Public Address - Island Life (Home)

A virgin's guide to tax cuts | Jun 30, 2005 13:37

I love paying tax. My biggest regret is that I wasn't in the top bracket when Muldoon was PM. I could have been handing over as much as 66 cents in the dollar then. Just the other day the accountant rang to discuss what we should pay for next weeks' provisional tax. She'd worked it out already, but I said to push it up another 30,000 just to be sure. She thought I was just being prudent. I didn't tell her that in fact I love the idea of paying as much tax as I possibly can.

Such lies, as Ms Kember nicely puts it.

I don't feel inclined to paying any more tax than I need to. So why am I not in a lather of excitement about the National party's plans for giving me a break? I agree with everyone who has emailed me in the past few days telling me they'd like to pay less tax. So would I. But not at any cost.

Michael Cullen says the government needs as much as it does. Dr Brash says vast amounts of that money are being soaked from us for needless schemes. I wouldn't accept either of those propositions without a hard look at the numbers. But the more I look at them, the more I think that one of them is being prudent and the other is bending his words to fit the billboards.

I deliberately designed the tax calculator to demonstrate one particular aspect of this tax debate because it was the one that seemed to me to have the most pertinence to the billboard and bumper campaigning Dr Brash has been doing. Namely: we can cover the cost of a tax cut by cutting wasteful government spending.

What that implies is that it doesn't matter whether you have a surplus of eight billion or a deficit of four, that question is irrelevant. Slash wasteful spending to cover your lost revenue, and you can fund your cuts right there. Nice and simple, and boy does it read well on a billboard. But it's nonsense.

As the calculator demonstrates, as soon as you implement a cut of any heft, you need to abolish entire government departments to get the savings you want. That doesn't just banish the analysts who might or might not be wasting space, it means you have to start throwing overboard the people who do the uncontroversial stuff as well. The ones who pay the pensions, stamp the passports, pay the teachers and the police, and keep an eye on minor issues like foot and mouth disease and mutating avian flu viruses.

But don't just take my word for it. Ask someone who's run the Treasury. Here's what well-known lefty Graham Scott had to say to an ACT function this week:

At the risk of immodesty, the fact is that I know more about controlling government expenditure than the National front bench. They are talking as though it will be easy to cut enough fat from the state to pay for tax cuts - it won't be. Believe me I've been there and I have done that. The combination of the State Enterprises Act, the Public Finance Act and the State Sector Act, which I helped to design and implement, brought remarkable improvements in the effectiveness of public organisations and lower costs. I wrote a textbook about it. But those systems have not been used vigorously for a while and some slack has got into the system. We can get better value for money but it has to be done with a scalpel not an axe.
They say they are going to cut waste out of the health sector but also preserve front line jobs. Fine, who could object to that, but if they try to do this in a way that interferes deeply into the prerogatives of the DHB Boards and management there will trouble. As the former Chair of the Health Funding Authority I have the experience to know what works and what doesn't in quest for better value for the health dollar.
Designing tax cuts is child's play. It is on the expenditure side where all the problems are and where skill and experience are needed.

Let's say that Dr Brash might change his mind and decide to argue that tax cuts cannot be funded purely by slashing wasteful spending. Let's say he argues it on the same basis as one or two writers of spluttering emails to me: THERE'S AN 8 BILLION DOLLAR SURPLUS THAT COULD COVER THESE CUTS. CAN'T YOU ADD, IDIOT?

If you should happen to be the dyspeptic type who has already had two responses from me to this question, I recommend you read the foregoing paragraphs. Slowly.

Having said that, the surplus is undeniably an important question. That and the cost of the spending commitments Don Brash and his team have been making.

Surplus first, then. This argument goes nowhere fast if you can't even agree on the starting point. So I'll state what I understand the numbers to be. Do by all means feel free to correct me. You have your OBERAC, 7.445 billion, and your cash surplus, 2.413 billion.

Your cash surplus equals your OBERAC minus a number of items:

- The one and a half billion or more that goes into capital purchases such as new machines for hospitals and building new prisons.

- The three quarters of a billion that goes to loans - students and District Health Boards for example.

-The two billion or so you put aside to save for future New Zealand Superannuation costs.

-The half a billion or so that goes into cash injections for Crown entities to help them build hospitals and housing.

-And the nearly three quarters of a billion that goes into reserve bank reserves to maintain financial stability.

The actual figures are here at page 26 of this Budget document. Number crunching ends. Discussion resumes.

I entirely recognise the argument that instead of spending that money on these items you could borrow them. I entirely recognise the argument that if you borrowed that money, you'd have enough money this year to cover the tax cuts.

But borrowing money has a cost. 65 million per year, per billion of tax, Treasury says. And yes, that would then leave you some billions spare for cuts.

But that then brings on inflation, and it pushes debt back up and if you have to borrow it more than one year and maybe many years, you're suddenly carrying a much bigger burden. And then you might be wondering how smart it was to strip out the buffer against downturn that the 2.4 billion cash surplus represents.

And this is a good year. Once there are no surpluses, you get a whole lot more to wear.

And if you pile on the Nat's 7 billion of new spending promises, well, it all gets to be a much steeper hill to climb.

Of course you could ditch the super fund, but neither major party is proposing to do that, and for good reason: ditch it and you have an even bigger problem down the track. Nothing imprisons a person like poverty in old age. Just how little would you like the pension to be in 2020?

So yes, there is an alternative way to deal with this surplus. But how smart an idea is it to do a U-Turn on the steady reduction of government debt when so much of our sorry economic history lies back up that road of higher interest rates and inflation? Borrowing to invest in a more productive future is great, but look at our track record: we suck at it.

Fran O'Sullivan gets an important part of the picture right when she writes:

Quite why Cullen would expect a populace that binges on personal debt to fund its over-lavish lifestyle and ridiculously out-of-whack property prices, to continue to forgo today's pledges in order to earn a better tomorrow, has always seemed to be dangerously out of sync with New Zealanders' underlying ethos.

What New Zealanders want is more cash in their pockets so they can continue to fund their habit of living beyond their pay packets.

If they can't get it through wage rises, then another avenue must be found.

But there are also people who are battling along with rather more modest expectations who are finding that it's pretty bloody hard to support a family on the average wage. You'd think they might be pleased of the relief that comes in the Working For Families package, which is in effect a targeted tax cut, and yet you're just as likely to hear the gripe that they don't want to be a beneficiary, they want a plain-old-fashioned tax cut.

Some, though, seem to be a little more clear-eyed, PA reader Rob points out: "many of us 'mainstream New Zealanders' have already had our tax cuts."

It's called the working for families package. As the lucky father of five, I have a reasonably well-paying job and end up paying (gasp) almost NO tax. (esp if you take into account a loss-making side business and the subsidy on the twins' creche).
I don't know how that's gonna play out, but I'm convinced Mr Brash can't give me a bigger tax cut than almost nothing! In fact, it seems likely WFF will be rolled back in some way.
I think that's where the Nats "mainstream NZ" appeal may fall over. After you've excluded maori, the (likely childless) gays AND families... you're left with the economic self-maximisers who voted for act- and who else?

Precisely.

What is it with the Nats and their fascination for simple fixes and magic bullets? If a tax cut and a hands-off approach to economic management is the sure-fire answer, how come we saw so little fresh investment of those tax cuts in the 1990s and how come we saw the economy mired in torpor by the end of their last run?

It's nice to imagine things could be as simple as the billboards suggest, but they're no more grounded in reality than a Star Wars movie, and as the Letterman Show so acutely observed once, there are at least ten disappointments in watching one of those. The cruellest of them, perhaps, is this: when the lights come back up in the movie theatre, you're still a 37 year old virgin.

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How will Sir be paying for this? | Jun 27, 2005 06:56

So what will you be spending your tax cuts on? What fabulous holiday do you have planned? Or perhaps you'll be remodelling the kitchen. Maybe a new house? Don Brash might like you to invest it, but of course it's your God-given right to spray it around any old way you like. Good heavens yes.

Still, before this giddy night-before-Christmas euphoria gets the better of us, perhaps we should work out what we'll actually be getting. That is, of course, assuming the National Party and Winston get the chance to relive those glory days of 1996. And 7. And 8. And 9. Let's not dwell on that. I feel a Sideshow Bob shudder coming on.

Instead, let's give the present a good shake and see if we can work out what's inside the wrapping, because that old rascal Don doesn't want us to know too soon. There is, after all, more than one way to skin this cat. You can find anything on the Internet, and my word, it would be a poor show if you couldn't find a site somewhere that could let you work out for yourself what your tax cut might be worth. Your pals at Public Address are therefore pleased to introduce to you the online automatic Tax Cutter.

Just put in your income (or someone else's if you're shy), and choose the tax rate you want. The Tax Cutter will tell you how much extra money you can look forward to hanging on to each week.

Of course, being the killjoy that I am, I've also built in a costing mechanism. You'll get to see what your tax cut will cost the government, and how they might go about cutting spending to make up the shortfall.

That shouldn't be too hard surely? As Dr Brash says, there is no end of fat to be trimmed; no limit to the "dopey" schemes this government is hosing money at and no better time than "now" to get stuck into a surplus, notwithstanding that it's already been committed and won't actually be there next year.

Just in case I haven't trowelled the sarcasm on heavily enough, it seems to me that some small elements at the margins have been pressed into service as some kind of illustration of the way great wads of the taxpayer dollar are being spent by the current government.

There's a word for that, and it's nothing so prim as "baloney."

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Go Russ, Go! | Jun 12, 2005 14:17

Let's start with a disavowal. This post will not in any way make light of the misfortunes of Schapelle Corby in the Indonesian justice system. I am confining my remarks to making light of the misfortunes of people in the American justice system.

There's no such thing as a celebrity jail in America. Yet

But how far away can that be in an age where people like Donald Trump and Rupert Murdoch call the shots? Think about it: one big national penitentiary for all the celebs, televised around the clock, worldwide, Big-Brother style. It has ratings written all over it. Martha, Michael and Russell, all in the one place! (Assuming those last two are found guilty and sent to jail once tiresome matters such as due process are disposed of).

So could Michael Jackson and Russell Crowe one day be cellmates? And if they could, how do you think things might work out? Bitch is a word with some unhappy connotations. We won't explore them here.

But what about the fightin'? Now there's a Don King moment of wonder. You might think there's no match here -the gladiator versus the guy who's so light in his loafers he moonwalks? But don't be so sure. How many fair fights in the real world has Russell won? Actors are men who wear make up to go to work, don't forget.

I'm no expert on these things. My good friend Mr Reid might be able to offer some thoughts, perhaps. (Have I mentioned he has just had a thoroughly good book published?)

What I'd really like to do is test the wisdom of the markets. Or to put it another way, I rigged up that betting system for the Optimistic Predictions site last month, and I might as well make the most of it.

So let's have a bet: Who wins a cell fight between Russell Crowe and Michael Jackson?

Click here and decide for yourself. You have 100 imaginary dollars. Go right ahead and put your money down: who wins a knock-down take-no-prisoners, bitch-slapping cell fight? Russell or Michael?

Of course, you could content yourself with texting a vote for tonight's Dancing With The Stars, but you know that's just for sissies.

Update, June 14: The jury says Michael can go home, so just in case there was any doubt before, it's clear now: this is an imaginary fight we're talking about. It's still an interesting question to ask, though, so you can still place your bets.

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Envelope Opening | Jun 02, 2005 12:07

Just five short months after I said I'd be judging the contributions for the iPod contest, I've finally taken the time to do it. Refer to the surname if you're wondering why it might take that long.

So. Have you won an iPod? A fabulous consolation prize? Answers at the end of this blog but first, a few honourable mentions.

The object of this exercise was to compile a list of memorable dates in New Zealand's history. I wasn't necessarily looking for the most famous of moments. On the contrary, when you're trying to build a comprehensive collection, the more obscure the event, the more value it has. So thanks to everyone who nominated the Treaty of Waitangi, and well done for spotting that the judge might have a soft spot for that topic, but no iPod, sorry.

Our collective understanding of the significance of that day seems to remain somewhat loose, I'd have to say. One contributor proposed "the signing of the treaty of Waitangi" as a memorable day on the basis that "the moari's and the white people made friends, stopped fighting and taking land". Another had a more concise reason: "Because NZ got rich."

Your iPod has strong appeal to the youth market, and although I have no way to substantiate it, I'm envisioning (although trying quite hard not to make the picture too clear) a male not yet out of high school as the likely contributor of the following:

descovered pornography
porn is good
November 10, 1867

And then there were the doubters:

Still New Zealand is yet to have anything important happen in it or to it
Nothing having anything to do with New Zealand has ever been important and New Zealand probably won't ever be important

Whatever, dude. Reminds me of an old story in The Onion - Sullen Time-Traveling Teen Reports 23rd Century Sucks.

Happily, the great majority of the contributions were exactly what I was looking for, and I'm grateful to everyone who took the time to offer them. Before we get to the winner, I'll mention a few other noteworthy ones which have won the contributors a copy of Civil War and other Optimistic Predictions, with the author's compliments.

Matt Barrett gets one for nominating the day Ihug's Wood brothers,introduced flat rate dial-up to the public. While they were in the game, they truly shook up the internet industry in NZ, he says, and laments that "we are in dire need of innovation, with Telecom doing its damnedest to stop the penetration of truly high-speed broadband. "

And a copy of the book to Pat McIntosh for nominating the day TVNZ aired Peter Jackson's "Forgotten Silver" documentary about the legendary film maker Colin McKenzie. She recalls the public outrage over the fact it was a hoax and offers quotes from irate letters to the Listener, including: "Peter Jackson and his Silver Screen conspirators should be shot."

Ross Mason gets one for nominating the day Radio Hauraki began transmission in the Gulf from Tiri, and Kevin Moar for suggesting the day the first McDonald's restaurant in New Zealand opened in Porirua.

Thanks to Aaron Simperingham, the database will include the proud moment in Winston Peters career when he "punched John Banks....and got away with it by using the excuse that he was drunk! In parliament!!!"

"Try punching a teacher at school and using that excuse!!!", says Aaron, which of course is a question that is even more interesting in the political context which has developed since he submitted his entry.

A copy too, to Venetia King for nostalgically suggesting the last appearance of the Goodnight Kiwi on TV2. I miss the little guy too.

Mr Bell of the Drug Foundation had been promised a copy already, but Ross, you get it as well for nominating the time (in early 90s) at the Gluepot "when Straitjacket Fits played She Speeds after a period of not playing the song following the trashing of some Dunedin pub.

They were doing an encore, Shane walks to the mic, says "this one's called 'how to please your audience'", the song begins, marvellous. The Gluepot was pulled down soon after - but surely that's not a memorable moment.

And the last copy of the book (Civil War and Other Optimistic Predictions by David Slack 28.00, Penguin) goes to Mr John Smith, (and I'll take that name on trust) for one of the best descriptions I've read of the Bassett Road Machine Gun Murders:

Threatened by the prospect of a hand grenade being chucked into his Ponsonby beer den by a rival operator, a sly grogger and his mate got cranked up on beer, benzedrine and weed before machine gunning the rival (a seaman) and his spiv mate in the front room of a Remuera villa.

He also wins for this equally meritorious contribution, with extra marks for predicting a future that sounds completely accurate except for the very last bit:

La De Da's "How Is The Air Up There?" reaches #4 on the NZ Sales Charts.

A swaggering gang of Auckland teenagers in mod threads managed to get their second and best single into the upper reaches of the NZ charts, paving the way for more swaggering Auckland teenagers in Mod gear to do the same in 1981 (Screaming Meemees) and 2005 (the Checks). Well the last one hasn't happened yet, but you read it here first. Another prediction: The Checks will probably have a better song than "See Me Go" but not as good as "How Is The Air Up There?"

Moving on to the prizes for sheer volume, the promised CD vouchers go to:

1. Kent Atkinson

2. Terry Baucher

3. Matthew Bywater

4. Peter Clayworth

5. Keene Family

6. Andrew Llewellyn

7. Ross Mason

8. Jake Pollock

9. John Shears

10. Stephen Walker

I'm pleased to say that these winners provided not only quantity, but quality.

Peter Clayworth's contribution included mention of the deaths of 'Griff' MacLaurin and Steve Yates in the early stages of the Spanish Civil War, making them probably the first New Zealanders killed fighting against fascism.

Andrew Llewellyn contributed some of the most entertaining of all the entries, and I especially enjoyed his nomination of the night Russell Crowe was punched out by Eric Watson in the men's room at a London restaurant. "Someone had to do it," he said.

John Shears had some fascinating contributions on topics ranging from remarkable snowfalls to little-known facets of our nation's wartime exploits. Best of all, he offered this gem, which is the undisputed runner-up and wins a copy of the book to go with the CD voucher. Never mind the buzzy bee, jandal and hokey pokey nonsense that people talk when they go looking for so-called Kiwi icons. Your whitebait is what you want to focus on, son. Ask any of us more senior (ie Mr Christie's age or older) New Zealanders to recall a great experience with whitebait, and just watch the wistful expression come across our face. Here's John's one about the day he was unable to lift his whitebait net from the Clutha river because it was so full of 'bait.

My Cousin Vic who was fishing nearby came and helped me. I had to do the same for him a little later on. We were fishing on the North bank of the Clutha just above the Paretai Punt. It was school holidays. After my Aunt had served her famous Whitebait fritters (One Egg to a Pound of 'Bait) and we had all had our fill we sent the rest to the market in Dunedin in two 4 gallon cans and got threepence a pound. Those were the days.

Indeed they were.

In the end, though, there was just one entry I liked even more, and it was contributed by
Mikaere Curtis: when Te Pouihi was unveiled at New Zealand House in London by the Queen Mother.

Any Kiwi who has visited New Zealand House in Haymarket will attest to the presence and mauri of Te Pouihi. Its context - a quintessentially Maori artifact displayed in the lobby of a classically Pakeha building - is a visceral reminder of the common history shared by the inheritors of Te Tiriti O Waitangi. Ngati Ranana, the London Maori Club, refer to Te Pouihi as "te ngakau o te whare" - the heart of New Zealand House. And in this way the simple event of unveiling a truly New Zealand icon has persisted in the decades following; generations of young Kiwis on their OEs have (and will) feel the undeniable mana of Te Pouihi reminding them of their roots and the unique partnership envisaged back home. Te Pouihi is a physical utterance of a reknowned truth: being a Kiwi is *very* cool.

In Civil War, I quote Ani Mikaere in her 2004 Bruce Jesson lecture:

When travelling overseas, Pakeha leap forward to perform bastardised versions of the haka and "Pokarekare Ana", and adorn themselves with Maori pendants in an attempt to identify themselves as New Zealanders: when in Aotearoa it is often those same people who decry any assertion of Maori language and culture as a threat to their identity.

She's not wrong. Some of them even think it's a good idea to put up bullshit billboards that incite division based on willful misrepresentation. We can be better than that. One iPod to Mikaere Curtis for making that abundantly clear.

Finally, because I don't want to see anyone going away empty-handed, here's a gift for everyone else, courtesy of the entertaining people at Crikey. They write:

Ever read something in the papers that's had you scratching your head and wondering just what the reporter was trying to say? Here's a cut-out-and-keep glossary of journalistic cliches.

Here's a taste of what they have to offer:

Reportedly: we stole this bit of information

Intensely private: Not promoting anything right now

Rarely interviewed: Promoting something right now

Highbrow: boring

Family Values: right wing idiot

Progressive: left wing idiot

Couldn't be reached for comment: the reporter didn't call until after 5pm

Legendary: about to die

Click over there now and LYAO.

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