Tuesday, August 28, 2012

Shocking Unemployment Figures revealed!

Over the last few months we have had more evidence of the growing inequities that exist in New Zealand society. We have had the release of the NBR rich list which has shown that New Zealand now has a considerable group of very rich people who, for the most part, have suffered little from the world's economic down turn. The collective wealth of this group is considerable ($52 billion for the top 100) and, with a fortune of over $50 million, Prime Minister John Key doesn't even make the top 150. Most are still seeing steady increases in their wealth over and above the 20% average increases recorded last year.

When the government decided to reward our wealthiest with tax cuts, it not only reduced the tax take by an average of $2 billion a year since, but put the tax rate for upper earners below Australia's. It is generally accepted that a large proportion of our wealthy generate their income through untaxed property investment and most of them would be investing in property to some extent. It has been estimated that around 40% of the income for our richest New Zealanders, on average, is derived through property investment. When you take into consideration the amount of income that is untaxed it becomes clear that the overall ratio of tax to income for the rich would probably be far less than the average tax payer. It was also rather shocking to hear the other day that 50% of our richest New Zealanders practically pay nothing. Although their total wealth may be in the tens of millions, few declare an annual personal income greater than $70,000. Many avoid tax through family trusts and, even though these are now taxed more than they once were, trusts are still regarded as an effective way of avoiding personal tax and protecting fortunes from losses through litigation.

At the same time as we have learned more about our most financially privileged we have a growing understanding of the extent of poverty in New Zealand. Even though Paula Bennett refuses to accept any official poverty line it has been widely accepted that a least 20% of our children live in relative poverty, where the basic necessities of life (food, healthy home and appropriate clothing) are not guaranteed.

We have seen the average family income increase but closer analysis reveals that the increasing wealth of the rich has lifted the average and the mean has actually dropped. Maori and Pacifika families have suffered the greatest drops with Maori families losing $40 a week over the last four years and Pacifika Families, $65.

We have comforted ourselves to a certain extent by the thought that our unemployment levels have not reached the excesses of other OECD countries, where around 20% unemployment is a reality for some. Our recent rise to 6.9% unemployment still seemed reasonable in comparison until Roy Morgan produced statistics that are a little different from the official Government figures, while they accept there has been some growth in employment the true extent of our unemployed has not been properly recognized. Rather than hovering around the 6% level the reality is actually 3 percentage points higher and we currently have 9.1% unemployed and a further 9.6% that are underemployed. This means that almost 20% of our workforce, or around 470,000 people, are not able to find full-time work. Of course this doesn't include those who are in full-time work but on the minimum wage (many are now included in the growing numbers of "working poor" who still need financial assistance to survive).

It seems extraordinary that this government has focused heavily on reducing expenditure on benefits and other areas of social support when the need for it has increased. The reason for the cuts in government spending is largely due to a reduced tax income and yet little has been effectively done to deal with the avoidance of tax from those who should and could pay more. In fact this National led Government is deliberately shifting our nation's wealth into the pockets of a few and has callously ignored the growing struggle for most New Zealand families and the damage being inflicted on a large number of our children. They continually use the economic crisis and the Christchurch earthquake as an excuse for their lack of income and increased borrowing and yet the top ten percent of our income earners have never had it better.


Shane Pleasance said...

So what would you do, Dave?

What would the Greens do?

bsprout said...

Simple, Shane, close up the tax loopholes for the wealthy. introduce a capital gains tax that Australia and most other countries have, increase the minimum wage so that there is more money in the domestic economy, extend the home insulation scheme and introduce minimum standards for rental houses that includes isolation, invest in the construction industry through training schemes and building more state housing to lift capacity for the Christchurch rebuild, this will provide jobs and lessen the need to import workers. Cut spending on motorways and reinvest in rail, spend more on R&D (we spend less than most countries in this area. Pure Advantage had some excellent ideas for building business and export capacity also this: http://www.greens.org.nz/sites/default/files/gp_jobsbooklet_20final.pdf

bsprout said...

not "isolation" above, should read insulation.

Anonymous said...

A capital gains tax without exclusions?

bsprout said...

The family home is generally accepted as an obvious exclusion, but this would have to be well thought through as people could still use this as a potential loop hole to continue over investment.

Shane Pleasance said...

Thank you. How do you define 'wealthy'?

Armchair Critic said...

I think that perhaps most people are too keen to argue the semantics and ignore the temporal aspects. Beneficiaries may have paid much more in tax than they ever receive in benefits. While they may well be taking more than they receive when they are on a benefit, it is unusual for it to have always been that way. Nor is it certain to be that way into the future; people and their circumstances do change, often for the better. Especially when they start from a low base.
The same argument applies to tax. There are plenty of people who are wealthy. As they are taxed on income, it is quite possible that they pay little tax due to their low income. Taxing wealth would be one way to address this, however it is not part of the current system. And since the principle of taxing income and profits has been around for years, the wealthy have either paid their tax or cheated on their taxes, in the past.
The solutions, as I see them, to the issues you raise are quite radical.

bsprout said...

Shane, wealth is relative and I'm sure there are many possible definitions of wealthy. I am using the term broadly in reference to those described as wealthy in the articles I have linked to in past posts.

bsprout said...

Armchair critic, truly fair taxation is problematic I agree. There will always be loopholes and problems with consistency and fairness, but I guess the best that we can do is to deal with the most obvious anomalies and loop holes first and then attempt to address the more difficult ones as we can. As Shane suggests defining wealth and what can be reasonably taxed may not be easy.

Means testing has often been suggested as an answer for granting different benefits but the bureaucracy and costs involved in establishing wealth can sometimes be uneconomic. The same may be true when attempting to tax wealth, but it is definitely worth looking at.

Anonymous said...

"The family home is generally accepted as an obvious exclusion, but this would have to be well thought through as people could still use this as a potential loop hole to continue over investment."

Given that most (if not all) families with homes will benefit from a capital gain, a universal capital gains tax will reduce the costs of managing the tax collection if it is paid by all capital gainers.

Shane Pleasance said...

It may seem I am being pedantic, but use of words like 'the wealthy' can have such emotional connotations, which I am sure was not your intention.

So, assuming sensible economic policy can only be wrought from fact and a sound ethical base, do you think it is worth being more precise?

If I inherited my wealth, should I pay 'more'?

If I have lots of assets, should I pay more?

If I earn a lot, should I pay more?

Is it worth me having assets or income if I pay more?

Would it be better if the wealthy earned less and the poor more?

Is it only the Greens that can protect me from my own evil?

By what ethical basis do you hold the right of the use of force?

bsprout said...

Shane, I'll answer with questions of my own:

If people inherit wealth (not earned through work or their own input), and pay no tax on that, are the already wealthy capturing wealth and denying access to that by hard working, less fortunate people?

Farmers often have large assets but low income, this means minimal tax during their working lives while their asset grows in value. At the end of their working life they can then sell the farm and live in retirement as millionaires. They can also borrow on their asset and live a good life style and if the farm grows in value it counters the cost of borrowing. Is this fair?

One of the current problems is that although higher incomes are taxed more, clever accounting, the use of trusts and the lack of a capital gains tax, means many wealthy actually pay less tax in relation to their total income than the average person. Is this fair?

I am not aware of any wealthy people who had had their wealth taxed out of them, in fact the opposite is the case at the moment. Do you have evidence to show otherwise?

I think many jobs are currently over valued currently in terms of remuneration and many are under valued. The average CEO earns over twenty times their average workers income, in the US it is approaching 400 times from memory. The gap is rapidly widening. Do we not need greater balance? is the CEO of Fonterra worth hundreds of dollars every time he blinks? Should an elderly care worker earn a living wage?

Isn't any Government's job to create legislation that enables protections from abuses of power resulting from greed. Should the annual incomes of the NZ CEOs of government ministries be well over 500,000 a year while their departments have jobs gutted? Whose job is it to stop excessive salaries and to ensure a spread of money through a workforce?

I find your definition of force is not the same as mine, Shane, I don't call taxation force, just like I don't think road rules are abusive.

Armchair Critic said...

I believe there is no such thing as a truly fair tax system. The basis for this belief is that there will always be someone who believes that any particular tax system is unfair, and justifiably so. I include in this the absence of a tax system.
From this base it seems to me the best course is to implement the least unfair tax system we can find.
But that's all way off my original point, which is that people who are labelled as being non-contributors, either in terms of receiving a benefit or paying tax, have probably "pulled their weight" in the past or will do so in the future. Examining their current circumstances is usually quite unhelpful and misses the wider point, the brighter future.

Shane Pleasance said...

"If people inherit wealth (not earned through work or their own input), and pay no tax on that, are the already wealthy capturing wealth and denying access to that by hard working, less fortunate people?"

So someone being wealthy is denying someone else wealth?

bsprout said...

Shane, monopolies, by their very nature generally remain monopolies because they are able ride over any potential opposition. Wealthy families can be the same and often there is a connection between the two. In the most unequal countries there is less economic mobility, and often despite hard work and good qualifications. The richer families generally pass down their wealth to their children and this also includes influence. There is probably not an intention to deny wealth to others but to keep wealth to themselves, however the effects are the same.

A telling example of this was a recent documentary about some celebrities and successful business people who were left to live on the streets with no money. An entrepreneur thought that his confidence and skills would allow him to easily lift himself off the streets but he quickly discovered that regulations, laws and perceptions of him as a street person threw too many barriers for him to overcome. There wasn't a level paying field.

My children have discovered that when getting a job it is not generally your skills and qualifications that most increase your chances but who your parents know. The well off look after their own.

Obviously there will always be exceptions but generally speaking if your parents are rich you will be and if your parents are poor then it is much harder to improve your financial status.

We are rapidly heading the way of the US: http://www.tnr.com/article/politics/magazine/100516/inequality-mobility-economy-america-recession-divergence

New Green said...


What really worries me about voting Green is exactly the kind of thing you are doing here. I have seen it right through your blog - simple direct questions - and you obfuscate.

You obfuscate because you draw on old Marxist thinking and capitalise on rhetoric and voter ignorance.

You are being challenged on some of your underlying philosophies - intelligently and politely.

You are like escaped mercury - try to pin it beneath your finger and it has gone.

Is this because you are stupid, lazy or immoral?

Can you back your own blog posts up with fact - rather than emotive, politicking hogwash?

We have to get our act together and present credible arguments backed up by fact and driven by good and intelligent people.

You seem to offer neither.

I cannot vote National anymore - I would love to vote Green because we have just this one earth.

It is too important to be left to the likes of dull witted; people & success hating licentious people like you.

Shane Pleasance said...

Ok so we will set aside the question of 'the wealth pie'

If you suggest that monopolies are bad, what about the government monopolies held in health, policing, education, etc?

bsprout said...

Heaps of charities already exist that support children but the money isn't guaranteed and there are a lot of costs and staff involved in chasing donations.

There would also be a stigma attached to having to survive on "charity", it's very humiliating for many to have to ask for food parcels.

If we decide as a community that we value children and have a universal payment that goes to them all, it is cost effective and establishes a bottom line of support. Most families with young children struggle financially and the payment will also recognize the and support good parenting (rather than work another job it may allow some parents to spend more time with their children).

Shane Pleasance said...
This comment has been removed by the author.
Anonymous said...

Sounds like somebody needs to sit Dave down in a quiet room and gently explain basic economics to him.

bsprout said...

New Green, I would like yourself to be more specific in what you object to in my answers and hopefully provide a counter view. You accuse me of obfuscation, laziness, stupidity, immorality, politicking, being emotive and presenting hogwash. These are pretty strong accusations but I can't argue against them until I know what in particular they refer to.

bsprout said...

Shane in reference to the Government monopolies in health, policing and education, these are not commercial activities producing a product but public services. Please give me examples of where privatising these areas has been successful?

bsprout said...

Anonymous, there are different theories in how economies should be managed, what theory or economist do you support?

Shane Pleasance said...

Dave I am obviously a simpleton.

Help me out here.

1. So, monoplies in general are bad, but public service monopolies are good?

2. What piece of the government monopoly is good?

3. What constitutes a public service? (other than, in your opinion, health, welfare, education etc)

- The supply of food?
- Transport?
- Cleaning?

Where would you have it end?

New Green said...

Shane - please - stop it. It is like watching a cat play with a mouse.

I am still uncertain as to whether Dave is well meaning?

He is certainly economically illiterate, and without morals.

New Green said...

"New Green, I would like yourself to be more specific in what you object to in my answers and hopefully provide a counter view. You accuse me of obfuscation, laziness, stupidity, immorality, politicking, being emotive and presenting hogwash. These are pretty strong accusations but I can't argue against them until I know what in particular they refer to."

I am trying to be on your side.

Do you really think it is a good idea for me go to every detail to point out your failures?


If you cannot see you are a buffoon, pointing it out to you is probably going to be useless.

But, if you insist, I will go through point by point.

Say 'stop' at any time.

Or 'submit!'

*Greens, is this really the best you can drum up down here in Southland?* Honestly, you endorse this guy?

Carson had the where-withall to at least keep his mouth shut about things he knew nothing about.

bsprout said...

Shane and New Green, at least I am prepared to give an opinion and back it up with examples. I admit that I am no economist but I do find analysis from the likes of BERL and Dr Ganesh Nana on local economic issues to be authoritative and convincing.

Shane, I generally answer your questions but rarely get an answer from you. If you disagree that publicly provided education and health works give some example of countries where private provision is cost effective and provides consistent care. I am aware of none, please prove me wrong.

New Green, I will let you off from describing the endless examples of my baffoonery by asking you to list only five of my worst gaffes. I will steel myself to endure the inevitable onslaught and please don't hold back on the detail.

My recent thinking has been shaped by reading the likes of Raj Patel, Tim Jackson, Naomi Klein, Richard Wilkinson and Kate Pickett, and the likes of local economists Brian Easton and the thought provoking Gareth Morgan. Rod Oram has interesting business perspectives and I have found the report from Pure Advantage and the Round Table supported New Zealand Institute has useful overviews.

I would love to know what the two of you list as influences, I wait with interest.

Shane Pleasance said...

Dave, you are SUPPOSED to back your opinions up with examples - it is your blog.

As has been pointed out, I am genuinely interested in finding out what underpins your opinions.

I also think that you genuinely believe you when you do, you have answered my questions. Regretfully, when you do answer, your responses are often quite dogmatic, superficial or formulaic - routine socialist responses, ad nauseum.
I guess I am supposed to understand these. I do not.

A brief trawl through your blog will see several of my questions just hanging there.

I understand only first principles, and individual human rights.

I am therefore curious when you talk about rights and principles.

The non-aggression principle is an absolute moral value that underpins all my thinking.
it is not ok to use force, under any circumstances other than self defence.
The use of force, and that includes taxation, is uncivil, and every strongly emotive argument you might want to use may gain you huge, Mencken-esque support, but that does not make it right.

Dave, you are not debating a right-winger here. Those are not my values. I despise the Nats more than I did Labour!

I refuse to be drawn into your private vs public debates in all minutae. I am sure you are both right.

However, you do need to offer, morally, more of an argument than you do.
Sometimes it is like talking to a God botherer - I might suggest "Prove god exists!", to which you would counter: "Prove he does not exist!"

The time comes when one understands first principle of non-agression. If you are already there, that is good. The next step is to take responsibility for upholding it.

Not doing so is evil.

Armchair Critic said...

Hi Shane I am genuinely interested in understanding the link between taxation and force. It's an idea I've heard raised elsewhere and while it's not something I'm convinced on, I'd like to at least understand it from someone who can explain it from a NZ perspective.
Separately I would like to understand why you think aggression is justified in self-defense. You seem to hold some very black and white views, yet this very much blurs the lines.

bsprout said...

Shane, I prefer to have discussions rather than being interrogated. If I knew more about what you believe in I would shape my reply to suit. I have been a little guarded in my responses because you rarely answer my questions, especially the ones related to examples of Libertarian philosophies being practiced effectively.

Although I do have a philosophical base I am largely a pragmatist and would rather work towards achievable change based on existing realities.

As Armchair suggests you do appear to hold very strong, black and white views. My understanding of libertarian philosophy is that it is heavily based on the rights and freedoms of the individual, a good deal of trust that people will make good moral and ethical choices in the way they express that freedom without being dictated to by governments or lots of regulation.

You demanded that I give you some details about where monopolies are appropriate but I understand from your views on education that you prefer the private provision of many services and encourage competition and freedom of choice. It is difficult for me to justify spending time in explaining why this wouldn't work for the likes of education and health and easier for me to ask you where successful examples of your philosophy exist. I find it a little tedious to have an argument at a philosophical level because unless it can be proven in practice it is more or less just so much hot air.

You refer to taxation as an expression of force and a form of violence on the individual. I don't agree with that at all because a lot depends on the intention of the tax and how it is used.

Rates, for example are a form of taxation and I personally pay several thousand in rates a year. While I don't always approve of decisions made by our council or agree with many of their priorities, I do not complain about paying them because I feel I still get good value for money. Rather than worrying about organising and paying commercial providers for a range of services the council is able to do it at a reasonable rate. There are advantages in economies of scale and monopolies in providing public services. A city council's work is not determined by making a profit or providing dividends to share holders so that we have consistency in the provision of street lighting (as one example) across the city and at a cost that is much less than what could be provided privately. If we relied on private interests and competition the affluent areas would be well lit with attractive looking street lights and nothing in less affluent areas.

While they are not perfect, I have provided examples of states that are more heavily taxed, provide extensive public services but also support a high level of personal freedom and business competition that generally fit with my idea of what a good good governance could look like. Obviously I would also promote environmentally sustainable and socially responsible practices.

Again I ask, where are good examples of libertarian approaches that are being effectively implemented and what country operates in a manner that most closely fits your philosophy?

Here are the four principles that guide the Green Party:

Ecological Wisdom:
The basis of ecological wisdom is that human beings are part of the natural world. This world is finite, therefore unlimited material growth is impossible. Ecological sustainability is paramount.

Social Responsibility:
Unlimited material growth is impossible. Therefore the key to social responsibility is the just distribution of social and natural resources, both locally and globally.

Appropriate Decision-making:
For the implementation of ecological wisdom and social responsibility, decisions will be made directly at the appropriate level by those affected.

Non-violent conflict resolution is the process by which ecological wisdom, social responsibility and appropriate decision making will be implemented. This principle applies at all levels.

Shane Pleasance said...

New Green, my cellphone reception is poor at my house. Email me instead? shane@talkingshop.co.nz. Cheers.

Shane Pleasance said...

Dave, pragmatists always prefer discussions! http://pc.blogspot.co.nz/search?q=pragmatism

"The two points central to the pragmatist ethics are: a formal rejection of all fixed standards—and an unquestioning absorption of the prevailing standards. The same two points constitute the pragmatist approach to politics, which, developed most influentially by Dewey, became the philosophy of the Progressive movement in this country (and of most of its liberal descendants down to the present day).”
- Leonard Peikoff, “Pragmatism Versus America”

Here you join the heady ranks of Key and Nixon as master pragmatists.

So yes, I am gloriously black and white, and drive every day to eradicate the grey.

Things are either right or wrong.

Shane Pleasance said...

Armchair, taxation is force whichever country does it!

A good place to start is the philosophy of self ownership. This also touches on self defence. The Philosophy of self-ownership

Here is a dialogue which delves more into voluntaryism and taxation. Taxation is Theft

bsprout said...

Shane, I can now see why you find pinning me down in terms of my political beliefs and philosophy so frustrating. To me everybody's morality, sexuality or political philosophy exist on a continuum and few really sit on either end of the spectrum.

I find it amusing and slightly appalling (placing me with John Key) that you have locked on to my statement regarding my pragmatism as if I then rest at the ultimate realisation of that philosophy.

I am a pragmatist because although I have a philosophy that is closely aligned to the Party that I represent I realize that sudden change is unachievable in the real world without revolution or political destabilization.

I was grateful for the links that you provided for Armchair because it helped me understand that no amount of discussion or persuasion will probably shift your thinking regarding taxation. I think there may be many areas where we will have to agree to disagree, given your black and white approach.

bsprout said...

I find it interesting that New Green hasn't risen to my challenge...

Shane Pleasance said...

"To me everybody's morality, sexuality or political philosophy exist on a continuum and few really sit on either end of the spectrum."

What spectrum?

Taxation is but one manisfestation of force.
The fact that it is carried out by the jackboot of government makes it even worse, and is no justification.

You called yourself pragmatic, Dave. I merely provided the ethical context for pragmatism.

I am always open to learning. It is how I came to be where I am. It is one of the reasons I ask the questions I do.

If I find something better than freedom, I would be happy to move to it.

Most people hate the concept of freedom, as it carries so much responsibility.

bsprout said...

And, sadly, many like the concept of freedom because if they have a limited moral base it allows them to exploit others for their own benefit.

In reality we are not all created equal in our ability to make a living for ourselves and our families, governments exist to ensure some balance or equity in how resources are distributed and managed.

Do you really trust all industries to self regulate and people's generosity to meet the needs of the unfortunate?

Shane Pleasance said...

Ok, so we will ignore the 'spectrum' question. I will assume you mean that left - right continuum that you cling to?

Exploitation? Explain?

Your second sentence actually cheered me - facts! Reality! Well, the first part.
You actually believe - and are happy to state it - that the role of government is wealth redistribution for 'balance' or 'equity'?
You have hinted at it before, Dave - but when pushed about the 'F' word you shy away from actually admitting your jack-booted totalitarianism. But there we go.

As someone else said on your blog here - if that is your principal stance - your raison d'être, then you ought to campaign on it.

"No Wealth, no Poverty, no Freedom"

Whether I trust industry's to self regulate is irrelevant. If the product does not convince me, I do not buy it. I certainly would not rely on something just because it is government mandated. On the contrary.

And Libertarians believe in the inherent good in humans and rational self interest in negotiation.
New Zealand has a great history of endeavour and voluntaryism.

Yes, we trust them.

bsprout said...

There you go, Shane, leaping with great enthusiasm on a statement and putting your own black and white definition on it (I thought you would ;-) ). It wasn't that I hadn't given you facts and information before, just not the ones you wanted so that you could gleefully claim that I am some sort of rabid communist.

To me ensuring fair distribution of money and resources is through things like a minimum and livable wage, fair and just employment law, businesses covering the external costs of their industry (dairy farmers, fossil fuel industry) and making sure that taxation is fairly managed. Hardly revolutionary stuff.

The sort of world that you espouse would mean that some individuals will have more "freedom" than others because the poorer you are the least choices you have. I have nothing against those who have worked hard and accumulated wealth, as long as they have a acquired that wealth in a way that doesn't impinge on others rights and freedoms nor has negative impacts on the environment.

The fact that you have never given me an example of where your Libertarian system of governance has worked is a major concern. It is important to hold true to a philosophy or belief but a little pragmatism goes a long way if you want to see the practical realization of your vision. Nothing is really black and white and governance is never simple.

Shane Pleasance said...

I am trying, but there is nothing better I can say which would represent your stance than your words and this entire blog post.

Thank you Dave, I am now much wiser.

Anonymous said...

"It is difficult for me to justify spending time in explaining why this wouldn't work for the likes of education and health and easier for me to ask you where successful examples of your philosophy exist. I find it a little tedious to have an argument at a philosophical level because unless it can be proven in practice it is more or less just so much hot air."

I haven't read the full thread, so perhaps Shane has addressed this point, but I'm going to address it anyway, so apologies if it's doubled up. There are no modern day examples, because its actually impossible to practice when there is no such thing as liberty, thanks to people like yourself. However, there are plenty of examples outside of state monopolies that demonstrate the efficacy of a climate of freedom. Where free markets exist, a wealth and multitude of goods arise. Why is it that you want to stop free markets in health, education, etc? What actually gives you the right to do that?


bsprout said...

Richard there is a big difference between the ultimate realization of a "free" market and a "fair" market. If we compare two systems of health care and education that represent public provision and free market provision then the public provision wins hands down in quality, economic sustainability and equity of service.

New Zealand easily beats the US in both education and health and yet the US is the most obvious example of the use of the free market to provide both: