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Last Updated: Aug 15th, 2008 - 11:26:43

Newsletters : 2005 Newsletters : 9 September 2005
Thought for the Day


Socialism is about giving people what socialists think is good for them.

Brian Walden
British Journalist
Sydney Morning Herald 1986
Sep 9, 2005, 14:37

 Newsletters : 2005 Newsletters : 9 September 2005
Some Issues in the Current Tax Debate

Roger Kerr has some important things to say about taxation in this latest report from the Round Table:

Economic growth is the tide that lifts all boats. The potential of spending and tax reform (and other pro-growth policies) to increase living standards swamps feasible gains from income redistribution.

As Robert Lucas, the 1995 Nobel laureate in economics, has put it:

"Of all the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution … [O]f the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor. The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production."

The tax policy put forward by the National Party in the context of the 2005 general election is consistent with the principles of the McLeod Review to the extent that it is growth-oriented (it seeks to reduce the overall burden of taxation, and it creates a long income range – $12,500 to $50,000 – that would be subject to a flat 19 cent marginal rate, thus increasing incentives to be productive). However, it focuses on threshold adjustments not rate reductions, and it does not involve immediate cuts to the top personal and company tax rates (which are most important for growth).

The government’s Working for Families package, on the other hand, is focused on income redistribution, not growth, and indeed will harm growth by raising the average effective marginal tax rate for those affected by it.

The full report is well worth reading but here is a summary of the findings:

• The ratio of government spending to GDP is the best measure of the overall tax burden, as deficits and surpluses tend to balance out over time and most of what governments spend must be raised in tax.

• OECD estimates for 2004 indicate New Zealand’s spending ratio of 38.7% is higher than that for Australia (36.2%), Ireland (35.8%) and the United States (35.2%), and it is much higher than for the dynamic countries of the Asia-Pacific region.

• Independent analysis confirms that, over the whole of the income range up to $100,000, single income New Zealanders pay more income tax than Australians.

• Government spending in New Zealand is much higher than what is needed to fund core public goods and social safety net.

• The deadweight costs of raising an incremental dollar of tax are around $1.50, meaning that to produce a net gain in welfare, $1 of marginal government expenditure must deliver a benefit of a least $1.50; otherwise it is best left in taxpayers’ hands.

• High levels of government spending and taxation harm economic growth. At present levels, the government’s ‘top priority’ goal of returning New Zealand to the top half of the OECD rankings is not in sight.

• The Business Roundtable favours the introduction of tax and expenditure limitation (TEL) rules into the Public Finance Act, and more rigorous processes to control government spending.

• The 2001 McLeod Tax Review recommended moves towards a lower, flatter tax scale. The Business Roundtable advocates a top personal and company tax rate of 25%.

• Changes to high marginal tax rates (including those created by the Working for Families package), rather than adjustments to tax brackets, should be the priority in the interests of rewarding productive effort and fostering growth.

• The whole economy benefits from cuts to high tax rates, not just those who are immediately affected.

• Tax cuts are partly self-funding. Lower taxes mean faster growth and, over time, more revenue for the government.

• Recent tax policy changes have made the tax scale more complex and costly to administer.

• A well-designed programme of tax cuts is not inflationary.

Sep 8, 2005, 10:35

 Newsletters : 2005 Newsletters : 9 September 2005
The Economics of Self-Ownership
Libertarianism builds upon the self-ownership axiom. But why is self-ownership right (and just)? How do we justify the self-ownership axiom?

Mankind's choice is clear: self-ownership or non-self-ownership. With self-ownership comes individual flourishing, free markets, cooperation, and learning. Without self-ownership comes suppression of the individual, controlled exchange, greater conflict, and a dulled spirit. Without self-ownership comes a regimented society.

This is an interesting discussion of the theories of Libertarianism as a basis for rational economic systems. A bit "academic" but a good read this provides us with a basic principle with which to judge political parties.
Sep 7, 2005, 15:02

 Newsletters : 2005 Newsletters : 9 September 2005
Letters to the DomPost
The Editor,
Dear Sir,

I see from your article in today’s paper that over the last 6 years our annual health spending has gone up by 50% or $3,200,000,000 and that we still have waiting lists the same length and a waiting list to get on The Waiting List.

Because we cannot get our operations done when needed under this government run system 1,200,000 citizens spend extra money for health insurance. This costs around $1000 per head for a comprehensive cover with small excess ($600). Families and groups would get further discounts. If the government was to pay for health insurance for all remaining 2,800,000 citizens this would cost about $2,800,000,000.

Logic will give all New Zealanders private health insurance and we would not even have a waiting list but socialist ideology refuses this simple concept and condemns 2.8 million citizens to the vagaries of the waiting list.

What is the point of a healthy growing economy when so many of us are condemned to take our chances on The Waiting List.

Yours sincerely,
Phil Scott


This letter remains unpublished at the DomPost.
Sep 6, 2005, 11:56

 Newsletters : 2005 Newsletters : 9 September 2005
The Labour Government’s Socialist Agenda
BEWARE - POLITICAL POLEMIC. MAY DESTROY YOUR MIND.

This week Newman Online (ACT Party) looks at how the Labour Government is turning New Zealand into a socialist state with its rules and regulations and questions whether Kiwis will realise before it’s too late.

I have thought for a long time that this was Labour's goal and thought that most people would think so as well. When we look around the world and see what socialism has done and is doing to countries then it seems like a very good idea not to go down the socialist route.

Now this is an item from the ACT party so we should understand the ideological bias, but it says some very important things that we should all consider if we are concerned about the future of New Zealand.

How do you picture the New Zealand of 2020 or 2050? Will it be a country that retains its expensively educated citizens? Or will they be heading off to Australia?

Will socialism get us to this ideal? Or do we need a new concept for creating what our citizens want?
Aug 20, 2005, 13:59

Can we fix it?