tax

ᔥ NBR.co.nz

Rodney Hide has a great column in the NBR. These are his comments about the Cullen Fund:

The previous administration invented the pretend policy of having a giant government piggy bank to pre-fund future payments. Journalists understand the concept if not the practice of a piggy bank and bought the policy without hesitation and without a thought.

Political success

They wrote the policy up as though it made a difference. Finally, they wrote, someone has done something to fix the problem: future pension payments are to be pre-funded.

The policy has proved a great political success even though it serves no useful public purpose. The $20 billion fund doesn’t change the cost of pension payments one bit. It just ever so slightly shuffles a very small part of the cost forward.

Besides, if the government knew how to invest money to make a buck there would be no need for tax. The government could earn its own money. That we are still taxed suggests the government’s investment skills are no better than the rest of us.

But here’s the thing: Both National and Labour now agree that borrowing money to sink into the Cullen Fund is dumb. But why are we even borrowing money when we have the fund?

There’s $20 billion in the Cullen Fund. That’s twice what the government hopes to make selling off half a stake in power companies and Air New Zealand.

The same logic that sees payments to the Cullen Fund suspended should see the entire fund on the block. Getting rid of the pretend policy would also focus minds on the need for the real policy.

The trouble is politicians have been pretending for so long that the Cullen Fund serves a useful purpose that they now can’t sell it.

But at least it’s easy to see what New Zealand will look like in 20 years: just look at Greece now.

ᔥ The Telegraph

An interesting Telegraph article from Philip Johnston about the morality of lower taxes:

The moral, and Conservative, case for lower taxes is that they allow people to make their own decisions, to save when they wish, to give if they choose and to spend on what matters to them. Tory politicians should not be ashamed to talk about cutting taxes, because high taxation removes the need for individuals to take responsibility for their own lives and heightens cynicism about the ability of the government to deliver. The point of the beer/tax story is that a Robin Hood tax system of the sort envisaged by Cardinal O’Brien will harm those who create the wealth and jobs, without which there are no services for the less well-off.

The Cardinal is right to recognise the moral dimension to taxation; but it cuts two ways. Yes, we should be prepared to render unto Caesar what is Caesar’s, but it is incumbent upon Caesar to ensure the money is properly spent; and while that was certainly not true of the appalling Tiberius in Jesus’s time, neither is it true today. Taking people’s earnings to spend them wisely in the interests of the common weal, however defined, is one thing. Squandering them is quite another. Each year, billions of pounds are taken in tax for programmes that by no measure can be justified in the public good, while at the same time the individual’s right and duty to choose is restricted. That’s immoral.

ᔥ The Spectator

This article in The Spectator is about Sweden’s Finance Minister Anders Borg who confronted the recession by cutting taxes across all income groups to prevent the wealthy leaving Sweden, refused a big stimulus spend up  and has been working to move Sweden away from a high tax, high regulation system and create smaller government including cutting welfare payments.

His advice, ‘Keep on dealing with the deficit, because deficits destroy everything else.’ Similar to National in New Zealand he was criticized for allowing tax cuts to the wealthy and yet the Financial Times recently declared him the most effective finance minister in Europe.

Interestingly we don’t hear much about Sweden from Labour despite it’s success at dealing with the global recession.

‘Everybody was told “stimulus, stimulus, stimulus”,’ he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fuelled spending splurge. Borg, an economist, couldn’t work out how this would help. ‘It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem.’ Non-economists, he says, ‘might have a tendency to fall for those kinds of messages’.

He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. ‘In most cases, the company would not have been created without the owner,’ he says. ‘There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden.’

But they were not rich, I say, when they were starting out. ‘No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion. But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation.’

The Conservative took a hit politically for giving tax cuts to the rich, but interstingly the tax cuts across the board had spectacular results:

Tax rates would be cut for workers, and welfare cut to pay for it. High welfare levels, he says, can inflict cruelty in the name of compassion. ‘People emigrate from the labour market. Unemployment traps capture a lot of people in social exclusion.’ Tax cuts are not spoken of as an ideological aim, but as a tool to cut unemployment and advance social justice.

What even Borg did not expect was that his tax cut for the low-paid would increase economic growth so much that it has almost entirely paid for itself. Borg had created something that Osborne’s critics say does not exist: a self-financing tax cut. ‘There was some criticism at the time that we were borrowing to finance tax cuts,’ he says. But Sweden could do it, because it was expecting to return to surplus soon; Britain has no such luxury, he says. His main advice to Osborne is: ‘Keep on dealing with the deficit, because deficits destroy everything else.’

National is trying to return to surplus and Labour insists on spending even more. AS Anders Borg says deficits destroy everything else.

ᔥ The Telegraph

David Shearer is a big fan of Finland, other Labour politicians love cherry picking scandanavian countries to prove obscure political points about how crap new Zealand is and how we would be all so much better off if we would just follow those countries examples.

New Zealand is not unique in having socialists gaze lovingly at other countries. In the UK Polly Toynbee has similar aspirations:

We’re all aware of Polly Toynbee, doyenne of the Guardian’s comment pages and conscience of the nation. It’s true that she comes in for a bit of stick at times, but I think it’s time we started to take her more seriously. Indeed, time that we create the sort of society she desires. Which is, as she tells us this morning, the following:

I want Britain to aim for the social and economic balance that thrives in Nordic nations.

Excellent! Let’s change policy to achieve that laudable aim. We should copy the Finnish education system, for example – it is, after all, the number one such system in the world. There they divide into academic and vocational at 16 and there’s none of this nonsense that all must go to university – that’s reserved for the small fraction that are indeed academic. Or the Swedish system of education vouchers. Parents decide on the school they want children to go to and the local council stumps up the fees – whether it’s a public or private school.

From Denmark we’ll take a couple of policies. Privatise the ambulance and fire services certainly. They’ve been working well there for nigh on 90 years. We’d want their taxation system as well: the national income tax is 3.76% and the top national rate is 15%. True, total income taxes are high but the rest is levied by the commune, a political unit as small as 10,000 people. At that scale, taxation is subject to the Bjorn’s Beer Effect. If you know that it’s Bjorn who levies your taxes, Bjorn who spends your taxes and also know where Bjorn has his Friday night beer, then he’s going to spend your money wisely. Otherwise he can’t go out for a beer on Friday, can he?

From all of them we’ll take the abolition of the national minimum wage, for none of the EU Nordics has one.

Sweden has also abolished inheritance tax, gift tax and the wealth tax. Those sound like three excellent ideas to copy.

ᔥ NY Times

Bruce Bartlett explores simplifying taxes and making them easy:

 One idea is to do what Gen. Douglas MacArthur did during World War II — bypass enemy strongholds, leaving them isolated and relatively harmless.

Prof. Michael Graetz of Columbia Law School has proposed what I believe is a MacArthur-like solution to tax reform. He would abolish the income tax for the vast bulk of Americans and replace the revenue with a 12.5 percent value-added tax. People would pay their taxes when they buy things and wouldn’t need to worry about keeping records or filing tax returns at all.

The brilliance of the Graetz plan is that no tax expenditures need to be repealed. He would simply give every family a tax exemption of $100,000, which would eliminate the income tax for 90 percent of those now filing returns. For lower-income people who currently have no net income tax burden or who earn an income tax credit, Professor Graetz proposes a rebate (too complex in its details to spell out here).

The current income tax would be retained with a top rate of 20 percent to 25 percent only for those with incomes above $100,000.

Obviously the US has a more complex tax code than here, but it is a far simpler way of doing it than the current ridiculous Working For Families tax subsidies.

From the UK is a perfect example of why high tax tares are silly:

The amount of income tax paid fell sharply last month in the first formal indication that the new 50p higher rate is not raising the expected amount of revenue.

The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.

Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.

The self-assessment returns from January, when most income tax is paid by the better-off, have been eagerly awaited by the Treasury and government ministers as they provide the first evidence of the success, or failure, of the 50p rate. It is the first year following the introduction of the 50p rate which had been expected to boost tax revenues from self-assessment by more than £1billion.

Tax cheat Matt McCarten has the temerity to abuse politicians as being maths challenged.

This from the man who cheated the tax payers by failing to pay the PAYE of his employees.

Who is the one who is maths challenged, huh?

Len Brown is releasing a paper today on ways to fund his pet project, the rail loop.

Here are the proposed options:

• General rates – increasing rates.
• Targeted rates – rates to pay for specific projects.
• Development contributions – charges on new property developments.
• Regional income tax – new income tax paid only by Aucklanders.
• Regional payroll tax – new income tax paid by Auckland employers.
• Regional GST – raising GST in Auckland.
• Tax increment financing – tax on increase in property values from transport services.
• Regional fuel tax – raising petrol and diesel taxes across Auckland.
• Tolling new roads – charging for new roads.
• Tolling existing roads – charging on all roads or just congested roads.
• Carparking charges – increasing carparking fees.
• Visitor taxes – nightly charge for hotel and motel rooms.
• Airport departure tax – increasing departure tax on international flights.

Every single one of them is about increasing taxation and spending even more than his profligate council already does. Len Brown says that “there are those in government that would be reasonably amenable” to increasing taxes on Auckland’s population….I challenge Len Brown to name three.

There is not a single option for reducing our rates, or reducing council expenditure in other areas and there is not a single option fo0r charging existing customers of public transport increased fares for the allegedly superior service hey would enjoy from Len’s train set. Another option would be to reduce transport subsidies on fares and re-direct that into his pet projects.

It is a classic case of picking the pockets of other people to funds socialist pipe dreams. Len Brown is trying to box the government into a corner, what will happen is he will get his ears boxed.

Matt McCarten blurts out another anti-capitalist rant in today’s Herald on Sunday. But he finishes up with some breathtaking hypocrisy:

Twice as many children grow up in poor families now than in the 1970s and 80s, so the disparity will get even worse.

The solution to the poverty gap is for the state to raise enough taxes to fund schools, hospitals and housing. Then have economic policies and industrial laws that aim to create high-waged jobs.

Instead, our economic model requires the opposite. It seems it’s now a crime for a worker to have well-paid full-time job. Just look at the waterfront.

The solution for the problem of not enough taxes is for people like Matt McCarten to actually pay their taxes rather than steal employees PAYE. If people like Matt McCarten actually paid their taxes that were due I think we would find we would be a whole lot better off.

hat tip Heine

People like Phil Goff, Gareth Morgan and Selwyn Pellett like to tell everyone that the rich need to pay higher taxes. That higher taxes will solve all our problems. The thing is they arrange and structure themselves so that they don’t practice what they preach.

The next time Phil Goff talks about the wealthy paying more taxes why don’t reporters ask him if he would voluntarily do so if National won the election and kept tax rates the same.

In the US taxpayers can voluntarily pay more tax by filling out a simple form. Watch what happens when someone goes up to the US equivalent of Selwyn Pellett and asks them to pay more taxes.

Two dozen “patriotic millionaires” traveled to the national’s capital on Wednesday to demand that Congress raise taxes on wealthy Americans.

The Daily Caller attended their press conference with an iPad, which displayed the Treasury Department’s donation page, to find out if any of the “patriotic millionaires” were willing to put their money where their mouth is.