Public economics

An economic lesson for Labour they seem to have forgotten

The Labour party wants to raise taxes, add in the Greens tax increases and their fondness for keynesian stimulus spending, you really wonder if they understand basic economics.

You simply cannot tax a nation to prosperity.

Who better to explain the Laffer Curve than the guy who it named after, Arthur Laffer:

The IEA was delighted to host renowned economist Dr Arthur Laffer on 27th June. He was in the UK advocating lower and flatter taxes as the key to economic growth. He suggests high tax rates alter people’s behaviour and act as a disincentive to work.

Laffer Curve from Institute of Economic Affairs on Vimeo.

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How many Tax Commissars and Stasi operatives will Labour need?

Labour's new tax commissars line up outside IRD's Stasi HQ

Labour’s new tax commissars line up outside IRD’s Stasi HQ

Labour’s newest great idea is to establish a Tax Stasi, filled with Tax Commissars who will be “embedded” in businesses that Labour thinks are bastards.

They will be observing what is going on and reporting back to the Tax Stasi Gruppenfuhrer

This is an outrage…you can’t tell me that once the Tax Stasi have finished doing over multi-nationals that Labour won’t suddenly decide to implement more snitches and stasi agents and lower the threshold and rules down to businesses with say $30 million turnover.

What is more of an outrage is labour have exempted banks from the snoopy activities of having Tax Stasi agents roaming the corridors looking for evasion.

If National had done something like that Labour would be accusing them of cosying up to bankers, and corporate cronyism…like they do now over insurance companies?

You do have to wonder though if one of labour’s aor David Cunliffe’s major secret donors is bank or someone associated with banks.

There are serious questions though…surely if they are targeting tax dodgers and rorters then the unions should have Tax Commissars assigned to them, in particular Unite Union, with their history of non-compliance. Or will Labour except unions from having Tax Stasi Agents sitting in their offices.

In other matters you can tell they don’t know what to do about almost everything because they have retained their promise for us to trust them, they know what they are doing, look we will appoint an Expert Panel.

Expert Panel : An Expert Panel will be established to deal with issues that are technical in nature and involve areas where a high degree of specialised knowledge is required before a final decision can be reached.

This policy will raise an additional $25 million in its first year, growing in outyears to reach $1 billion a year by 2020/21.

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Sin taxes and stealth taxes affect the poor more

All sorts of people are proposing taxes on sugar, fat and other supposedly bad things.

They are modelling their taxes on tobacco taxes without thinking through that in the case of tobacco it is the smoker who pays With sugar taxes it will be everyone who pays and the burden for these stealth taxes falls disproportionately on the poor.

Chris Snowden explains this very well in this video:

[T]he IEA’s Director of Lifestyle Economics Chris Snowdon examines the extent of the burden of indirect taxes and government sin taxes on the poorest groups in society and how these have changed over time. This film is an excerpt from a recent IEA panel debate event on the ‘Cost of Living’ crisis, in which Chris was outlining the findings of his recent paper ‘Aggressively Regressive’.

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Green solar scam is a “dishonest subsidy”

The Green party launched their now thoroughly discredited solar power plan on the weekend.

It involved ‘loans’ in order to buy and retro-fit your house with solar power. It is a bizarre policy that will directly undermine their support for the joint Green/Labour power policy, but that isn;t the worst aspect of the whole scam scheme.

Jamie Whyte, the new Act leader, explains.

“The Greens’ Energy Policy announced today shows how dangerous they are to the New Zealand economy,” says ACT Party Leader-Elect Jamie Whyte.

“Cheap loans for solar panels are actually a dishonest subsidy.  The subsidy is hidden in the terms of the loan.  More honest would be to simply subsidise the panels, but in that harsh light people would see the policy for what it is – an election bribe ultimately funded by the taxpayer.

“Policies of subsidising biofuels have failed around the world – economically and  environmentally. There is no reason to think that subsidising solar panels will be any more successful.  Read more »

Let’s have a living tax on companies

David Farrar discusses a “living tax” proposal for offshore companies who pay little or no tax in New Zealand…like APN and Fairfax.

This old fashioned concept of paying tax on profit must be disposed of. We should demand a fair tax system. Let’s calling it a living tax – the level of tax a company should pay so that it no longer feels wretched and is helping fund a civilised society.

I think a 15% tax on revenue would be a fair living tax.  Both the Herald and the Dom Post have repeatedly run stories and editorials comparing tax to turnover, not profit. So we should start the living tax campaign with them. Here’s how it would work:  Read more »

Fairfax columnist recommends Fairfax be shut down

Dave Armstong has written a column that is online at Stuff.co.nz.

He thinks that, though loony, Labour’s Facebook Ban is actually on the right track. apparently the new standard for corporate tax isn’t the law, it is some sort of arbitrary moral code dreamed up by leftists.

Labour’s revenue spokesman, David Clark, a bright young star under David Shearer but a supernova under Mr Cunliffe, decided that if Facebook didn’t pay its fair share of tax (it paid $28,000 tax in 2012 – less than is paid by a demoted backbench Labour MP), a “back pocket” threat would be to shut them down.

Mr Clark’s Facebook facepalm quickly had the libertarians up in arms – avoid all the tax you like but banning internet sites only happens in despotic Third World regimes. New Zealand does far more civilised things like helicopter raids on residents we think may have breached US piracy laws.

Mr Clark was quickly defriended by his colleagues, who doubted Labour would take such draconian action. His relationship status within Labour quickly dropped from “liked” Dunedin MP to “single”.

Mr Key found Mr Clark’s comments “interesting” and Bill English called them “nuts”. However, the finance minister conceded that multinational companies like Facebook should “pay their fair share”.

At present many multinationals don’t. They avoid tax by various legal ways, including creating subsidiaries in low-tax places like the Cayman Islands. It is these subsidiaries that receive most of the company’s revenue, on which they pay negligible tax. The company’s expenses are channelled to relatively high-tax countries like New Zealand, where a loss is made.

Like Fairfax? When did they last pay tax in New Zealand?   Read more »

Herald hypocrites busted again

hypocrites

The NZ Herald likes to point the finger at other companies and accuse them of being tax cheats.

They did it last year in March and I busted them then. Their IRD dispute is still ongoing and IRD reckon they owe $48 million. Then there is the $611 million of accumulated losses meaning that they pay bugger all tax in New Zealand anyway.

Yesterday David Farrar came out of the blocks and kicked them fair in the cods too.

The Herald editorial:

Many firms that practice tax avoidance probably do feel wretched about it. But they owe it to their shareholders to pay no more tax than their lawyers and accountants say they must, and they transfer the blame to the legislators who leave loopholes for them, or who set taxes too high or spend the revenue unwisely. With the company tax rate at 28 per cent in New Zealand, lower than the top personal income rate, it is hard to justify corporate avoidance here.  Read more »

6 in 10 think people like David Clark are ‘tards

The NZ Herald has surveyed people and they have found that 4 in 10 Kiwis are dumber than a sack of hammers…including Labour’s revenue spokesman David Clark.

Nearly 40 per cent of New Zealanders believe GST should be charged on all purchases made on foreign shopping websites, a survey has shown.

The Government is estimated to miss out on up to $300 million in sales tax each year.

But New Zealand retailers struggling to compete with overseas sellers – whose sales are exempt from GST when they are for less than $400 – will have to wait for any decision on a potential crackdown.

Revenue Minister Todd McClay says the Government wants to see what other countries do first and a discussion document on the issue, due before Christmas, has been delayed until next year.  Read more »

Guest Post – Lindsay Mitchell on Working For Families

WFF

Yesterday I blogged about a reader’s experience with Working for Families. I asked Lindsay Mitchell, being an expert on welfare, to write a guest post about it.

“My husband earns a low salary, it’s a family choice we make because he works for a charity that supports people in poverty to lift themselves out.  He loves his job, it’s very rewarding.

I was recently offered some work, a small part time job.  I am a SAHM of two little ones.  I knew that some of our working IRD tax credits and WINZ benefits would drop but when I did the calculations I was staggered.  For every dollar I would earn I will lose (in tax or via drop in funding) 70 cents in the dollar.    

It was a disheartening discovery.”

Labour’s 2005 Working For Families vote-buyer began the process of transferring annually $2 billion plus of taxpayer money to families with children. Their incomes were boosted and greater lifestyle choices were also enabled.

Whale Oil’s  correspondent illustrates this. WFF allowed her husband to choose spiritually rewarding work over economically rewarding work. That choice came with a sting though. Financial assistance – or tax credits – has to cut off at some point. If the total family income rises through either her taking a job, or him getting a rise or working more hours,  a high ‘effective marginal tax rate’ will be incurred. A substantial portion of any extra earnings will be lost

What would a WFF system that let them keep 70 percent of extra earnings look like? One that cost a lot more than $2 billion! One that would impose higher taxes on, amongst others, the childless.   Read more »

Useless subsidises bugger up housing market in Australia

Subsidies are evil, they suck cash and they almost never work as intended often distorting the market terribly.

Beware of any politician who thinks subsidies are a solution. Especially for affordable housing.

High-income earners are the overwhelming beneficiaries of government support for housing, a report has found, turning on its head the popular perception that low-income Australians get the greatest subsidies through rent assistance.

”Only 25 per cent of renters get any support from the government,” the cities program director at the Grattan Institute, Jane-Frances Kelly, said. ”They get none of the support that homeowners get. Even landlords get more.”

The report, Renovating Housing Policy, found homeowners received $36 billion a year in government subsidies, landlords about $7 billion and renters less than $3 billion.  Read more »