Hard News by Russell Brown

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Hard News: Things To Do

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  • Paul Campbell,

    I have to chime in on behalf of the status quo - the current GST returns are so wonderfully simple - having to go over every purchase and sale and decide "is it food?" would make things so much more difficult

    I think that if we want to subsidise food we should raise the dole or increase WFF

    (and for something completely different I bring you: Police in southern China have discovered a factory manufacturing Free Tibet flags)

    Dunedin • Since Nov 2006 • 2173 posts Report Reply

  • Don Christie,

    But the idea itself is completely daft.

    No its not. GST is a regressive tax that has a far greater proportional impact on low income households than higher income households. Sorry Russell, you have got that side of the argument totally arse about face.

    There is an economic case for having the broad tax base that GST gives but it sure ain't that it is fairer on the poor, especially when compared to income tax regimes.

    Wellington • Since Nov 2006 • 1616 posts Report Reply

  • Don Christie,

    And to see a left wing site like the Standard falling for the same Friedman like tosh is pretty depressing.

    Wellington • Since Nov 2006 • 1616 posts Report Reply

  • Neil Smart,

    Does no one agree with you Russell? I will.

    I think you have it absolutely right why waste money putting in a system that will absorb much of the saving trying to collect the tax.

    Most of it will advantage the rich who spend most on food, unless of course you are going to make the tax only apply to staple foods and even more difficult to collect.

    It was on of the few things Sir Roger Douglas did right.

    The zero rated GST on foods is almost as bad as spending $5billion on a fibre network that 10 % of the population will use.

    Since Nov 2006 • 71 posts Report Reply

  • Deborah,

    Don's right. Poorer households spend more of their income on food, so greater proportion of their income goes on GST. Wealthier households tend to be able to save more of their income.

    Wealthier households will pay a greater absolute amount of GST, because they spend a greater absolute amount on food, but relative to their income, they pay less GST.

    Manawatu City • Since Nov 2006 • 1323 posts Report Reply

  • Scott Fannen,

    I'd go for the status quo too (even though it makes no difference to me directly - I'm in London where the rate is 17.5% on most things).

    If you have exemptions your get weird exceptions as quoted from Wikipedia "The UK also exempts or lowers the rate on some products depending on situation; for example milk products are exempt from VAT, but if you go into a restaurant and drink a milk drink it is VAT-able." Many other variations on this exist.

    Also, with food and other things GST exempt - the government might make up the (surely considerable) shortfall by increasing GST in other areas - especially with NZ's GST rate being relatively low by international first world standards.

    If they did make changes to combat price rises there should be some mechanism to reverse the situation if prices go back down again - otherwise the justification is wrong.

    People have also mentioned that it should be exempt on healthy products - milk has been suggested. That's where people's definitions of healthy comes into play - I love milk but I know that dropping lattes all day reduces my weight so go figure.

    Yes, life is tough - lattes - but that's my opinion ;)

    RE: the Free Tibet flags (can I have the steak knives instead?) - this could be a legitimate thing. If China has such control over the media, the locals might not know what the Free Tibet flag looks like because of that very control. I had to look it up myself.

    Warsaw • Since Nov 2006 • 14 posts Report Reply

  • Paul Campbell,

    I'd disagree - GST is equally fair on everyone since it's the same for every transaction - when you buy an X it doesn't distinguish between rich and poor - and because it's on absolutely everything it's pretty much impossible to avoid no matter how much you earn

    On the other hand I think that we do need an overall progressive tax system - you're right it's a matter of social fairness- currently we do that with income tax (and benefits) because that's the one place where actual income is available to trigger differential taxation.

    The big thing we don't have is a capital gains tax I think if you want to make things more progressive that would be a better place to start - it's the one major tax break the rich get that the poor don't - the problem is that there are always 2 easy numbers - 0 and everything (ie no tax or tax at the income tax rate) - I like the US mechanism that: taxes at the income rate for short term investments, at a lower rate for long term (3+ years - 25%) holdings and an exemption for family homes under most common circumstances) - that doesn't screw the middle class and encourages money to go into longish term investments rather than real estate and/or quick bucks

    One thing that I do think is broken is 'fiscal drag' - I'd love to see a law that automatically pegs the steps in the tax system to some standard inflation index.

    Dunedin • Since Nov 2006 • 2173 posts Report Reply

  • Tom Semmens,

    Oh well. At least Russell hasn't framed the whole debate as the "poverty industry" feathering its own bed, complete with the justification "Disparity is indeed the natural order of things". Pretty much confirming some people still believe in "The rich man in his castle; The poor man at his gate; GOD made them, high or lowly; And ordered their estate."

    Auckland • Since Nov 2006 • 1810 posts Report Reply

  • James Littlewood*,

    Fresh foods - health foods of all kinds - cost more than junk.

    Therefore rich people people spend more money on the food that will be exempted from GST.

    Therefore rich people will save more than poor people, making GST exemptions on healthy food more regressive than blanket GST.

    No?

    All of which says to the labour govt: cut back GST. It's the one tax break you can give which National can't.

    Auckland • Since Mar 2008 • 213 posts Report Reply

  • Craig Ranapia,

    Who'd bet against the 12.5% saving on food being at least partially swallowed up by increased margins, or simply more price rises of the kind we're already seeing? The cost, meanwhile, would be both in the simplicity and relative ease of compliance in the system we have, and in more than two billion dollars in government revenue.

    ITA. And while I feel icky defending Doctor Sullen, I think he's stating the bleeding obvious when he says that he doesn't have a lot of influence over (say) drought conditions in Australia or force the OPEC cartel to increase production and drop oil prices. Bugger.

    North Shore, Auckland • Since Nov 2006 • 12034 posts Report Reply

  • James Littlewood*,

    GST is equally fair on everyone since it's the same for every transaction - when you buy an X it doesn't distinguish between rich and poor - and because it's on absolutely everything it's pretty much impossible to avoid no matter how much you earn

    Nonsense. Fred earns $50, Jo earns $100. They both pay $5 for a beer, with the same 62c in GST. Fred's paid a higher proportion of his income on GST.

    Plus, Jo earns more because he owns a company (probably an over-capp'd LAQC), so writes his beer off as a bogus business expense, paying no GST at all.

    Cheers.

    Auckland • Since Mar 2008 • 213 posts Report Reply

  • Neil Smart,

    So if you want to help the poor raise the threshold rates of income tax that people start to pay. That way you provide a greater sum of the money to the the less fortunate without giving a hand out to those who earn enough to spend on luxury items.

    Look at the practicalities not the the commonly used tags such as

    "Friedman like tosh"

    which don't mean anything.

    And with respect to Deborah do we need advice from Australia or even from Kiwis living in Australia?

    Since Nov 2006 • 71 posts Report Reply

  • Craig Ranapia,

    I think that if we want to subsidise food we should raise the dole or increase WFF

    So, those who work but are on relatively low incomes and/or don't have children can go get fucked again? I'm just sick of the implicit argument that people who don't have children are living on the pig's back (liberally garnished with cheese, of course), because I'd sure like to see any empirical evidence that's the case. (Then again, I won't hold my breath waiting for any politician with the intestinal fortitude to go on the campaign trail and say "Can't feed 'em? Don't breed 'em -- or, at least, contraception is always an option." I don't hate children -- most of the time -- but I'm sick to death of the idea that having a set of viable reproductive organs makes is some kind of entitlement.)

    North Shore, Auckland • Since Nov 2006 • 12034 posts Report Reply

  • Deborah,

    You can do 'fairness' in a number of ways. (1) When it comes to paying for something, one way to do it fairly is to ask everyone to pay the same a amount. (2) Another way to do it fairly is to ask everyone to pay the same proportion of their income. (3) A third way to do it fairly is to ask people who earn more to pay a higher proportion of their income than people who earn less, because even after wealthier people have paid a higher proportion of their income, they will still have more left in their pockets (in absolute terms).

    It's worth being clear about what sort of definition of 'fair' you are working with before claiming that x is fair or y is fair.

    Manawatu City • Since Nov 2006 • 1323 posts Report Reply

  • Deborah,

    And with respect to Deborah do we need advice from Australia or even from Kiwis living in Australia?

    That was gratuitous, Neil.

    Manawatu City • Since Nov 2006 • 1323 posts Report Reply

  • Craig Ranapia,

    And with respect to Deborah do we need advice from Australia or even from Kiwis living in Australia?

    *cough* Probably no more than Yanks "need" the rest of the world giving them advice on their domestic electoral politics. But that's never stopped me, or anyone else around here. :)

    North Shore, Auckland • Since Nov 2006 • 12034 posts Report Reply

  • samuel walker,

    those of you with an interest in logical gymnastics

    nice, there are some Comaneci grade flips going on there...



    that Dad4justice gives me the shivers though....yuck.

    Since Nov 2006 • 203 posts Report Reply

  • Paul Campbell,

    James EVERYTHING we buy has GST - that means when we spend our take home pay we all spend 12.5% of it on GST (except for the guy who writes it off which IMHO is wrong but that's another issue)

    What is different is that it's 12.5% of you take home pay, not your gross - you can subtly argue that the rich guy is paying less because the GST tax is on take home pay - if your marginal rate is 40% then for every $1 you earn you take home 60c and the added tax is 12.5% of that 7.5c, while if you're on a 20% marginal rate the added tax on that $1 will be 10c - but the rich guy still ends up paying 47.5% total while the poor guy pays 30% total so the total tax system is still progressive

    Dunedin • Since Nov 2006 • 2173 posts Report Reply

  • Tom Beard,

    Wealthier households will pay a greater absolute amount of GST, because they spend a greater absolute amount on food, but relative to their income, they pay less GST.

    Depends upon the household. At a rough guess, I spend about 17% of my after-tax income on rent, less than 10% on utilities, 10% or so on clothes, books etc, and the rest on food and drink. Well, drink mostly.

    But I'm not sure about how certain things would apply. Would restaurant and takeaway meals also be exempt? What about beverages: tea, coffee, milk, juice, vermouth?

    If you try to define "staples", then you'll run into all sorts of cultural and socioeconomic complexities. For instance, some people obviously count butter as a "staple", but I never used the stuff when I ate at home. Olive oil was much more of a staple for me, but presumably that's a very middle class thing (at least for us Anglos). Soy sauce is clearly a staple for lots of people, but what about expensive balsamic vinegar?

    And let's not get into all the tangles about what defines "prepared" vs "unprepared" food: unless you pick it, dig it or kill it yourself, someone has already started to put effort into preparing it for you, and it's a continuum from there to readymeals.

    Has anyone actually done a costing on how much administrative overhead is saved by having a blanket GST rather than targetted?

    Wellington • Since Nov 2006 • 1039 posts Report Reply

  • Craig Ranapia,

    nice, there are some Comaneci grade flips going on there..

    Ewww... Ian Wishart in a unitard, doing the spread eagle on a pommel horse. Thanks for that picture, Samuel. :(

    North Shore, Auckland • Since Nov 2006 • 12034 posts Report Reply

  • Paul Campbell,

    Craig: I'll happily add to that "or move the tax steps" making the lower steps wider - as I said I'm definitely in favour of a progressive tax system, I just think that GST is not the way to do it - I've had to file Californian sales tax returns - NZ's system is so wonderfully easier to deal with

    Dunedin • Since Nov 2006 • 2173 posts Report Reply

  • Russell Brown,

    __And with respect to Deborah do we need advice from Australia or even from Kiwis living in Australia?__

    That was gratuitous, Neil.

    Quite.

    Auckland • Since Nov 2006 • 18961 posts Report Reply

  • Shep Cheyenne,

    Gst on food is a non issue, it is to quibble at the margines.

    Far better to ensure the level of support the families get is raised to where quality food is avalible to all.

    As has been noted before, removal of gst won't result in a 12.5% reduction in food prices.

    The increase in food prices over the last 2 years has been massively more than that and we can expect it to be more in the future. As such any reduction in tax is a nonissue.

    The issue is a living wage, and the growing number of working poor in NZ.

    Since Oct 2007 • 927 posts Report Reply

  • Terence W,

    Many other countries have chosen not to apply their GST-style taxes to some or all foodstuffs, but that's typically more a nod to social sentiment than practicality, consistency or effectiveness.

    Not really: foodstuff exemptions are - in my opinion, and compliance costs notwithstanding - a reasonable attempt at trying to reduce the regressive nature of GST-style taxes by exempting goods which are less elastic to income.

    But I agree that removing it would lead to problems with savings not being passed on. It would also be a form of fiscal stimulus (everything else being equal) so probably wouldn't help with our inflation problem.

    A better solution, if tax cuts were your thing, would be to create a tax free threshold (more money in the pockets of the least well off), offsetting fiscal impact of the cut by raising the top marginal tax rate accordingly.

    YesWeCanberra • Since Mar 2008 • 41 posts Report Reply

  • Craig Ranapia,

    I'll happily add to that "or move the tax steps" making the lower steps wider - as I said I'm definitely in favour of a progressive tax system, I just think that GST is not the way to do it - I've had to file Californian sales tax returns - NZ's system is so wonderfully easier to deal with

    Paul: Fair enough, and that's a serious argument worth having. I just wish people who reach for WFF as an income redistribution mechanism would remember barren spinsters (of all genders) have to eat and pay the bills too. :)

    North Shore, Auckland • Since Nov 2006 • 12034 posts Report Reply

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