Cracker by Damian Christie

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Cracker: Another Capital Idea...

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  • Damian Christie, in reply to Rich of Observationz,

    I was working to list the various failures of Telecom management – but hey, I don’t need to

    Exactly - imagine how bad they'd be if they only got paid 1/20th of what they get now....

    Wellington • Since Nov 2006 • 1127 posts Report Reply

  • James Butler, in reply to Damian Christie,

    I was working to list the various failures of Telecom management – but hey, I don’t need to

    Exactly – imagine how bad they’d be if they only got paid 1/20th of what they get now….

    I don't buy that it would have any (negative) impact at all. Perhaps if their making a fortune was properly contingent on success - rather than success being the difference between a huge fortune and a slightly huger fortune, or there being no difference at all - I would have more sympathy.

    Auckland • Since Jan 2009 • 799 posts Report Reply

  • Danielle,

    Wait. There are still people who think our system is fundamentally a meritocracy?

    How sweet.

    Charo World. Cuchi-cuchi!… • Since Nov 2006 • 3623 posts Report Reply

  • DeepRed,

    The point is that CEO pay often relates to the size of the company, rather than actual performance. Hell, in the cases of Enron and Lehmans et al, there were executive bonuses even for running the companies into the ground. Closer to home, some years back Solid Energy lost $86m and laid off dozens, while the outgoing CEO walked away with a six-figure golden parachute.

    The southernmost capital … • Since Nov 2006 • 4058 posts Report Reply

  • Hilary Stace,

    This has been going around the internet for a while but it seems relevant to this discussion and it only takes 2 mins.

    Wgtn • Since Jun 2008 • 2004 posts Report Reply

  • Sacha, in reply to DeepRed,

    Income tax rates aside, it's a well-busted myth that high taxes make NZers emigrate. The real reasons are that NZ is a small fish in a big sea, and that there aren't enough specialist or otherwise interesting jobs for the most talented NZers (because all the investment money has gone into housing speculation).

    And you surely don't need to be a lefty to understand that a CGT would mitigate some of the damage from those distorted investment patterns.

    Ak • Since May 2008 • 16270 posts Report Reply

  • Sacha, in reply to giovanni tiso,

    Welfare benefits are set 20% below the poverty line. I fully realise that middle class New Zealand liberals are past masters at not giving a shit about any of that, but I say we can do better.

    You'd be surpised how many NZers don't know what Richardson and Shipley did in their name - and which every government (and opposition) since has chosen not to challenge.

    Ak • Since May 2008 • 16270 posts Report Reply

  • Hilary Stace,

    More significant than a CGT is Labour's suggested commitment to making all policy child-centred. If this is implemented it would mean that benefits below the poverty line would become a thing of the past, as would cuts to education, state housing and anything else that disadvantages children.

    Wgtn • Since Jun 2008 • 2004 posts Report Reply

  • Sacha, in reply to Hilary Stace,

    More significant than a CGT is Labour's suggested commitment to making all policy child-centred.

    It's only 'more signifcant' if you have no interest in economic policy (or in how the other policies will be paid for).

    Ak • Since May 2008 • 16270 posts Report Reply

  • Stephen Judd,

    if the salary was capped at $361,000 or whatever arbitrary figure we decide is ‘enough’, they might be quite a shitty CEO

    I suggest you google "CEO compensation correlation". You might be surprised, or not, to learn that there appears to be no correlation or possibly an inverse one. So there might be a shitty CEO at $361K, but there might be an excellent one as well.

    A possible explanation which I heard is that skills at negotiating compensation packages and climbing the corporate ladder aren't necessarily the same skills required to run a business really well. Another is that external factors -- luck -- overwhelm the effect that one person can have. Another is that good boards are really what create great companies, and a good board doesn't overpay the CEO.

    I honestly believe that the idea that CEO pay reflects their contribution is bullshit. Competent people are rare, but not that rare. If you don't share that belief, obviously you'll come to different conclusions.

    As to the businesses we can least afford to have leaving being portable, well no. Dairy farms are not portable, and they are the engine of our current economy.

    Niche manufacturing, software and high tech, which I personally think of as being the ones that we really want to grow and depend on for the future, are portable, in the sense that intellectual property is mobile. If the creators of those businesses were strongly motivated by tax regimes, they'd be elsewhere already. In any case, they certainly don't pay themselves very much, in my experience. Not Telecom CEO level pay. A 40% or even a 50% marginal tax rate is unlikely to make much difference to what in the end is a lifestyle choice to remain in NZ, I suspect.

    Wellington • Since Nov 2006 • 2917 posts Report Reply

  • Rich of Observationz,

    Not to mention the number of people that have created great things and generated wealth while existing on an academics wage, or no wage at all:
    - Tim Berners Lee
    - Linus Torwalds
    - Ernest Rutherford

    Back in Wellington • Since Nov 2006 • 4356 posts Report Reply

  • BenWilson,

    The point is that CEO pay often relates to the size of the company, rather than actual performance.

    Yes, in that way they're actually like government.

    My personal experience has always been that the bigger an organization gets, the generally less empowered and happy the employees feel, and the greater the disparity between pay and performance. But the people at the top get way more than most small organizations, so naturally they think it's pretty choice. Which probably explains why most examples holding up capitalism as awesome are simple, referring to small businesses, simple markets, etc. When the iron law of oligarchy kicks in, and power does what it usually does, concentrates, then most of the least optimal aspects of capitalism kick in. Luck is rewarded far more than talent or effort, and the most rewarding behavior is to crush competition, either internally via sneaky politics, or externally with sheer muscle.

    It's hard to see how this basic factor could be changed without dramatic changes to our social organization, because large scale organization is something that it is pretty much impossible to stop.

    Tweaking existing taxation goes some of the way, but I don't actually think that focusing on pulling the big boys down can ever work. They're just too far in front, too entrenched in power structures, too mobile, too strong. The better way is to focus on bringing the small players up. The more empowered they are, the greater the chance of upward mobility of everyone who cares for it. And the more it is seen to happen, the more people do care for it.

    So I do favor a more progressive taxation system. Bringing in a CGT is a good start, focuses on a particularly dysfunctional part of our national wealth profile. We could do more, though.

    All this said, I do agree with Damian that we should still be allowed to make mad cheddar. Some good ideas should be allowed to go apeshit. If hotcakes are selling, that's because people want them, and they'll go without if at some point the hotcake maker is told that they're just not allowed any more.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • martinb,

    Sorry this may be pointed out already- I'm just going to read through the responses, but I think it is wrong to suggest that Key is dictating the discussion over it.

    Commentators are, and also most people seem to have a good idea about what it is, and are forming their own ideas.

    For me Key's response feels like knee-jerk scaremongering.

    I think this is some good politicking from Labour, and it would be nice for it to stay that way until they next get elected, and well after that.

    Auckland • Since Jul 2010 • 156 posts Report Reply

  • Damian Christie, in reply to Stephen Judd,

    As to the businesses we can least afford to have leaving being portable, well no. Dairy farms are not portable, and they are the engine of our current economy

    Yup, and if you think our future prosperity lies in shipping milk powder overseas, then there's another thing we'll have to agree to disagree on.

    *EDIT (having read the rest of your post): I actually do think there's a point where living in New Zealand, or at least basing your business and therefore tax revenue stream, becomes less choice, especially when you're young and enterprising and have a kick-arse idea. I simply can't accept that there's absolutely no correlation between tax rates and retaining people who have other options, but I'm certainly not saying there's an absolute cause-effect relationship where everyone will abandon the sinking ship.

    I'm going to duck out of this now, because it's the weekend, and also because I think some time ago I heard the clunk of metal on metal you get when people disagree over fundamentals.

    I'm off to make some more money.

    Wellington • Since Nov 2006 • 1127 posts Report Reply

  • giovanni tiso, in reply to Damian Christie,

    He also voted for homosexual law reform and supports medical marijuana… should I change my views on that too?

    As Ernesto Rossi once said, if a fascist says that it's raining and it is actually raining, then the fascist is right.

    But hey, look, knock yourself out, agreeing with Roger Douglas wise. You'd be a lot more above board than the bulk of New Zealand liberals, who always bang on about how evil Roger Douglas and Ruth Richardson were, but god forbid they should ever suggest, much less advocate, reversing their policies. Apparently because they were "a necessary pain". Just not for them.

    Wellington • Since Jun 2007 • 7320 posts Report Reply

  • martinb,

    http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10737062

    for once I think the Herald editorial and cartoonist nails my perspective!

    Auckland • Since Jul 2010 • 156 posts Report Reply

  • Damian Christie, in reply to martinb,

    but I think it is wrong to suggest that Key is dictating the discussion over it

    Yeah, that was over-simplistic of me, I simply meant that it certainly ain't being dictated by Labour, whose fricken policy it is. And knowing the media fairly well, they'll be reluctant to re-run the "Labour to introduce CGT" headline a week after they first did, simply to get Labour's side of the story.

    Wellington • Since Nov 2006 • 1127 posts Report Reply

  • Jeremy Eade,

    Damian,

    Which N.Z business people in particular do you fear would leave and how would they do it ?

    I guess I'm with the higher taxers. I can't understand your proposition. The facts don't reflect your predictions. I can't begin to understand the defence of tax laws made by strange parliaments that don't exist anymore unless those tax laws make sense

    The economy is busted, is that hard to say.It busts a lot, too much in my opinion: because a busted economy starts to entrench poverty pretty fast and that will cost.

    We need to start taxing back the capital that has been created in our recent boom years to fund all the good things in our society.

    Reading everyones terrific writing I believe this to be true:

    That since the Eighties onwards the richer have got richer and yet delivered a poorer society overall .This surely defeats the purpose and logic of rewarding them with money. The results are getting worse every year.

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • Stephen Judd,

    I think one thing we need to keep in view about higher taxation is what we do with the money, and how that can be positively attractive. The government doesn't set your tax money on fire, it spends it, sometimes on rather good stuff.

    When we have high quality public services and low income inequality, we are likely to have a happier populace, lower crime, better educated and presumably more productive workers, blah blah -- if you loved Sir Paul Callaghan's prescription for more high tech etc, note that it was accompanied by a call for promoting social justice in order to create a country that is attractive to smart people.

    I actually agree with Damian in that there is some point at which taxation is so onerous that it will cause a harmful level of people to choose to live elsewhere. But I think we can usefully argue about where that level is and what would justify it. Arguments that amount to "ooh, if we raise taxes too high then all the smart rich people will leave and we'll be DOOMED" are not helpful or convincing to me. Especially since arguably, I AM one of those people, and am not fazed in the least by the prospect of 70s-level taxation, at least if it funds 70s-level public services.

    Wellington • Since Nov 2006 • 2917 posts Report Reply

  • bmk,

    I like the look of the Australian tax system and would be happy to have that implemented here.

    Taxable income Tax on this income
    0 – $6,000 Nil
    $6,001 – $37,000 15c for each $1 over $6,000
    $37,001 – $80,000 $4,650 plus 30c for each $1 over $37,000
    $80,001 – $180,000 $17,550 plus 37c for each $1 over $80,000
    $180,001 and over $54,550 plus 45c for each $1 over $180,000

    But of course if we were to implement this we would be told that all our top-earners would flee to Australia to escape our punitive tax rates.

    *Edit* That was nicely formatted but as PAS won't take standard html tags can't put in nbsp. Can the acceptance of standard tags please be implemented at some stage?

    Since Jun 2010 • 294 posts Report Reply

  • BenWilson, in reply to bmk,

    Don't forget the compulsory super that is at least 9% regardless of bracket. Not technically a tax, but it's money straight out of your pay packet that you can't spend, so it works much the same economically. There's some other taxes - the medicare levy surcharge is 1%.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • bmk, in reply to BenWilson,

    Yes so people here really can't complain about the tax we pay. And so all the kiwis moving to Australia aren't doing it to escape our oppressive taxes either. As I (and others) have said before it's funny how National keep talking about catching up with Australia but seem unwilling to bring in any Australian style policies here. They instead seem to think we are going to catch up with Australia by doing the opposite of Australia which seems strange logic to me - but then what do I know.

    Since Jun 2010 • 294 posts Report Reply

  • DeepRed, in reply to bmk,

    They instead seem to think we are going to catch up with Australia by doing the opposite of Australia which seems strange logic to me - but then what do I know.

    Speaking of Australia, the logic is quite simple really - the prevailing orthodoxy thinks Kath & Kim is a manifesto, not a sitcom.

    The southernmost capital … • Since Nov 2006 • 4058 posts Report Reply

  • Tim Hannah, in reply to Stephen Judd,

    We don't even have to go back to 1970s tax rates, I remember the great CEO outflow of 2000 when top tax rates went from 33 to 39%.

    We were all lined up at the leaving gates, we were, weeping and wailing and begging them to stay.

    Wellington • Since Jan 2007 • 222 posts Report Reply

  • Damian Christie, in reply to bmk,

    Yes so people here really can’t complain about the tax we pay.

    Yes, they can, if they want to. There are plenty of countries with less tax, and a number of my friends have gone to live and work in them. You can’t just point to a country that has higher tax than us and say ‘see’, any more than you can point to a country with a higher gender wage gap than ours and insist women should stop complaining about that.

    And so all the kiwis moving to Australia aren’t doing it to escape our oppressive taxes either.

    No-one said they were, not here at least. It probably has a lot to do with the 30% higher wages and brighter economic outlook.

    As I (and others) have said before it’s funny how National keep talking about catching up with Australia but seem unwilling to bring in any Australian style policies here.

    So you think that the key to Australia’s current economic success is it’s progressive tax system? Screw mineral wealth, those top tax rates will sort things out.

    Wellington • Since Nov 2006 • 1127 posts Report Reply

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