Friday, June 02, 2006

Supreme executive power derives from a mandate from the masses, not from some farcical aquatic ceremony.

Ok, so I know that the budget was a little while ago, and Michael Cullen did not include any tax cuts. Boo Hoo. Have a Cry. Call the wah-bulence. Whatever.

I absolutely cannot stand rich people complaining about why they have it so hard in life because they have to pay more tax then others. I cannot stand it when they use the justification: "why should I be taxed more just because I work harder?"

Firstly, it makes huge generalisations that just because one earns more, one is naturally a hard worker. I will concede that higher-paying jobs often require a lot more skill then other low paying jobs, but this is not the arguement. I think the cleaners at univerity work hella hard cleaning up the place. Students are messy, I seriously think that students for the most part take them for granted. Many of these cleaners are at uni at 6am cleaning up our rubbish and because the cleaning companies that employ them are notoriously bad at giving them normal hours, they may not leave uni until 7-8pm that night. Not only that, they are doing the jobs that no one wants such as cleaning toilets, changing "feminine" rubbish bins, cleaning urinals - not exactly fun and easy tasks.

Furthermore, often people who recieve high saleries is because they tend to have a lot more responsibility, not always because they work harder than anyone else. Think about major CEOs, if they fuck up, the company fucks up - when you think about this, its a major burdern on one person, and hence why they can command a higher salery.

Finally, to pay for tax cuts we would effectivly take money from health and education- of course this wouldn't affect the well-off because they don't have to rely on these things as heavily as lower socio-economic groups. However, for people who are less well off, they will have to dig deeper into their pockets just to afford the basic nessessities in life.

Basically, I honestly do not have problem paying taxes. I see it as a way of pooling everybodies resources to look after those in society who have been born into disadvantaged situations. People at all times in their life will be dependent, and I see taxes as a way of ensureing that nobody becomes disadvantaged by social and economic inequalities. The system of cource is not perfect, and I don't think it will ever be, but I believe we are on the right track at least.

Anywho, thats just my rant.

One last thing: To all those libertarian minded people out there, normally I wouldn't mind you responding to this blog, but to be honest, I seen and heard all your arguements. I know exactly what you will say - taxation is theft, Robert Nozick's principles, Ayn Rand is a goddess and I want to have her babies even though she is dead, I will exhume her body, take some DNA, and clone her. It's rather predictable.

Can someone PLEASE come up with an opposing argument from an entirely DIFFERENT perspective? I know a marxist would be against the idea of taxation...


Psycho Milt said...

Happy to oblige. As someone with a bit of respect for Marx I'm not that keen on taxation. But it's clear enough that Marx didn't anticipate globalisation, and there isn't likely to be any movement towards post-capitalist modes of production until sometime after capitalism is the mode of production in every country. Present-day enthusiasts for Lenin and Trotsky are only fooling themselves.

On that basis, we've got capitalism ahead of us for quite some time yet, and one of the best ways to mitigate the dodgier effects of capitalism is through taxation. Let rich bastards like me decide who we're going to bestow our charity on, and we'll all be stepping over dead beggars in the streets before you know it.

One day people will figure out how to make the democracy we spent the past couple of hundred years killing each other to achieve apply to the world of work as well. Hopefully without spending another couple of hundred years killing each other, but who can tell. I do know that I had a friend who cleaned toilets in the UCSA building in the mid-80s, and he was astounded at the things students could do with shit. Yeah, it's clear enough why that should be low-paid - er, not.

Single Girl in Londontown said...

OK - well then a question for you.

Lets take the cleaner as Person A, and lets say myself as Person B.

Now I don't want to get into a discussion as to why I get paid more than Person A. But lets just assume for arguments sake that I make 10 times as much money annually as Person A. Lets also assume, so that we make this a little more simple, that both Person A and Person B are single, no children.

How much more tax do you think I should pay than Person A?

10 times as much? Or more? And if more, how much more and why?

Anonymous said...

Nice, KG.

For one thing, Sophia, you need to decide who are the 'rich people.' Tax is on income, not wealth. It is those who are seriously rich who are able to avoid (not evade) tax. It is those who seek to work hard and earn more that are taxed with progressively higher tax rates. Start working and pay 19.5%, okay. Put in extra hours, be nice to people at work, think hard about the job your doing, basically just provide things for others, and you get to $38,000. Bang! 33% of your further earnings now go out of your control. Never mind, keep going at it, maybe start a business, give other people a job, get a degree, create even more value to trade with others. You get to $60,000 and you hit one of the lowest tax thresholds of its rate in the OECD, not to mention more relevent economies who are our Asia pacific neighbours and trading partners. You now give up 39c out of every extra dollar with no choice.

Taxation means people don't take opportunities that would have otherwise been good for themselves and others. So called progressive tax structures make it worse as you take more initiative.

You've got to ask, is that the values we want for New Zealand, effort and initiative being discouraged by force? (If you don't think it's force, try evading tax for a few years and see what happens to you.)

For that reason a flat tax structure would be a big improvement. Say we make the tax rate 20% flat on all income. There are a number of advantages:

1) People who earn more do still pay more tax, as KG has pointed out 10x more income means 10x more tax.

2) People aren't discouraged from taking opportunities, particularly those graduates, employers, workers of overtime, investors and risk takers who would have otherwise been in higher brackets. Treasury has previously calculated that a 20% flat tax would increase economic growth by 1% per year. That may not sound like much, but if we let it compound until the baby boomers retire and current students are starting families, it would mean a lot more wealth for the average Kiwi.

3) Ironically, lower, flatter tax RATES have often lead to higher total tax TAKES. This is because the increase in economic activity means there is more money to tax, and even taking into account the lower rate, govt revenue increases. Examples would be found in Eastern Europe this century and NZ 1986-88.

4) Everyone paying the same rate on all income has been speculated to increase social cohesion. People would respect government spending more and use it more carefully, Richard Epstein's argument goes, if they felt that everyone was paying a fair, transparent share.

Your idea that the government should try to compensate for the market undervaluing low income jobs also has a serious problem. For reasons I'm not going to explain in a blog post, try reading Mises or Hayek, governments cannot have sufficient information to distort prices and improve overall welfare. What you're talking about is effectively making low paying jobs more attractive than they would otherwise be by giving lower tax rates to people in those jobs. However it is not true that people are 'stuck' in those jobs or that society is better off overall with those jobs being filled, so why would you set tax rates in a way that actively encourages them to stay there? That's an argument about information and epistemology that you'll really have to find out about for yourself.

As for your idea that we face a trade off between tax cuts and helath/education spending, let's be honest. It doesn't matter if Cullen has changed the accounting system that was accepted for a decade before. It doesn't matter that he has demarcated billions as provisional spending with no clear purpose. We are at a stage where we have a surplus not far shy of $10b. Think about that. Everything that is bought and sold in New Zealand over one year is worth about $140b, and he has $10b just sitting there. We could afford a 20% flat tax rate without cutting spending, in fact, we could still have a surplus. All the benefits of flat tax listed above would apply, without loosing any govt services.

So what's the conclusion? The current tax rate is damaging our country. It punishes initiative and effort, and it then punishes further initiative and effort further. These are not the values I want for New Zealand, I want success to be celebrated and not discouraged, don't you? A flat tax rate would be much better. It would still mean higher tax payments for those who earn more, it would also mean more growth, and ,ironically, more tax in absolute terms. We could afford to cut taxes and there are good reason why we should.

If I was Young Labour I would be confronting this situation and putting pressure on the party to adopt more sensible economic policy. This would be a much better achievement than, with incredible irony, trying to defend Michael 'oh, shit, was the camera turned on' Cullen by taunting others about the wambulance.

If you'd like some figures, see here:

You have to decice, Sophia, if you are a ranter (as you have suggested yourself) or a thinker. Reading this report on the state of taxation in NZ would be a good start.

Seamonkey Madness said...

I don't mind paying tax per sé, more the tax bands and thresholds themselves. (Don't really like flat tax, but flatter tax rates, with larger bands would be nice.. =) )

I don't mind paying for core services and possibly for services that could be shared by a public/private partnership (roading, ambulance/health etc), but I DO NOT want to pay for hip-hop tours or financial aid to terrorists. This is where this Labour Govt have jumped from the sane train to the loony wagon. Spending our money on 'stuff' that isn't in the public interest.

See here:

And especially, especially because Cullen & Co are sitting on top of a big fat SURPLUS. Need I say go and read some of DPF's recent posts.


Sophia said...

I suppose the idea that I'm trying to get at is that the suffering of people born without natural skills and abilities, or is born more disadvantaged is underserved, than the benefits that people recieve from their natural talents is also undeserved, seeing as what you are born with seems to be determined a lot by chance, or 'life's lottery.' This is a very short response, I would really need a book to actually go into detail.

And David, yes this is my ranting 'hat' per se, I don't see blogs as anything else apart from a place for people to rant about various things. If I was in a 'thinking' hat, I would draft a huge long policy document, backed up with evidence etc. and publish it.

Furthmore, David, I'm actually quite curious, when did you join ACT? and was there any defining moment when you decided that classical liberalism was the philopohy that best suited you?

Ed said...

Finally, to pay for tax cuts we would effectivly take money from health and education

Given that the second and third highest areas of spending are "Core Government Services" and "No Functional Classification" could you please explain why money would come out of four and five Health and Education?

David also makes an interesting point with the whole Laffer curve thing, I'd encourage you to do a little bit of reading on the concept if you aren't familiar with it Sophia, I'm sure you'll disagree but it is a very interesting theory.

Anonymous said...

Yes I understand your post about reducing the inequalities Nature gives us all.

Just out of interest, do you think the government should help ugly people? Being good looking can make a huge difference to success and happiness, and people can't control it. Could the government compensate for this? Should it? And is it fair to make people equal in some things like earning) but allow other advantages (like looks) to go unchecked?

You really need to read 'The road to serfdom' by Hayek to understand why using tax to hold some people back doesn't actually help overall.

Nice try, but why do you think I've decided CL is the best philosophy for me?

Ed said...

You might also find this piece from the Wall Street Journal interesting

Basically touches on the idea that if governments want to effectively care for the disadvantaged they have to create a society that is condusive to the creation of wealth rather than blindly re-distributing whatever they can get.

Single Girl in Londontown said...


Lets take your post and comment above and talk about me again for an example.

I have had a great upbringing. I know that and I don't deny it. I have parents that valued education and that have always supported me.

I also have parents that could not afford to send me to university. I did that myself, and walked out with a HUGE student loan (which i may add I am still paying off!). I also studied hard, and worked hard.

I am 29. I believe that I have worked hard my entire life. Yes - I do think I am intelligent. Yes - I do think I have natural abilities. But - I also believe that I have worked my ass off for as long as I can remember.

I have progressed in my job, through a mixture of intelligence, and hard work. I have worked 12 hour days plus weekends for years of my life. i have worked this hard because I like what I do, I am good at what i do, and I care about whether I do well or not.

You make the comment above about CEO's not necessarily working hard - but having a lot more responsibility because of what they have to lose and thats why they get paid so much. This makes it sound like CEO's are born. But they are not - they are made - through hard work and intelligence.

I have absolutely no problem with paying tax. I am happy to pay tax. I don't even necessarily argue for a flat tax rate. A flat tax rate would mean - that if I earnt 10 x as much as you, I would pay 10 x as much tax as you. Thats clearly not how it works in our current tax system.

What really bugs me - is people who think that people who do not want to pay the current level of tax that they pay - only argue for lesser tax - because they have oh worked so much harder, and so why should they? That is so not the case.

Honestly Sophie. How much do you really know about how our tax system works?

You are what? 19? Do you have a job? Are you a student? I will admit I know absolutely nothing about you......but am happy to find out more. Might make for interesting reading....

James said...

Sigh...I should really jump in here but its late...I'll check in later..;-)

I will say that If you can't argue against the Libertarians case Pam why should we offer up points you think you can rebutt...? The case against tax is damming...its immoral,its inefficient,its destructive,its corrupting and it doesn't solve the problems its supposed makes them far worse.What other reasons do you need...?

Anonymous said...

are you talking about tax, as in tax in general??

errrrrrr...... are you being serious???

Sophia said...

James, the reason I asked libertarians not to post, was not because I didn't think i could rebut their arguements but rather that are large proportion of libertarians seems to hang out at this blog and always offer the same arguements...I was actually keen to get a new viewpoint for a change...

And David, honestly, I am curious about when you did join ACT.

Anonymous said...


Anonymous said...

Cheers Ed, that's a great piece. The Nordic model is some coffee I wish certain lefties would wake up and smell.

James said...

"errrrrrr...... are you being serious???"

Yes...why do you ask?

Ok Sophia...I will respect your wishes on this...

Anonymous said...

I think the thing to realise about KG's comment is that not only is 'progressive' taxation unfair on her and the efforts she has made. Although saying what she creates is hers is a totally legitimate argument in my view, let's assume your view that libertarianism is wrong and people exist for the state, not the other way around. Overtaxaion is also bad for the rest of the economy.

Other things being equal, people like KG are less likely to work hard given higher tax rates. When this happens there is less economic activity, not because people want less, but because the tax rates make it less attractive. Chances are that whatever KG does, it is beneficial to others. She may create jobs for others, and the simple fact that people choose to take them mean these jobs are better than others available, so the job takers benefit. She may develop technology which makes others' jobs more productive, therefore more rewarding for any given level of effort. She may make products in a smarter and cheaper way, therefore making them more affordable for consumers, even if those consumers' income stays the same. However, every extra percentage of tax the government takes makes all these things less likely.

You see, Sophia, it's not just a question of taking money and giving it to poor people who need it more, the unseen costs of taxation are many and varied. The cost of discouraging economic activity doesn't just fall on those taxed, it falls on all.

At this point you have to ask yourself, who is more selfish? Those who want to pay less tax and create more wealth, or those who want to continue overtaxing (hopefully you've read Phil Rennie's paper on NZ taxation levels linked in my first comment here) to fit some ideological mould or some practical misunderstanding?

It would seem that we have the same goals of a prosperous country with equal opportunities for all, however we differ in our understanding of how tax actually works.

Anonymous said...

'The case against tax is damming...its immoral'

tell that to sickness beneficiaries, teachers, sick people, etc etc

Heine said...

Kiwigirl, I didnt think you had it in ya :)

Anonymous said...

Anon, I agree that many (not all) teachers and the sick rely on taxation as the original their source of income AT THE MOMENT.

But to really understand James' point (and, to a lesser extent, mine) you need to ask yourelf if the status quo is the only possible way, and if indeed it is the best possible way to provide those people's income.

Now I'm not really against tax per se, I just think it's way higher than it should be at the moment. However if James could show you a way that we could have education and look after ourselves without taxation, therefore reaping all the benefits of less tax and less govt spending, would you want that?

Sophia said...

OR, maybe we shouldn't be focusing on ideas of fair and just distribution...if all we ever do is redistribute income from those who own productive assets to those who don't, we still have class system, which will inevitably result in exploitation and thus, we end up having the same conflicts that make us debate how income should be distributed in the first place...

Anonymous said...

Your thinking is stuck in the past, Sophia. It may well be true that two centuries ago, when your mate Karl was writing, owning assets like land was a way to make money. Perhaps there was a class system that depended on inherrited assets. Today things are very different. 80% of US millionares weren't born that way, it is education and entrepreneurship that has made them wealthy. Sam Morgan also springs to mind. He may have had a wealthy background, but certainly enough to make $700m just by expoliting others. I forget the name of the Wellington girl who just sold a marketing company to MS for $400m, then there's the story of hotmail. It would seem that creating wealth is no longer about expoliting others, but creating better products and services, which may involve no more capital than a laptop.

If you are still talking about owning productive assets, class systems, and exploitation then you, with all due respect, are a dinosaur. I suggest you cross the road from the pol dept to Economics.

However Sam, MR girl, and the creators of hotmail, not to mention legions of others who have made money out of ideas rather than fixed assets albeit on a smaller scale have had some advantages.

Class is no longer a question of inherrited wealth and concrete assets, but having the ideas to create new and valueable things to trade with others. The economy has changed. For one thing, Moore's law states that computer power doubles every 18 months. That means that between now and the end of 2007 the average computer power will increase as much as it has in the 30 years up to today. Think of the opportunities that creates across a range of businesses, compared to what you can do by owning property but not having any ideas.

Education is important, it would stand to reason that if we are going to alleviate the new idea-based class differences and give equal opportunities to all, we should start with education. You have to ask yourself if Labour's education system dominated by a teachers' union that spent as much campaigning against education reform in 2005 as a small political party is doing that. Should education be serving students or teachers? Why do they spend so much money trying to maintain the status quo? The poor are zoned in and take what they can get from the system, while the wealthy can go private, buy in desirable zones, and pay for extra tuition. If you want to get rid of class differences and 'exploitation' in the modern economy, advocating education reform would be a good start.

Shakespeare said that a king may pass through the guts of a beggar. And so it is in the modern economy. Once you have an education system that gives every student the same choice of services and the same opportunity to get the same qualifications (we're talking school vouchers here, and it's one Swedish idea you should be looking at), you need to give people openings to use their schools.

I recently went to Italy where the government basically has three rules.
1)If it moves, tax it. 2) If it keeps moving, regulate it. 3) If it stops moving, subsidise it. Their taxes are high, their employment laws are TIGHT, their economy is growing at 1%.

For actual people in Italy, the result is the continuation of class structure. Immigrants flog Gucci knock offs because they can't get regular jobs. My Mum's friend has to go into a ballot to get a pharmacy license because she doesn't have the option of inherriting one and it's illegal to just start one. When you regulate you remove opportunities for meritocracy and promote back door dealing.

You might think that regulating and taxing means fairness, but in practice it means less economic activity, and less openings for those born without silver spoons to use their skills (assuming the education system has provided them).

So what's the message? Once again Sophia, we seem to want the same things. We want people to have opportunities to be the best they can regardless of how they are born. However it would seem that a preocupation with outdated Marxist economics and the power of government , and possibly different beliefs about what people are able to do for themselves has left us with very different views on how to actually achieve this. Lucky how ideas are free, huh?

Anonymous said...

*schools should be 'skills'

Sophia said...

SIGH. David, I never said that was what I actually thought. I completely disagree with Marxism such as his view that in a communist state there would be no need for liberal justice, and I also disagree with his premise that the wage-labour relationship is inherently exploitative. I was just providing all alternative perspective.

Maybe we should stop talking about economic inequalties, and discuss social inequalities seeing as in this day in age everybody has been granted (to a large extent) equal rights*, yet some people, for some reason still are marginalized.

I'm actually sick to death of liberal thought, be it libertarianism or liberal egalitarianism. Sigh.

*there are some that still in my opinion rights that need to be granted, i.e. gay marriage, gay adoption etc.

Ohhhhh, I'm going to Italy in 3weeks!

Heine said...

Sophia, good timing. The weather is wonderful on this side of the planet.

Pamziewamzie said...

I'm going to Spain in a month!! :D

James said...

If I was commenting on this thread... I would ponder how it is students can afford to induldge in international travel while I as a full time worker cannot....and they say students are hard up!!!??? ;-)

Heine said...

I agree, these trips aint cheap, especially with the shit NZ dollar at the moment. :) Life is good for some!

Sophia said...

I worked at studylink fulltime throughout my summer holidays last year, as well as working my regular job at a resturant. Every single cent from studylink went into my trip.

Pamziewamzie said...

I'm going to a socialist youth conference. We fundraised most of the money. I used my course related costs to help pay for it, because I absolutely suck at handling money :)

Heine said...

Heh, well thats one way to do it. Good on you, especially as the weather is PRIMO here at the moment.

Course related costs got me through much of my Uni life :) Bugger the loans, its free money anyway!

sagenz said...

so pamzie - I assume you have paid tax in the funds raised? It will give you a personal benefit after all. And it would be unfair not to declare it, being a socialist and all.

Heine said...

LOL, oh come on Sage, remember Socialism works wonderfully until it is applied to the people advocating it :) Ha ha ha.