Public economics

The lunatic left all promote a ‘Robin Hood’ tax, aka a Tobin Tax or Financial Transactions Tax. Matt McCarten, himself a stranger to paying tax, even promoted it in the Herald on Sunday.

The problem with such a tax is that it doesn’t work, and it has been tried before with disastrous consequences..

James Tobin, a Nobel-prize-winning economist and disciple of Keynes, first proposed the idea of a global transactions tax—on foreign exchange—in 1972. This newspaper has regularly criticised it on two counts: it would be unworkable unless all governments signed up to it (and perhaps even if they did); and a levy would harm the liquidity of financial markets, making asset prices more volatile. Now there is a third, equally valid objection: that a Tobin tax is a poor solution to the problems in banking—too much leverage, too little care taken in assessing risks and banks that are deemed too big to fail.  Read more »

Matt McCarten has a column in the Herald on Sunday where he claims his budget would do the trick. What would he know about budgets, he doesn’t even pay his taxes, or even file his tax returns.

There is a slight problem with Matt McCarten suggesting any sort of budget…he can’t even run his own union, stealing PAYE and Kiwisaver contributions which as far as I know he hasn’t yet paid back. If we all ran our households and businesses like Matt McCarten runs his union there wouldn’t be a cent in tax for him to spend in his budget.

A real game changer would be to get all tax cheats like Matt McCarten and lock them up in a debtors prison, until they cough up what is owed. Until he pays what is owed Matt McCarten should really shut the fuck up.

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Helen Clark’s government forecast a decade of deficits…National arrested that. In Australia Julia Gillard is similarly facing a decade of deficits despite promising many times to balance the books. Predictably the Liberals have attacked.

Australia faces a decade of budget deficits with the annual total set to pass $60 billion in 2023 unless governments take tough action to “share the pain”, an expert panel has warned.

The Grattan Institute’s assessment comes as Treasurer Wayne Swan confirms the budget has taken a $7.5 billion hit since the midyear update in October.

He told the ABC from Washington: “We have seen the terms of trade come down but the dollar didn’t move. That’s caused a hit, if you like a sledgehammer, to revenues in the budget since the midyear update of something like $7.5 billion. And of course the impact won’t just be in this financial year. It will also be across the forward estimates.”

The institute says that while notionally on track to surplus now, the combined state and federal budget deficits should reach 4 per cent of gross domestic product by 2023, which is about $60 billion in today’s dollars and would be about $100 billion in 10 years’ time.

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The more I look at the video of David Shearer’s Q+A interview the more I think it was a train wreck.

Far from providing clarity on any issues or any policy in fact it clouded anything and raises the possibility that he certainly doesn’t know what he is talking about.

Take his answer on capital gains tax:

We’re not putting our money in the profitable sector; it’s going into the property market because we don’t have a capital gains tax that will help us direct money into those areas. And if you’re wanting to raise money, then at least put money into businesses- invest in businesses through the incentives of capital gains, and that brings, obviously, money into the government as well.  Read more »

“The MPs from NZ First, Labour, and the Greens have all pledged not to buy Mighty River Power shares to demonstrate their opposition to the sale.”

All very well, but let’s see how far the sanctimonious behaviour stretches.

Will they be moving their funds from their current KiwiSaver provider, if their KiwiSaver provider does the rational and intelligent thing by buying a stake in Mighty River Power?

Let’s remember the fuss the Greens have raised about the NZ Super Fund and ethical investing.

It would be nothing but hypocrisy for them to profit from Mighty River Power through investing in a subsidised fund, using a taxpayer subsidised Kiwisaver scheme for them to buy state owned assets.  Read more »

APN/The Herald have an article covering that Apple NZ paid 0.4% tax on TURNOVER of $541 million – a story pushed by Labour and David Cunliffe.

Apple’s New Zealand division made sales of $571 million last year but paid only 0.4 per cent of that in tax.

Labour’s Revenue spokesman David Cunliffe said that’s akin to paying nothing at all, and letting a corporation get off “scott free” is something New Zealand taxpayers shouldn’t have to stomach.

Apple’s New Zealand sales topped the half billion dollar mark in 2012 after rising to $414 million in 2011, according to its financial results for the 12 months ended September 29. Apple is the world’s biggest tech company and makes iPads and iPhones.

Its local unit recorded a tax paid profit of $5.5 million in the year, down 40 per cent from its 2011 earnings. Income tax fell to $2.5 million, amounting to 31 per cent of pretax earnings, from $5.1 million a year earlier.

Nowhere in the story does it state want percentage of profit was paid in tax. The story seems to be pushing emotion while being light on facts and data.

But since APN think tax should be paid on turnover I thought I’d check what they paid. After all if you are going to point the finger at other corporates you had better be a corporate citizen than they are.  Read more »

Governor Bobby Jindal at the Republican Leadership Conference in New Orleans, Louisiana. (Photo credit: Wikipedia)

Could it be possible…no income taxes at all? Bobby Jindal thinks so:

Governor Jindal has unveiled a specific proposal.

The plan will eliminate two major tax types: personal income tax and corporate income and franchise tax. Eliminating income taxes in a revenue-neutral manner and improving sales tax administration will dramatically simplify Louisiana’s tax system and reduce administrative problems for families and small businesses. The effective start date of the program is January 1, 2014. …The plan will ensure revenue neutrality by…[b]roadening the state sales tax base and raising the state rate to 5.88%.

This is a superb plan.

Of all the possible ways for a state to generate revenue, the income tax is the most destructive.

That’s why researchers consistently have found that states without this punitive levy grow faster and create more jobs.

It’s also worth noting that jurisdictions such as Monaco, Bermuda, and the Cayman Islands manage to be very prosperous in the absence of an income tax, though the incredible wealth of these places is partly a function of bad policy elsewhere, so the comparison isn’t perfect.

Anyhow, Gov. Jindal expands on this research with some very powerful data.  Read more »

Labour has as one of its core policies that they will lift the minimum wage. The green taliban support that as well and if they have their way would lift it even higher.

Perennially the politicians of the left clamour for the lifting of the minimum wage claiming that it will lift workers out of poverty…of course they ignore the fact that the minimum wage is far higher now than it used to be and yet the workers at that level are still poor relatively. They are allowed to get away with it because right thinking politicians have poorly thought out rebuttals for the [il]logic of the left.

Worse still National had Kate Wilkinson as labour minister for a time, and she was overly sympathetic to union demands.

The same call is being made in the US to lift the minimum wage and Evan Soltas at Bloomberg says that must be resisted…and goes further and proposes an alternative to the minium wage…an extension of the modification of our Working for Families, but with much more aggressive abatement regime.

Liberal arguments for increasing the minimum wage have a fundamental flaw: They restrict the set of policy choices to either a minimum wage increase or doing nothing. That means they overlook the single most important federal policy for the poor: the Earned Income Tax Credit.

The EITC is a measure in the federal tax code to support the living standards of the poor without creating a “welfare trap” by diminishing the incentive to work. Economists widely consider the credit a success for reducing poverty while increasing employment.  Read more »

You would think that people around the world had looked at the pending financial doom of western democracies mired in locked in welfare wouldn’t you?

Not India, they are hell bent on driving down the same dusty road of welfare:

The Indian government is handing out cash to the poor as part of a phased rollout of a scheme designed to replace some 30 welfare programmes. Initially 200,000 people in 20 districts will receive the money, but the government plans to cover the whole country by the end of 2013.

“Nothing less than magical, and a game changer for governance” is how India is selling the ambitious scheme in which an estimated 90 million households stand to receive around $58bn in cash.

Those living below the poverty line will receive between $542 and $723 a year.

Welfare isn’t magical…it created shackles worse than slavery.

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The Huffington Post article on Canada that I blogged earlier is fascinating…we have already looked at the role of big government in stuffing everything up and then attempting to fix it.

But what about the role of debt:

Governments must lead by example when managing their own debt and spending. Low debt is the result of low spending. Federal government spending as a share of the overall economy is 15 per cent in Canada (2) and 24 per cent in the U.S. (3). The numbers are not merely the result of prodigious U.S. military spending, though that is certainly a factor. Non-military federal government spending is 14 per cent of Canada’s economy (4), and 18 per cent of America’s (5).

Just as cause equals effect, spending equals debt. Net government debt as a share of the Canadian economy is 36 per cent. In the U.S., it is 83 per cent. America’s gross government debt is now bigger than the entire U.S. economy. According to the U.S. Treasury Department website, Mainland China holds $1.1 trillion of it. To quote Mark Steyn: “If the People’s Republic carries on buying American debt at the rate it has in recent times, then within a few years U.S. interest payments on that debt will be covering the entire cost of the Chinese armed forces.”

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