Health, education, sustainability before tax cuts
National and Labour have already signalled that they want to make tax cuts a big part of this year’s elections. And, as we know, more tax cuts mean less money to spend (or save), so let’s have one more quote from the Picnic over the weekend:
Let me make it quite clear: if the point comes when the government really has health, education and sustainability all well funded, the fair place to cut taxes is at the bottom. The Green policy has always been to replace some income tax with resource and pollution taxes so we encourage good things like work and enterprise and discourage bad things like waste and pollution. That would allow us to take all tax off the first band of income which would give everyone the same tax rebate. Any other kind of tax cut increases the gap between high and low income earners - a gap which has grown dramatically in New Zealand over the last two decades.
January 22nd, 2008 at 10:43 pm
Did the greens vote for the recent business tax cuts?
January 23rd, 2008 at 8:08 am
That sounds like a very fair proposal to me.
January 23rd, 2008 at 8:27 am
Frog, you havent actually addressed how to close the gap in incomes. How about having a try?
With an 8 Billion surplus ( http://en.wiktionary.org/wiki/surplus ) perhaps the real issues are that there is already enough collected , if only they would spend it and perhaps the money is not being used efficiently.
A question though. This year, as an individual, I will pay over $300,000 in Tax. Isnt that enough for one individual to bear?
January 23rd, 2008 at 9:14 am
And, as we know, more tax cuts mean less money to spend (or save),
So the Greens will actively vote against a Budget that includes them?, or simply sit on its hands and abstain and allow them to occur.
With the current state of the parties, Greens voting against the Government on the Budget could prevent them happening….( and possibly cause an election) or is voting with National too much to stomach,
January 23rd, 2008 at 9:26 am
Toad,
In an ideal world what should the gap between a high and low income earner be?
Seeing tax cuts are going to widen this gap, you must have an indication of what the ideal gap should be.
The best way to deliver exitable tax cuts is to drop GST to 5% or better still get rid of it altogether.
That will make a huge difference to the low income earner. With the added benefit that I dont have to act as an unpaid tax colletor for the government when dealing with my customers.
Think of the saving the IRD can make by not having to collect GST and instead putting those resources into tackling the cash markets so favoured by the criminal elements in our society.
January 23rd, 2008 at 10:24 am
I’m more for spending in useful areas, particularly education and R&D. If we need new technologies and systems they are not going to just arrive, and if we want to be at the forefront of sustainability we need to do more to develop stuff for ourselves.
If we do restructure or tax system the idea of removing GST and replacing it with more progressive personal/corporate taxation and a capital gains tax would seem sensible (and so unlikely to happen). But it would be a large benefit to both low income citizens AND small businesses by removing a large part of the “compliance costs” that business are always complaining about, while the capital gains tax would (hopefully) deflect some capital to more productive areas than the housing market.
However one of the things about the whole tax cut debate is the seemingly default assumption that we are highly taxed in the first place. According to the only study I recall having seen that attempted a comprehensive international taxation comparison we came out on the low end.
January 23rd, 2008 at 10:46 am
Gerrit- I have to agree on GST, but I think the best course of action if you want to give good tax cuts through it is to drop GST on food. Exclude alcohols and such and you’re set.
That said, it is probably a lot simpler legislatively speaking to remove tax on the first bracket.
January 23rd, 2008 at 11:00 am
I’m with chopping GST and the bottom band of income tax to be offset by pollution taxes… but I don’t think the government would risk the latter in an election year.
The economist Dean Baker has an interesting view on using green stimulus packages to help the (US) economy .
January 23rd, 2008 at 12:47 pm
From the International Herald Tribune:
January 23rd, 2008 at 12:48 pm
actually i think i put that in the wrong post-thread
January 23rd, 2008 at 1:35 pm
exempting food from gst is the worst possible thing you could do - it’s when the tax code loses uniformity that it becomes a nightmare to administer - including for those long-suffering businesses strangled by red-tape (a myth as it happens, but less so if you complicate the tax code with exemptions).
businesses still act as tax collectors in the case of income taxes, so merely abolishing gst will do little to help them, cutting gst nothing at all, & introducing exemptions to gst will positively harm.
if progressivity is a desirable goal it can & should be administered entirely through the income tax
January 23rd, 2008 at 1:39 pm
Roman,
At the risk of poking you with a sharp stick here…
If you are personally paying $300,000 dollars tax, even at at a rate of 90% that would still leave you with a personal income of $33,000. $33,000 is almost the average national income BEFORE tax.
You will excuse me If I don’t cry you a river. I also think you are being rather disingenous when you mention a total sum rather than a percentage of income as your tax payment. So, assuming that you are talking about your personal income…when do think you will have enough money? When you are earning 5 times the average? 10? 20? Are you any happier?
Are you using this wonderful high income of yours to help build a better society? or you just a larger consumer?
The most common argument I have heard for wanting a lot of money is that it buys “freedom”..freedom to do the things you really want to do. I hope you are using that “freedom” to put money into projects that will make the Earth a better place. I realise that may seem idealistic, but so be it. 10% of your income would have a hell of a lot more impact on the environment than 10% of mine.
My apologies Roman if I am making unwarranted assumptions here (since the nature of the Internet makes us mostly anonymous) ..but your “isn’t that enough for one individual to bear?”, frankly pisses me off.
January 23rd, 2008 at 1:48 pm
I’m not in favour of dropping GST; I like the way GST works, and it has the advantage of not being a cost to business, other than the administrative costs, which for a taxation system as simple as GST are not excessive.
I’m also not against having some items outside the scope of GST. It certainly works for the UK equivalent (VAT) which has a standard rate, a zero rate and exempted (which is also zero percent but is different to zero rated), all of which is handled by tills and accounting systems and even old men with printing tabulators…
January 23rd, 2008 at 1:56 pm
“works”?
well burning whale oil for fuel works, but it comes with a cost.
January 23rd, 2008 at 4:37 pm
Peteremcc:
The 2007 business tax cuts were part of the budget which, as a confidence and supply matter, the Greens were required to abstain on during the vote in parliament as part of their cooperation agreement with the government. Jeanette said this about the tax cuts in her speech in parliament:
January 23rd, 2008 at 8:56 pm
# Roman Says:
January 23rd, 2008 at 8:27 am
> A question though. This year, as an individual, I will pay over $300,000 in Tax. Isnt that enough for one individual to bear?
It’s worth considering how anyone would manage to earn enough money to incur a tax bill that high. You would almost certainly be dependent on your business operating in a country in which the government provides rule of law, infrastructure and an educated population who you or the companies you invest in can employ. and not just enough educated workers to do the job - the cost of hiring workers who have been educated to high school level is driven down by the fact that everyone (except some refugees) has been educated to high-school level. In conclusion, your ability to make that much money rests to a great extent on the environment provided by the government, so it is logical that you should pay a reasonable share of your income for that.
January 23rd, 2008 at 9:06 pm
# dbuckley Says:
January 23rd, 2008 at 1:48 pm
> I like the way GST works, and it has the advantage of not being a cost to business, other than the administrative costs, which for a taxation system as simple as GST are not excessive.
True, but taxing a few things like fossil fuels and other natural resources instead would be even more efficient. Consider that currently everyone pays fuel taxes (even people without cars pay it indirectly when they pay for products that have a transport component in their cost), but directly only the petrol companies pay it. Than means that there are only 4 taxpayers for that particular tax, which saves a lot in compliance costs.
Taxing natural resources would also create a big incentive to reduce wastage.
I wouldn’t suggest abolishing GST and replacing it with resource taxes over night on the first of April, because that would make lots of profitable businesses suddenly unprofitable before they had time to adapt - I’d suggest a gradual phase-out of GST and phase-in of resource taxes over a period of about 10 years.
> I’m also not against having some items outside the scope of GST. It certainly works for the UK equivalent (VAT) which has a standard rate, a zero rate and exempted (which is also zero percent but is different to zero rated), all of which is handled by tills and accounting systems and even old men with printing tabulators…
I don’t doubt that these accounting systems and men with tabulators cope, but someone must be paying for them. And small businesses probably spend a bigger proportion of their turnover on them than big businesses do.
January 23rd, 2008 at 11:58 pm
Roman,
Rather than looking at how much tax you pay, why not look at it another way:
How much money are you left with after tax, and how many hours do you work to get that (ie, what is your hourly pay rate, after tax). After you have done that calculation, do you consider yourself hard off in comparison with most other people?
January 24th, 2008 at 3:10 am
“if the point comes when the government really has health, education and sustainability all well funded” With health and education we are already at that point, we always have been and we always will be. We are just too stupid to run things effectively and efficiently. As long as we allow doctors, nurses and teachers to design the systems they will always underperform badly. Successful car companies are almost never run by automotive engineers. Successful aircraft companies are almost never run by aeronautical engineers. Lawyers and advertising agencies are an exception only because they operate in industries where money is no object.
Running a fish factory is no less complex than running a hospital. They are both highly seasonal. They are both highly time critical, need exemplary hygiene standards. The main difference it that fish factories that kill their cuctomers or can’t operate within budget don’t stay in business very long.
The problem is that the medical and teaching professions are reluctant to admit when they don’t know best and seek out assistance from those who have the required skills and lack the institutionalised mindset that comes from working only with like minded individuals.
Selective abuse of the statistics on the number of “managers” doesn’t help. There is a certain amount of willful obfuscation by certain groups who imply that manager has the same meaning as administrator. In fact manager means manager, it includes matrons, registrars, and anybody who would be classified as a foreperson or higher in a factory. Essentially anybody who is on an annual salary instead of an hourly wage rate is a manager. All of the senior medical staff in hospitals are “managers”. And that is why most of the extra money pumped into the health system over recent decades has been swallowed up by huge pay increases for “managers”.
My experince of being on the receiving end of the health system is that is appallingly inefficient. That doesn’t mean there is necessarily a place for just in time delivery in the health system but there is certainly a place for bar codes, inventory tracking, production planning, expert systems and all the other proven computer and systems advancements of the last 30 years. All of which are notable by their absence in the health and education systems. Modern systems done properly with the willing participation of those within the health and education establishments needn’t cost a fortune but could deliver huge effectiveness and efficiency gains. Real value for the existing tax dollar. I bet your medical specialist owns a car that costs more than your home.
January 24th, 2008 at 3:14 am
Maybe Roman is a heart surgeon moonlighting as a Queenstown property developer.
January 24th, 2008 at 8:40 am
Frog
Any policy that goes against tax cuts will see the Greens fall well below the 5% threshold.
It seems to me that the Greens are determined to drive away all but their most fervent supporters.
Their can be NO justification for withholding tax cuts, the surplus is in excess of eight BILLION dollars, the usual emotional clap trap about health and education being the reason for continued high taxation does not wash either, this govt (supported by the Greens) has seen more than two billion extra poured into health care yet we see LESS operations as a result.
What the Health sector need is a good clean out and a massive reduction in administrators, Labour’s (and by association the Greens) record in the area of public heath has been nothing short of scandalous.
January 24th, 2008 at 3:39 pm
Haha, what responses. Yes I earn a lot more than that. It has taken me 30 years to get to that point…….30 years of verry very hard work, lots of study and many many attempts to get things right. At age 25 I had nothing and was on the dole. Seven years ago I didnt even have a house.
There are no reasons why others couldnt do this. I suspect they dont try.
No-one has answered why I should pay 10 times the average wage as tax.You go on about “fairness” but iis it fair because I try I should pay for those who dont.
Btw, I could go to Hong Kong tommorow and only pay10% tax. And wouldnt even have to live there. It would be more your loss than mine.
Getting the point now?
January 24th, 2008 at 3:44 pm
Oh, and I’ve always been happy. Thats all about attitude not money.
Jingyang, look at the tax rates and you can work it out.
Samuela- obviuosly I’m better off than most people but obviuosly my hard work has succeeded better than most people, but I dont think I’m better than anybody because of it. We all bleed the same, do we not.
January 24th, 2008 at 3:47 pm
Kevyn, maybe I’m lots of things. Sometimes things or people just cant be pidgeon holed. Thats a very left pov
January 24th, 2008 at 4:04 pm
Incidentally i saw a story about a surgeon the other day who bought a property for 8 million in Herne Bay.
January 24th, 2008 at 5:18 pm
StephenR, Your point is?
January 24th, 2008 at 7:17 pm
Part of the problem is that while health, education etc are noble goals, their problems seem to be management related- will more money help?
How about a mixed tax package- a small tax-free threshold, and adjust all the brackets back to where they were in 1999 relative to incomes?
January 24th, 2008 at 9:25 pm
but there are. you are unlikely to have become so rich if you’d had to pay each of your workers that same amount.
& yet it would be your loss too… otherwise you’d be there now, right?
sure you do. that’s what all that “i’m so happy” stuff was all about. purest one-upmanship. along with all the “i deserve to be better off than you” stuff.
main problem with health is that technology is always increasing the amount of things we can do for suffering people, leading to the moral implication that we should do it, while the cutting edge technology is always more expensive than the level of health care we have provided, & have been able to provide, in the past.
meanwhile the technology also increases the amount of other ways we can enjoy our life. leading to the question of how much of our resources to devote to those things which enhance the quality of life of the healthy people and those which extend the life of the unhealthy, or make the unhealthy healthy.
the problem is likely to never go away… until we can all afford to fill our bloodstreams with nanobots constantly repairing us cell-by-cell so we need never deteriorate & we recover miraculously from wounds & fatigue & drug abuse & inappropriate nutrition etc.
maybe at that point there’ll be no more improvements to be made to healthcare & it will be simply a matter of expanding the economy until we can all afford it.
January 24th, 2008 at 9:52 pm
Roman my point was that you wouldn’t necessarily need to moonlight as a heart surgeon/Queenstown property developer.
January 25th, 2008 at 2:14 am
andrew, you make a lot of good points. Add to them the notion that all this research into new diagnostics and treatments hasn’t been matched by research into reducing costs or improving system efficiencies and you pretty much have all the bases covered. I suspect the reasons for the lack of efficiency breakthroughs is that the structure of both public and insured private healthcare currently provides no financial reward for cost innovations whereas medicines and machines can be patented.
January 25th, 2008 at 12:51 pm
i don’t suppose you’d suggest we should be able to patent organisational structures… so how can we get the rewards to the people coming up with the cost-saving ideas?
January 26th, 2008 at 2:48 am
andrew, I don’t know for sure, but I guess the best place to start looking for that anwer would have to be Toyota or Honda.