties be prepared to stop hand wringing over child poverty and support the Green Bill? Watch this space.

54 Comments Posted

  1. If a CGT is based on realised gains – what are the realised gains from moving from one primary residence to another?

    Everyone paying a CGT on the property they leave would end up with lower equity in their next home as a result. It would discourage labour mobility. The TWG were thinking in isolation from other markets such as this and coming to perverse conclusions. Far too shallow and simplistic.

    A person moving from one primary residence to another in the same market does not make a CGT on their ownership of a primary residence, they only move upmarket or downmarket or trade equivalent value.

    And if we limited a tax to those who went into a rental we would discourage people from doing this and investing their housing capital into other investment.

  2. Perhaps photonz should try and not confuse the TWG with the Treasury position and certainly not the Treasury briefing papers to Bill English.

    “A new Treasury report highlighting vast differences in tax rates between asset classes is a thinly-veiled call for a capital gains tax, according to one tax expert.

    The Treasury has released the briefing it gave to incoming Finance Minister Bill English after the election, featuring a comparison between the effective tax rates on various asset classes.

    It shows that despite recent changes to the tax system, housing is still a much more attractive option tax-wise than shares or bonds.

    At a 33% marginal tax rate Treasury calculated that debt instruments (mainly bonds) have a real effective tax rate of almost 50%, with domestic shares at just over 45% and foreign shares slightly lower at about 42%.

    Meanwhile, rental property has an effective tax rate of only 25% and owner-occupied housing isn’t taxed at all.

    “The Treasury is continuing to examine a range of options for taxing capital more evenly, and at lower rates,” the report said.

    “Key questions that will need to be addressed before making decisions on tax reforms of this magnitude include the size of the economic benefits and fiscal costs, administrative feasibility, and implications for distributional equity.”

    PWC tax partner and Tax Working Group member Geof Nightingale said the report was “advocating quite strongly for a capital gains tax” even though it never used the exact words.

  3. Photo. If the possibility of double taxation on a few occasions is the only thing you can find opposing a CGT then there is not much downside.
    The tax working group were equally grasping at straws when they raised this possibility.
    Retained profits are either used to pay off debt, add to Capital or pay expenses. In most cases it then comes off the next tax bill as a credit for expenses, depreciation or off personal tax because of reduced dividends. Not double taxed at all. I notice you are not in the least concerned about the double taxation of many other things already, including work expenses paid by PAYE tax payers.

    CGT is mostly a matter of fairness as well as being a pigovian tax to cut investment in non=producing assets.

    I agree though that family homes should only be exempt up to the median house price. Otherwise a lot of wealthy children will be buying family homes.

    What we really also need is a FTT. To lesson the huge grab of wealth that is the financial sector.

    And progressive tax rates like Australia. 45% on over 150k income for example. Note the low tax on low incomes results in more spending in OZ, which helped keep them from going down with the rest of the Anglo countries.
    The opposite of NZ where the vaunted trickle down effect has failed to deliver the productive investment and jobs that the proponents said would happen.

  4. SPC says “on balance Treasury is realistic enough to accept that a CGT is a good idea and has recommended it to the current government. Why not quote the conclusion they came to – … oh … that’s right you just selectively quote to suit. ”

    You are making up nonsense.

    They prefered other taxes over GCT, and warned of the complexities of CGT, and creating a biased tax sytem which would shift taxed investments into private housing.

    That’s the opposite of what we want to happen. The TWG warned the likely shift from taxed investments into private housing could actually LOWER the tax take.

    They also said IF a CGT was bought in, it should include family homes.

    Their conclusions on GCT
    “While the comprehensive nature of this option is seen as attractive and therefore its introduction is supported by some, most members of the
    TWG are concerned about the practical challenges and efficiency implications of introducing a CGT. These issues include the lock-in effects that can result from a realised CGT and the inherent complexity
    of a CGT.”

    “Introducing a CGT that excludes owner-occupied housing would create a new bias in the tax system.”

    Here’s how reported it –
    “Due to the complexity of a capital gains tax, most members of the Tax Working Group therefore favoured a low-rate land tax for funding other tax rate reductions.”


    So apart from doing the very OPPOSITE of what we want (it provides a strong incentive to shift investment from the taxed productive sector to the untaxed housing sector), the other issue with CGT is that by nature it has to have so many loopholes, and is so complex, that (as Australia found out)
    – it doesn’t bring in much tax, and
    – it takes 15 years to build up to “not much”.

  5. @photonz1

    The tax working group reported that a large part of rise in share value is because tax paid profits are pumped back into companies, so any CGT would be double taxation of these profits.

    I think we are talking to the same point (sort of).
    I am saying that companies that reinvest will have a higher value/SP than those that regularly pay divs – simply because the value is conserved rather than dispersed.
    Your example assumed an identical company value after divided. That is the logic I am disputing. Futhermore, any investment in plant will be subject to depreciation which would offset some of the future tax burden.

    I think in the end the difference would be marginal to the extent that while shareholder A would get a dividend and but possibly no profit or CGT on divestment, shareholder B would make a profit on divestment but be subject to tax. The end amount in the shareholder pocket may not be that different.

    Where will people invest if the productive sector gets double taxed, but home speculation is tax free?

    This is a valid point, which is why I would support a comprehensive CGT across all income sources (shares incl.) and not exempt the family home. I think as long as some provision was made for inflation adjustment of the period of holding the asset (irrespective of class but possibly offset against gains made from economic rents – divs, rental income etc.) then there is no reason why it couldn’t work.

  6. Andy Haldane, executive director for financial stability at the Bank, said economists misled policymakers in the years before the crisis by promoting a “blinkered” view of the world based on the assumption their theories were unfailingly correct.

    The academic establishment, including central bankers, needs to own up to its mistakes, he added.

    In an interview with OurKingdom, the UK arm of openDemocracy, Mr Haldane said: “It’s right that it should shoulder some of the blame [for the financial crisis]. In part, this is because thinking within the wider academic economic community did start to shape and influence public policy in important ways.”

    The profession’s mistake was to allow “a rather restricted and blinkered view of the dynamics of social and economic systems [to be] carried across into how public policy was thought about and executed”.

    He said the error was not driven by economists seeking financial gain but “the quest for certainty”. But their error was to think of the assumptions used to build economic models as cast-iron laws.

    “A concept gets formalised and then gets socialised and then believed as an almost theological doctrine,” he said. “The notion of not knowing, of imperfect information, of uncertainty, got lost from economics and finance for the better part of 20 or 30 years.

    “I think one of the great errors we as economists made was that we started believing the assumptions of economics, and saying things that made no intellectual sense. We started to believe that what were assumptions were actually a description of reality, and therefore that the models were a description of reality, and therefore were dependable for policy analysis.
    “With hindsight, that was a pretty significant error.”

  7. All theory. No commonsense. Everyone has to live in a primary residence – that is the only property exempt. There is no income gain unless the person downsizes their property – and invests elsewherre (outside property). In Oz it seems to be shares – so the “double taxation” does not discourage ownership. They also have higher R and D than here – so it does not discourage investment within the company relative to us (and we have no CGT).

    I have based my opinion on real world evidence not the theory of those who have failed to provide this economy with sound guidance.

    None of them even predicted the consequences of floating the dollar (for us and Oz) of borrowed money inflows on consumption of property (housing and land) – as for the GFC – spare me their theories.

    However I will concede for all the theories of some you cite – on balance Treasury is realistic enough to accept that a CGT is a good idea and has recommended it to the current government. Why not quote the conclusion they came to – … oh … that’s right you just selectively quote to suit.

  8. SPC “ much for the negative impact of “double taxation” (no wonder Treasury is unconcerned) on investment.”

    What utter nonsense.

    The Tax Working Group report prepared by Treasury and IRD says –

    “For income taxed at the company level, there could be an element of double taxation if firms had not distributed this income and if the retained earnings were reflected in higher share prices and gains in shares were being taxed on sale.”

    “An outcome to avoid is one where the tax treatment of shares relative to dividends discourages a company from retaining and reinvesting profits.”

    On exempting the family home they say

    “The concern with exempting the primary dwelling is that it creates a bias towards investment in one’s own home relative to other forms of investment, particularly since the land is expected to appreciate in value.”

    They go onto say that with a CGT exemption for family homes, money is shifted from productive and rental sectors that are taxed, to a sector that has no tax of any sort, so bringing in CGT with a family home exemption, could potentially lead to an overall LOSS in taxation.

    “As around two thirds of residential homes are owner-occupied, the reduction in potential tax revenue from a capital gains tax may be significant.”

  9. Gregor says “I’m just not sure that your examples assumptions are necessarily ‘true to market form’ as it were.”

    The tax working group reported that a large part of rise in share value is because tax paid profits are pumped back into companies, so any CGT would be double taxation of these profits.

    Where will people invest if the productive sector gets double taxed, but home speculation is tax free?

  10. photonz, where does someone who makes a CG selling their primary home then live? It’s not income unless the person trades down – and even sny trade down house will be worth more than before it’s rise in value in the same market.

    In OZ the impact of the CGT appears to have been to divert focus fron rental to share ownership – so much for the negative impact of “double taxation” (no wonder Treasury is unconcerned) on investment.

    If the lack of a CGT is so good why are we such low investors in shares and our companies the lowest spneders on R and D growth of the compnay anywhere?

  11. photonz1 – I guess I’m disputing the “shareholders have exactly the same total return” bit, but only inasmuch as the companies respective SP rise is unlikely to be uniform. I would expect Company B’s to be higher based on investment of retained earnings.

    But I see your point that, assuming the companies values increase at the same rate, while Company A’s dividend would be tax paid, both companies shares would incur a CGT component on sale.

    I’m just not sure that your examples assumptions are necessarily ‘true to market form’ as it were.

  12. Gregor – the point is that although both companies have made
    -exactly the same profit
    -exactly the same tax
    -shareholders have exactly the same total return

    Under a Greens or Labour CGT, shareholders in company B will be taxed a second time on their profits.

  13. @ photonz1

    Your company example is a bit out (unless I have something wrong).

    If each company’s profit is $7m and company A chooses to pay a dividend then the stockholders gain an immediate benefit via disbursement.
    Shareholders in company B do not gain this benefit.

    Where the return is immediate for A the return will be deferred for B as it will take the form of increased capacity (and therefore future earning potential) as well as higher depreciation benefits against future profits.

    Company A’s value would not in crease necessarily as the asset base remains the same; $100m.
    Company B reinvests the $7m increasing the asset value by 7%; $107m.

    The EPS is the same for both companies at that point but the value is different both in terms of assets value and earning potential.
    This would likely be reflected in the share price with a higher long run valuation for company B over company A.

    Generally, ‘double tax’ doesn’t really exist as it is offset by credits at some point; in the case of dividends by imputation to the stock holder.

    It tends to exist on levies like rates wearing a GST component (which for the life of me, I cannot fathom).

  14. Land is banked when the market value is increasing, or projected to increase. Liberate enough new land into the market and the price of base sections will quickly fall to about rural values. Then land becomes a product like any other, and is treated as such by the seller.

    Then put a good kit-set house on it and stop turning young families into debt slaves.

    When you get past all the bullshit it really isn’t hard….and you will have no problem finding finance for your highly affordable home. Because it’s affordable!

  15. SPC says “Treasury have not raised this as a problem in having a CGT here.”

    Actually the tax working group HAVE pointed out that CGT on shares would be double taxing.

    For example, take two identical $100m companies who earn 10% or $10m profit each.

    Company A pays it’s tax of $3m and pays out $7m in dividends.

    Company B pays it’s tax of $3m and spends $7m on new assets.

    It’s shares go up 7% to reflect the new value of the company.

    The companies have identical profits, and shareholders have IDENTICAL benefits, but the Greens and Labour want to double tax company B shareholders with CGT, on profits that have ALREADY been taxed.

    The incentives from this would be for companies to pay out ALL profits as they are penalised by double tax if they reinvest for growth.

    That’s about the WORST possible incentive you could have for an economy.

  16. SPC asks “photonz – how does a CGT encourage people to put more money into their family home?”

    I thought that was pretty obvious.

    If you can make a tax free capital gain your family home, but get hit with cgt on a rental home, where are you more likely to spend money, speculate etc?

    From TVNZ ‘Mansion effect’

    “About two-thirds to three-quarters of houses are primary residences.

    Therefore the tax will only apply to the minority and perhaps encourage what in Australia has become known as the “mansion effect”.

    That is, it pays to pour all your money into your home because when you sell it, the gain is tax free.”

  17. We stopped having council doing the streets and services for new development housing.

    Any available sections are the property of “property developers” who manage the whole thing, sell the sections to builders at exorbitant prices and the builders build on spec so they build as expensive a house as they can to maximize their returns.

    They’re not stupid, but we were.

    The developers HAVE to recoup their investments on the initial house sale, so they WILL build the infrastructure as cheap as possible to meet the council’s requirements and then the people who buy the houses pay rates.

    Now there’s aspects to this I don’t really like – the amount of the rates and the fact that we pay taxes on those taxes… but the proper jobs of the council INCLUDE the development of sections. A responsibility they abdicated for reasons I do not understand, but they are willing to inspect houses and warrant their livability.. a responsibility they cannot properly fulfil and have no need to take on. My feeling is that there are a lot of people sucking money out of this mistake, and that it exists because of some ideological idee’ fixe that private is better, but the way it really works is badly.

    Council can and will collect rates on those houses for a hundred years and a dozen owners. The developed sections and the houses people put on them are assets to the community and the society… and they are taxed that way… so why is the private developer so damned important, and why is it necessary to force that first buyer to pay the full freight of the section development, when the house will be taxed for 100 years?

  18. photonz

    Is a greater home sale price than home purchase price really income? The person still has to downsize or downvalue their living arrangement for it to be income – if they replace with a comparable property in the same market there is no income.

    As for CGT regimes – Greens propose a company tax rate tax on after inflation profit. Labour proposes a 15% rate that applies on the inflation component of the gain (this is simpler to apply and is on the presumption that half of any increase is inflation).

    As for shares, and how CGT is assessed on them giving the range of mechanisms companies have for delivering benefits to shareholders – I would imagine this is an issue for the many overseas regimes that apply a CGT. They would have already faced companies responding to their CGT regimes (looking for mechanisms that mitigate CGT liability for shareholders). So I suppose we would have to use knowledge gained overseas to guide our regime – Treasury have not raised this as a problem in having a CGT here.

  19. photonz – how does a CGT encourage people to put more money into their family home?

    I can only see how a CGT on rentals would encourage people to have a family home and shares, rather than a family home and a rental.

    The reason a lot of people there are building better homes and owning more shares is

    1. rising wages
    2. access to offshore money to bid up their home values (via their banks)
    3. Kiwis arriving and increasing demand for property (seen GC, Kiwis speculating in the renatl market despite a CGT because the value is still rising).

    Their CGT has nothing to do with it.

    Their access to good wages and greater ability to service unlimited bank lending is the cause.

  20. Andrew, land banking is done whenever there is a lack of investors (we have a shortfall of money going into home building since the finance companies and property developers went under) in the market, not just the amount of land. Another factor is regulation of those holding land available for home building to prevent the landbanking practice. Make it available for sale to others (not yet in the same area market) if it is not used within an x period?

    Citing the building cost of other nations is irrelevant to local costs – an impact of a lack of competition in the supplier side and the small scale.

  21. SPC says “photonz, please note that the Oz people invest in the stockmarket despite there being a CGT and a CGT on property excluding the family home.”

    When CGT was brought in in Australia – house prices went UP – not down. It resulted in what was called “mansion complex” where people put even more money into their personal houses, resulting in a market even more expensive than NZ.

    I saw an article today listing 12 places in Australia where you can still get reasonable “entry level” home for A$500,000 (NZ$640,000).

    I doubt it’s quite that bad, but prices certainly make NZ look really cheap.

  22. SPC says “A CGT is simply taxing all income equally.”

    I’ve never seen one that does that.

    Labour and Green CGT plans means someone can buy a Paratai Dr palace for $10m, live in it and sell it for $15m next year, and pay nothing. While someone else who has a $100,000 rental in Bluff, but rents themselves elsewhere, sells after 20 years for $150,000, making a loss in real terms after inflation, will get stung by CGT.

    Similarly with shares, some share values go up because the market decides they are worth more, and some go up because more the business was expanded by buying more assets with AFTER TAX PROFITS.

    What is my real capital gain on a companies shares if I’ve been buying them for over a dozen years, on more than 50 occasions recieved tax paid shares instead of tax paid dividends, bought on more than ten other occasions, sometimes higher, somethimes lower than previuous purchases, partially sold five times, and there’s been 7 for 3 shares split, and a 9 for 5 share split, and special dividends on three occasions resulting in shares being cancelled.

    And then how do you work out how much of the growth in price is because of inflation, how much is because of increase in company value because of reinvesting TAX PAID profits, and how much is the remainder (i.e the ACTUAL capital gain)?

  23. SPC:

    MUL’s is what induces land banking in the first place. Enough supply capacity and that bubble must quickly burst, leading to ‘natural’ prices.

    $200k for a good first home is entirely realistic – and is done overseas.

  24. On the issue of compulsory Kiwisaver, while not opposed, the greater priority is government affordability of tax paid universal super. That requires dedicated contributions between now and 2030. These should be deducted from wages at 2% from employees (2% from employers) – a similar compulsory deduction from wages with employer matching for KiwiSaver.

    However I am not sure this would expand the sharemarket that much – the funds are very risk averse – so they avoid things like building dairy plants and undersea cables – they only invest in more mature companies. They would enable local venture capitalists to on sell locally though and that would offer something at least.

  25. But presumably a farm is productive and earns foreign currency.

    For sure. But if that farm is also claiming tax loss or neutral year on year, then John and Jane Taxpayer are effectively footing the bill.

    Broadly I think you are correct. Education is the key.
    But I would caveat that inasmuch as example is the best education, and that the example should first and foremast be set by government;

    (i) leveling the playing field by closing investment loopholes
    (ii) aggressively and publicly going after tax cheats
    (iii) moderating bank behavior beyond tweaking interest rates
    (iv) investing via consumption / stock holding/ JV with local enterprises over foreign companies.

  26. photonz – the problem with the CGT on property bought (and done up) and sold within 2 years is that people who do this often live in the homes while doing this and claim the property is not an investment, but is their home. The ones who work at the same time are near impossible to touch – it’s only the ones not working “otherwise” who are easy to spot. And yes the CGT proposed by Greens and Labour would not improve our ability to “catch” them in the CGT net either as the property does not come under the rental category.

  27. photonz, please note that the Oz people invest in the stockmarket despite there being a CGT and a CGT on property excluding the family home.

  28. Andrew, $200,000 for a newly built home? Not likely. It costs $150,000 to build a basic home, a minimum of $200,000 for a better one. Land will still have a market value however much is on the market for home building. And land availability is only a means to reduce price if there is no land banking by the pricate sector – only if a public company with no profit motive is involved to provide the competition (selling land for building at a lower price) will do this.

    I’d settle for getting homes down to $300,000 value on average rather than $400,000. That means holding them to an average of $400,000 for the next 10 years.

  29. Gregor says “A possible alternative might be a tax on unproductive capital”

    But presumably a farm is productive and earns foreign currency.

    Perhaps a lot of incremental changes are needed across a wide variety of aspects.

    – make Kiwisaver compulsory? That way more money goes into productive investments.
    – further tighten rules on what can be claimed on rental properties, and tighten policing on CGT on houses (we do actually a CGT for houses that are sold within two years)
    – educate people about the housing bubble and other forms of investment.
    – strengthen and enlarge our sharemarket. In the last 20-30 years, the Aussie sharemarket has grown by 600-700% MORE than the NZ market. There are SINGLE companies on the Aus sharemarket that are bigger than EVERY single company on ours.
    – increase social advertising to promote investing. 40% of Australians own shares. Last figures I saw, NZ doesn’t even have a quarter or that.

    While there are things then government can do, what’s really needed is a change in the mindset of Kiwis.

  30. photonz – the reason wages rose a few years ago was that unemployment was falling and the MW was increased from $9 to $12 over 3 years. The latter also impacts on wage levels above the MW because of relativities/preference for staff with skills.

    A CGT is simply taxing all income equally. Sure it won’t cure an asset bubble because the same banks whose practices created one here did so across the Tasman where there is a CGT. But the lack of a CGT will exacerbate an asset bubble because of the extra reward for speculators.

    The way to mitigate an asset bubble is to dry up finance for home purchase – require more of the money to be saved, – not just from the domestic savings pool but also from higher deposits at purchase. Particularly, higher deposits for those buying second properties (to limit speculative interest in rental property). The housing bubble source is the floating of the dollar and the inflow of foreign money to finance home purchases – this needs to be better restrained.

    Another thing to do would be to encourage purchase of new property to encourage more home building. Maybe by allowing bids on low deposits here only (and requiring investor migrants to buy a newly built home etc).

  31. If you put it on everything, then that provides no incentive for people to change investment from houses to the productive sector.

    True, but IMO, leveling the field between asset classes is also important.

    We also get the crazy situation where the agricultural productive sector is hugely inflated in value, with farmers running constant losses in terms of cashflow (and the taxpayer footing the bill) with the absolute certainty that when they sell they will pocket tax free capital gains. Again, the real winners are the banks.

    A possible alternative might be a tax on unproductive capital (i.e. compelling capital to ‘earn’ a yearly RoR or be taxed the difference) combined with utilising an FTT and/or smashing the banks with a super tax on financial profits in order to penalise flooding the market with cheap credit.

    Not sure how this might be managed though as taxation tends to be a pretty blunt instrument. An alternative might be to reduce the credit pool by raising the deposits ratio?

    Agree with your ‘red light’ assessment as well.
    A lot of this has to do with the lack of viable alternative investment options due in large part to things like poor financial regulation and a shallow stockmarket etc. and the embedded fallacy that no one will ever take a bath on property – it’s like people have forgotten the 70s-80s.

  32. Gregor – the problem with CGT is it often does the opposite of what is intended.

    If you put it on everything, then that provides no incentive for people to change investment from houses to the productive sector.

    Similarly, if you put it on rental houses, but not owner occupied houses, you incentivise investment into owner occupied houses.

    As the majority of houses are owner occupied, ALL house prices go up.

    And so does rent.

    Currently the rent from many rentals is less than (low) interest rates. By the time you factor in a 2-3% cost for maintenance, insurance, rates etc, a rental is such a bad investment that it relies on capital gain for a return.

    So why will house prices go up if rents are already high, and people can’t afford any more? (i.e. rents will give an ever decreasing % return if house prices continue to go up at this rate)

    Answer – because there’s so many people who can’t figure out that we’re still in a property bubble.

    And the big red warning light signifying a bubble starts flashing when income from a rental doesn’t cover interest, rates, maintenenance and insurance.

    It’s been flashing for 7-8 years but people have been ignoring it.

    House price increases at current rates are as sustainable as spending 15% more each year than we earn – the reason for the bubble in the first place.

  33. @ photonz1

    Excellent points.

    The speculative money-go-round of the 00s has crippled this country with debt peonage.

    How to break those habits is the question.

    In my mind, dis-incentivising speculation and taxing wealth as opposed to income is critical (which logically bring us to measures like a comprehensive CGT and a nominal Financial Transaction tax) ideally coupled with incentives in the productive sector (compelling govt to consume goods and services locally etc.)

    A strong domestic economy creates a ‘virtuous circle’. Better profits, better pay (thus removal of the effective taxpayer low wage economy subsidy in the form of WFF)and higher employment all result a broader tax base.

  34. Sprawl takes the jobs out with it over time, so it does not increase average travel times – it actually reduces them. Sprawl mostly localises new travel demand to the fringes.

    A good transport system begins with comprehensive demand control with congestion charging – giving us highly efficient buses, car-pooling, taxi-vans etc.

  35. Catherine says “The way to make work more rewarding is to pay decent wages!”

    Better wages come from one thing – businesses being more profitable.

    Unfortunately many people see higher profits as a bad thing, and want to do everything they can to take profits away from businesses through higher tax, more red tape etc.

    Incredibly, they don’t see that they policies they want for businesses, results in LOWER wages.

    In the mid 2000s when most businesses were making good profits, wages went up significantly faster than they had previously, or ever since.

    Unfortunately that was built on a debt fuelled bubble when the whole country spent 15% more year after year than we were actually making.

    In a few years our mortgage debt went from $60b to $160 – to own exactly the same houses we owned before. Now that’s nearly $180b debt.

    If EVERY working person in the country paid an extra $100 a week into mortgage debt, it would still take 12 years just to get back to where we were.

    Instead of spending all our money on buying exactly the same houses off each other and owing more and more to overseas banks, we need to change our habits into putting money into sectors that are productive, rather than houses that produce nothing.

    Only then will business grow. And we need to change our attitudes so that we see profitable business is a good thing.

    Because without businesses making better profits, you will NEVER get any significant rise in wages.

  36. Railway service.

    I simply was reflecting Andrews aversion to rail.

    However, an hour’s commute each way is still 2 hours on top of a full time job that you are away from home. It isn’t “good”, just not as bad as the alternatives.

  37. BJ,

    Drive? What happened to the trains?

    GOOD homes are those built close to a railway station.
    GOOD businesses are those close to a railway station.
    GOOD jobs are close to a railway station.

    If we could just get trains to run to placers like Helensville, Kaukapakapa, Dargaville, Whangarei, and in your neck of the woods Matamata, Huntly, Tuakau, etc. you will find businesses will relocate there to provide the jobs.

    Places like Pukekohe and Wellsford can become sattelitte towns to service the surrounding “mini” towns along the rail line.

    With the Auckland mayor and council navel gazing with a centre business district focus, this is not going to happen.

    We will end up with a rate payer funded white elephant called a buried rail loop whilst regional development in the Auckland/Northland is largely glossed over.

    Regional development is the answer, not a central rail loop and crowding more people into a smaller and smaller space.

    So what comes first, regional railway service, regional cheaper housing, or regional jobs?

    Someone has to be first.

  38. We saw property values double nationwide not just in Auckland.

    While migration into Auckland early in the 2000’s fueled demand for housing there, property prices doubled nationwide – the only commonality was banks willing to lend on low deposits and buyer expectation of rising value (and a fall in unemployment) – thus demand despite rising prices.

    What is fueling buyer demand in Auckland now is a combination of low cost mortgages and a shortage pushing up rents (landlord investor demand is returning) – and a return to banks lending on low deposits.

    The decline in house building in Auckland is more a case of new home finance drying up because finance companies and property developers went under (and some builders went to Oz). The government has failed to do anything to compensate for this. Opening up new fields alone won’t do it if there is not enough investment in building.

  39. SPC:

    Then why do we see property inflation (Auckland style) only in places that restrict land supply.

    People, generally, only borrow $500k for a house when they have no other choice. Banks can only play their game in inflating the market when the supply response has been actively restricted. I have explained this in detail – for years.

    THINK. People do not borrow huge money for a house just because the banks will let them. There is another force cranking up the market.

  40. Andrew the price of houses doubled within 5 years – the cause of that was not urban sprawl – but easy access to bank finance and a tax regime excluding CG.

  41. So it could be said a consistent policy would be to

    1. increase the number of houses built.
    2. improve the standard if rental property – required insulation
    3. a higher minimum wage
    4. improved support for all those raising up children on low incomes.

    This is the Green Party position.

  42. The difference will go to the landlord. It doesn’t matter where the money comes from – more money in the hands of renters, across the board, will subsidise rental inflation until the under-supply in houses is sorted out.

    Unless, that is, you control how the money is spent with some kind of food and clothing vouchers, etc, so the monetary gain simply cannot be used to inflate rents because it is force-spent on other things.

  43. It is a sad fact that wages are very low in some jobs and also that benefits barely cover costs for many families. The way to make work more rewarding is to pay decent wages! One way to help children is to give their parents more money as we used to get in the old days – it was called Family Benefit and it really made a difference. Ask anyone raising children on benefits or study or low hours of work whether this Bill would make a difference!

  44. Great stuff Catherine. A great way to get this issue brought up again. I hope that the debate can be had resonably instead of hysterically in much the same way as Nick Smith wants to ‘inject some science and common sense into the debate’about fracking, although going by the comments made by photonz1 this appears unlikely.
    Support you 100% on this one.

  45. photonz knows

    1. that only a minority of parents on benefits are irresponsible – but would expolit them to deny support to other families.

    2. that the (40 hour) minimum wage job is way higher than any benefit payment (two times after tax, the highest work tested one). The problem is the growing prevalence of 30 hour jobs the government calls full-time, this requires a $15 an hour pay to provide “an incentive to work”/a reasonable living wage.

    A bit of a paradox, someone against increases to the MW, saying there is not enough incentive to work.

    And reducing the abatement regime for beneficiaries working part-time would mean people would be more comfortable staying on benefits rather than seeking full-time work (that has child care costs). Despite that the government is requiring this part-time work seeking that places these people in that very position – no doubt because with an abatement regime in place it reduces benefit payment cost (and pushes down wage demands on their employer supporters).

  46. Catherine – dysfunctional families who spend money on cigarettes, booze, drugs and pokies, instead of breakfast for their kids – are not going to change their habits because you give them more money.

    A second issue is you narrow the already small gap between what people earn from a benefit and what they earn from working.

    Why would someone on a benefit bother with a full time job when they lose almost all their money in tax? Effectively they’ll have to do five days work just to get one days pay more then they get with a benefit.

    And the other way around, why would people working on a low wage bother to keep working when they can get just about as much on benefit.

    The dilema is that is that your bill gives all the wrong incentives – big incentives for people to do the WRONG things.

    Rather than encouraging people to train and work, it encourages them to NOT work.

  47. “If we prioritise the children who need it through a targeted tax mechanism that doesn’t discriminate we will all be better off.”

    And we can hold you liable if this passes and we still have as many children in poverty in a few years time?

    This WFF tax mechanism is no gurantee it will ensure assistance the kids you speak about – the money goes to adults not the kids.

    Why cant we all (not just those over $100K) be taxed less, and all have more money in out pocket. This redistribution mechamism has transaction costs and double handles money when for many that qualify are simply getting some of the tax they pay back.

    WFF is vote grabbing and nothing more.

  48. One wonders what alternative to this Labour will propose, if it was to get to a second reading – maybe someone should ask Peter Dunne (and the MP) to ensure this happens, so we can all find out?

    I’m guessing they have not decided on a new policy in place of their 2011 position.

    Maybe it’s adopting other existing Green policy instead – such as required insulation of rental property? Or will this be part of “their” job creation programme?

    Presuming they will also give up on taking GST off fruit and vegetables (another post “2011 centre-left Goff” centrist leadership branding) maybe they will support meals in poor area schools? Or is that too much centre-left 2011 as well.

    National lite in 2014 – as they shed the centre-left vote to others.

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