LABOUR’S TAX INCREASE

What a hypocritical furore following the government’s announcement lifting the top tax rate from 33% to 39%. That means once over the threshold figure high income earners must now work all Monday and Tuesday before they’re left any money for themselves.

Numerous journalists and diverse economic commentators cried this wasn’t punitive enough. Tax wealth and capital they demanded and specially tax expensive homes.

Now before going any further I shall again tell the story I’ve often recounted that says everything you need to know about tax.

In or about 1991 the then new Bolger Government, in conjunction with Victoria University’s Economics Department, staged a massive tax conference. From memory it lasted about a fortnight.

Every conceivable sector was represented; Federated Farmers, trade unions, educationalists, retailers, exporters, importers, manufacturers, the different professions and so on and on.

Wellington’s two daily newspapers gave good coverage to every address.

It seemed I alone noted the common denominator, specifically that without exception every speaker outlined why society would be better off if their group was taxed less and they honed in on others they felt should be taxed more, for the greater good of society needless to say.

Well, we’ve watched the same scenario play out again since Labour’s 39% announcement.

Low paid journalists and narrow perspective economists, all people unaffected by the increase, have sung in unison, it’s not punitive enough. To quote Rob Muldoon they’re shallow as a birdbath.

Take lightweight broadcaster Jack Tame writing in the Sunday Herald. He arrogantly accused the Prime Minister of “selling out on tax by doing what is popular,” instead of what he, Jack Tame, thinks is right. What he thinks he out-lined and surprise, surprise it involved imposing taxes that wouldn’t affect him. He’s a classic example of the 1991 Conference speakers I’ve described.

Apart from my main proposition that everyone wants low taxes for themselves and more taxes on someone else, there’s another factor at play here, namely my life-long observation of the most powerful human emotion of all, namely envy of the rich.

The fact that the rich in the vast majority of cases deserve their success, their wealth invariably being based on doing something of value to society, of initial personal sacrifice and lots of hard work makes no difference to no-hopers of the smug Jack Tame ilk.

“Punish them” he urges.

Well, boy journalist, try thinking.

Punish the rich and they’ll do one (or more) of three things.

  1. Ask themselves why bother and go fishing, to society’s loss.
  2. Work out ways to avoid new punitive taxes specifically targeting them.
  3. Sell up and take their capital to a less hostile society.

27 Comments

The latter option is inevitable. Whilst NZ saw a brain drain 30 years ago we are about to see a capital drain under this communist Govt. Worse, capital won’t flow this way.
Have you noticed how every reporter now looks 12. Cindies child army I call them. All wok, liberal, dreamers who will never have a dime. They swoon, like Jack, over the PM because they lack life, business or real experience.
I remember being told when GST was introduced we will only need a 10% flat tax rate for ALL. Not holding my breath.

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I have no issues with the new tax even though it affects me. (Maybe because I expected something nastier). What really galls is the Party Leader’s insistance, as part of the justification, that “we all have to do our bit”. Even she cannot equate 2% with ALL.

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Yes those media personalities, who are paid well over $200,000 have been betrayed. Tame is one of those. Cindy’s media stardom, may not be shining so bright, no she’s seen to be taking from her very own propaganda machine. Time for a change of heart.

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Very good article sir Bob so true. The communist dictatorship is almost here.

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According to Wikipedia (‘Economic Inequality in New Zealand’) the wealthiest 5% of people in New Zealand now own 38% of the country’s wealth. Aristotle rightly concluded in ‘Politics’ that one of the main causes of revolution is inequality. Maybe the rich in New Zealand should be grateful to the Labour Government for narrowing the gap, even slightly. After all, it probably reduces the chances of them losing their heads as in France, or being put up against the nearest wall, as in Russia. Just saying.

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    Because the French, Russian and Chinese revolutions turned out so well for those who instigated them?

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    Maybe the 95% of not rich people do not want to be rich but rather choose a certain lifestyle.
    If they want to be rich maybe they should research how it’s done. It’s a fairly level playing field and opportunities are enormous. Diligence, intelligence and hard work is a good start.

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    Ha!!!
    In France the rich were born into it and earnt everything off the back off the poor. Most rich NZers have worked hard, taken risks(often going broke) and earned what they have.
    The result of that hard work and money is too often envy but that envy comes from people who never risk everything or bury themselves in reality TV or Facebook and YouTube junk. Worse they listen to Cindy talking about evil landlords (equal to the French attack on the “rich”.) or poverty. Any poverty in NZ is self imposed.
    Your proposition confuses poor with entitled. Being rich in NZ is having the same opportunity as anyone else. It then comes down to what you do with that opportunity. Communists will never understand this principle.

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    The classic Leftist threat Mr James.. pay up or get the chop.

    So what if 5% own a big chunk of the countries wealth… does it take bread off any tables? No it doesnt.

    NZ has social mobility… anyone can make if the are smart and/or hard working….

    Envy is a bitter drink Francis… the Left imbibe of it far too much

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    If the inequality is due to tyranny there’s some justification for your envy and resentment Francis. I don’t believe that’s the case for us or the West generally, more that the wealthy have learned the value of bargaining with the future. There’s a thousand games to be played, work out what you want, find what you’re good at and pursue it.
    Ancient Chinese saying: “Man going nowhere is certain to get there”

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      Why do you assume I am envious of the rich? I am one of the rich. That doesn’t negate the point that inequality breeds revolution. If us rich want to avoid revolution we need to make sure the gap between rich and poor doesn’t get too big.

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Well Bob, I’ve never have envied the rich. Mainly because I’m not an envious person, but also because I know the rich are generally just as miserable as everyone else – often much more!

You’re completely right though. When you don’t reward entrepreneurial behavior – you don’t get it.

There’s a lot to be said for getting rid of protectionism (in all its forms) to ensure people get rich for the right reasons, but for the most part we need to make sure investors want to set up shop in New Zealand. That’s not just important – it’s how economic development works.

I even made a silly kids story on it, if I may include it. Labour and the Greens need to watch it (and half of National too): https://youtu.be/vqEaablct6o

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All too true, though of what I saw Geoff Simmons’ opinion piece was at least analytical and coherent.

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Fixing the tax system in New Zealand is easy. You have a flat rate gross income tax of 10% and a GST tax of 10%. There is no incentive to employ an accountant to try to find deductions as the tax is based upon your gross income.

I suggest New Zealand’s total tax take would be about the same but with a much fairer system and one which is must easier and less costly for the Government to manage.

A lot of accountants wouldn’t be happy as their billable hours would reduce significantly due to the simplicity of this system. Some business owners would object and say my net profit could be zero and I’m paying tax based upon my gross income. I say reduce your costs or welcome to the world of people who have to get by on the minimum wage.

This low tax rate system encourages people to work harder and discourages attempts to find tax loopholes. If only a political party would introduce such a system and think outside the box, rather than heed the advice of bank economists and the like, who predicted house prices would drop during this Covid era.

I think a political party would gain a lot of votes and shake things up with this tax system.

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You can’t argue with that consistent human condition “what’s in it for me !” or “as long as it doesn’t affect me !”
I can’t help but note at least two ironies.
The people being targeted by this tax legislation are the people most likely to be able to avoid any punitive effects from the legislation and secondly people such as Bill and Melinda Gates who appear to be genuinely trying to do some good in the world are currently being targeted and vilified as having some sort of hidden malevolent agenda !

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I agree with Sir Bob. People are always after a fairer tax system, what they mean is tax someone else

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I agree
The other concern is she falsely leads people to believe that this 500m (probably end up about 300m as people restructure) from the rich will fund her reckless decisions. It will not. More taxes or spending cuts or borrowing will be required but she is misleading the voters to think that “the rich” will pay for this folly and that it is all being properly planned for.
The truth is it’s a 100 billion dollar vote buying exercise

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I still don’t understand why wealth is considered a limited pie where more for someone else means less for others. If the median wage is going up, does that not reflect a general improvement (of course as long as it’s outstripping inflation)?
https://figure.nz/chart/QRwTnCDzvn0Do1D6

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I concur with your article Sir Bob! The reference to the “boy journalist” gives him far to much credit in my humble opinion however. Boy yes journalist no! The ‘boy’ has no life experience and no doubt spends the best part of his day in front of the mirror. When his lips start flapping largely unsubstantiated drivel emanates. Personally I vote with my remote on cue cutting off the diatribe before he gets the chance to insult my intelligence

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Tame is indeed that,a silly irrelevant schoolboy who needs to grow up and do some homework taking time to analyse what he will turn up .These envious twits dont seem to realise that their endeavours re extra taxing of “The Rich’ are fruitless and just as Sir Robert suggests anyone with a brain already has systems in place to negate this.
Envy seems to demotivate the media and bean counting lot from seeing and taking the opportunity that abounds in this country and nobody should take any notice of their posturing.

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Well put..The other thing that always amuses me about the “Tax the rich” crowd is that they don’t seem to get it that the rich generally couldn’t give a toss what the top tax rate is. Spending ones capital is always an option for the rich unlike the poor (but possibly highly paid) wage and salary earners who must always live off their after-tax income.

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Well you get what you vote for Sir Bob. Vote for Jacinda again because you think she’s such a nice person and see if she takes Jack Tame’s advice & rorts you (& the rest of us) via tax – what are the odds? Robertson said he won’t tax everyone beyond the 39% if elected, but remember when the nice lady Jacinda said no new taxes last election? Now we pay the govt more in fuel tax than the fuel companies charge, and there is a regional fuel tax in Auckland. Like I said, you get what you vote for, & it will be more than 39%, tax hikes across the board, & more fuel taxes. Be kind ;).

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A tax that will generate half a billion or so won’t fill a $100 billion hole.
The economists in NZ have lost the plot, be they those at the Treasury, the Reserve Bank, or private forecasters. We have a consensus of stupidity.
The V shaped fairy tale is such an absurdity, you might wonder how it can be the consensus opinion.
Allow me to explain. I’ve worked on financial modelling for decades, so I know intimately why and how the models fail. It is very human. Typically, you start with a goofy physicist, who designs an elegant model, with throws out absurdities. This is not surprising – although the goofy physicist is intellectually formidable, the physicist in question typically has trouble dressing themselves in the morning. Real world tasks are a challenge for these people. Don’t get me wrong – these physicist types tend to be likable people – they just lack common sense.
In terms of this nasty flu, a goofy physicist here predicted 80,000 deaths in NZ. It took me 30 seconds to work out his model was nonsense, but I’ve seen these guys in operation for decades, so I knew what to expect. You don’t allow these guys to throw their dumb arse predictions out into the wild, without first reviewing their assumptions and predictions for reasonableness.
In terms of the economists, I suspect that I know how they’ve their models have contrived to produce absurd forecast as well. GDP is calculated by summing consumption, investment, government spending and net exports.
Consumption and investment have collapsed, but the economists simply assume government spending (with a fat Keynesian multiplier) will offset the declines.
The problem with this prediction is that the annihilation of business investment is structural. Businesses that took decades to build aren’t replaced overnight.
As a long-term strategy, replacing out biggest export earner tourism with massively increased government spending cannot sustainably generate comparable levels of GDP. Building new sustainable businesses to replace the ones that have been annihilated due to government vandalism does not take a year or two. It could take decades.
The consensus forecast is extremely unlikely.

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    Well put and all too true…Sadly the same sort of thing also applies to climate change modelling, though you’d be shot down for “denying the science” if you said so

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Jack Tame is indeed a lightweight but he is guilty of being something far worse, namely wokery.

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I haven’t seen an opinion poll for a while….but I’m picking labour will still be ahead of national. Act will be ahead of the greens. nz first..dead in the water. However, on ‘ issues’ like tax, how much of an old labour hoary is it to ‘tax the rich’ and think that will save the country? If labour are still ahead of national, then you have to say that lack of policies, failures etc etc by labour have gone totally un noticed by most of those who say they’ll vote labour? What do they base their indicative vote on ? Can only be that ardern is pushed in their faces endlessly, air brushed smile and all. Just have to read ’em and weap folks, like getting a bad hand dealt in poker.

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