Let them eat cake

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I look forward to reading Max Rashbrooke’s latest book ‘Too much money” It is past time we had the public debate about the divisive and unsustainable inequality that has been driven by our low-tax, free-market system. Solutions will require vision, bravery and leadership.

The headlines in the daily paper show how far part society is drifting. A couple in Auckland (who may be perfectly nice people) are demolishing their $24m mansion on the waterfront (with swimming pool) and commandeering scarce building resources (in a time of a severe housing crisis) to develop an even more luxurious palace (together with Helipad).   

In the same week we hear that in the past three months, the demand for Te Tāpui Atawhai Auckland City Mission’s services has been the highest in the organisation’s 100-year history.

Helen Robinson, the Auckland City Missioner says 

The City Mission plans to deliver 9,000 food parcels and 30,000 gifts in the two weeks leading up to Christmas, which Robinson said was its capacity.

“In fact, we’ve been doing the most of what we can do for the last three months so this planning for Christmas is truly kind of the last draw of breath that the mission can give this year to respond to the level of need.”

I expect Max Rashbrooke to cover the issue of a wealth tax. A proper tax on holdings of real estate used for excess wealth accumulation would be a step in the right direction.  I hope Max also analyses NZ’s three major redistributive programmes; social welfare benefits for working age adults, Working for Families (WFF) for children, and New Zealand Superannuation (NZS) for those over 65. 

As evidenced from a recent article in interest.co.nz  many commentators clearly dislike beneficiaries, hate WFF and have little sympathy for the plight of low income children, and yet are happy to ignore the comparatively, overly generous treatment of those over 65 even if in full-time well-paid work or with multiple million-dollar properties. 

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Even many on the left are deeply suspicious of WFF: arguing it is propping up wages that are too low many families. The welfare state is despised equally by both the right and the left, for different reasons.  

But the pandemic has shown, too many of us are only a few pay cheques away from the need of state support ourselves. Few seem to understand that all developed countries have a programme like WFF to assist in the costs of rearing children, usually more generous and better designed. 

Both NZS for the old and WFF for the young,  effectively ensure there is a basic income; the old get this cushion in the form of a universal taxable pension, the young in the form of a weekly cash payment to the parent that is given to all low-income families and reduces gradually as income increases above $42,700. For both payments, this is unconditional money that helps prevent old age destitution for those over 65 and child poverty.

NZS is expensive, ($18 billion for around 900,000 people) wage-linked and only slightly targeted through the tax system so that millionaires still get 75% of the amount pensioners with no other income receive. WFF is relatively cheap ($3.5 billion with around 1million children), is tightly targeted, discriminates against children in families on benefits, creates very high effective marginal tax rates above $42,700, is not linked to wages and is only partly indexed to the CPI.  

But the bureaucrats in Wellington have decided (with no evident objection from politicians) that their long-winded review of WFF had become too hard to continue this year. Instead of the profound reform that is needed, some minor ad hoc changes for next year have been announced.   Furthermore, subsidization of foodbanks appears to be their answer to the manifest, overwhelming need this Christmas.     

51 COMMENTS

  1. My main issue with WFF is that it is essentially a benefit. Not saying it’s not necessary but why not reform the tax rate to redistribute wealth. If you made the first $14000 of earnings tax free, rather than the present 10.5% and the rate for earnings from $14000 – $48000 reduced from 17.5% to 15% you would add approximately $45 per week to the incomes of those earning less than $48000. Then leave the next tax rate at 30% up to $70000 pa. After than increase the rate to 34% up to $120000 and have the 39% rate kick in at $120000 instead of $180000.
    There are a lot of other measures like addressing corporate tax avoidance and taxing overseas companies earnings in NZ that also need addressing but redistributing the PAYE tax rates could give an immediate boost to lower income earners. Of course, those tax rates also apply to benefits so beneficiaries would also have an earnings boost.

    • It costs at a bare minimum about 25000 a year to rent any hovel in NZ anywhere. 500 per week, 52 weeks. But heck, it is not gonna happen, they rather increase WFF for a few, then help the many. Never mind the dear leader of L announced a NZD 5 increase in the ‘benefit’ for orphans and foster kids. So kind, so generous.

      • Cheap Chinese and Japanese imports subsidise New Zealand inflation (rent and cost of living ect, what Sabine said) that’s how over worked Jacinda is. We need to bring China into the TPPA so that China can bring it’s wealth redistribution knowledge into corporate new Zealand which is a dangerous fucking game. There’s no tarrifs.

        Right now at USD$10k per capita, Chinas economy is 25% larger than the United States. At $15k as China develops more sophisticated goods and services, NZ inflation will start moving in ways you won’t like. And Chinese income per capita is eyeing $20k by 2030, possibly $25k. Either Bitcoin will take over from there because we can’t get the results out of Jacinda, or Jacinda will get the results. China has to be brought; not the TPPA. Nevermind he pa pua All of Jacinda’s political skill and capital has to go into brining China into the TPPA.

    • ChrisR Thank you for the suggestion. But an extra $45 to those earning under $48,000 CANNOT replace WFF. What you have suggested would make us more like Australia where the first $18200 is tax free. (Dont forget too that their GST is only 10% and exempts a lot of the basics). Yet the Australian system of family tax benefits ( akin to our WFF) is still much more generous than WFF. For a start they include all low income families without discrimination against those on benefits. Currently a sole parent with 5 kids on a benefit in Australia gets $35,199 in tax benefits for the children,$10,393 more than in New Zealand–see https://www.cpag.org.nz/assets/AUSvsNZChildTaxCreditsForWeb.pdf

      • the point is not to remove one benefit, but simply increase the weekly pay people take home. That would also include all those that are poor, without housing or food security that are currently being overlooked.

        We are not Australia, and as National did not bring wage parity with Australia, Labour will not bring benefit parity with Australia. In fact it is telling that even under Labour our benefits are at starvation level. WFF was set up by Labour. And Labour will not change WFF to benefit poor people or benefits in general. It goes against everything they believe.

        • There are just far to many opinions on this or that, climate change, welfare, capitalism and so on to satisfy with one or two domestic policy adjustments.

          The government just has to get bigger, manage more resources and people in the best interest of New Zealand’s National Security.

      • Susan, as Sabine picked up, the point of my post was not necessarily to do away with WFF. It was to suggest re-distributing the personal tax rates so those at the bottom pay less and those at the higher end pay more. I don’t have all the information to do full costings but I suspect it would be largely cost neutral in terms of the present PAYE tax rate. I certainly don’t mean to imply that an extra $45 per week in the hand is enough or that there wouldn’t need to be a top-up for lower income earners. What I do think though, is that having someone feel their earnings from working gives them a bit more ability to meet their basic needs is important for people’s dignity. While I’m personally on a good income now, I know what it’s like to work long hours, earn very little and be living from week to week.

        • ChrisR I appreciate that thanks for clarifying. The low tax flatish rate model we inherited from Roger Douglas shifts the tax burden from the top to the middle. The bottom is protected with tax credits– but when they abate the increase the Marginal tax rates of low middle income people over long income ranges. Last weeks WFF changes that increased the rate of abatement of WFF to 27% mean that families over $48,000 face effective marginal tax rates of at least 57%– add on ACC kiwiSaver and student loan repayments and you are over 70% to say nothing of loss of child care subsidies or child support payments when they apply. It is easy to earn another $20-50,000 or more and be literally no better off. What can we do about it now? it needs another blog….but hint it means increasing taxes markedly at the top end of income and wealth

      • Australia can do that because China subsidise Australian inflation as well. Jacinda best pull fucking finger and structure New Zealand’s relationship with China correctly.

    • Yes. It’s been said that exactly the same result as WFF could be achieved by just adjusting tax rates.

      However one has to bear in mind the reason for implementing it in the first place was as an election sweetener by Clark – she had to be seen to be ‘giving’ people something in order to promote herself in the polls.

    • Agree with your accept for the up to 70k bracket as this is not a lot of money with CPI rising as we speak.
      WFF can also been seen as middle class welfare and the foreign banks need to be sorted they are creaming it at our expense. We need to keep building good quality homes (preferably a good mix of homes not just blocks of flats) for working class people and their changing families. We need to be careful with too much immigrations as our infrastructure is buckling. We need to increase funding for palliative care as we have an ageing population. Our government needs to apply an equity lens in all of their economic policies as they are currently increasing wealth at the wrong end.

    • WFF is not a benefit, it’s a subsidy to low pay employers every dollar spent on it is a ‘market failure’ we need a legislated decent living wage no more faffing round the edges adjusting this, tweaking that just kicking the can exercises…..decent living wage now…issue over.

      • Gagarin- while you are right there is a case for the living wage or better,but in no way can such a wage cover the needs of children– if it did it would be far too much for a childless person and doubtless far too little for large families

        • bit less breeding wouldn’t hurt the planet…2 kids per couple seems the optimal when considering decent happy protected upbringing…and that only achieves population stasis.

  2. The gutless, ignorant and easily scared voted for Muldoon to get rid of a super scheme. The terrible legacy of that National government bites every day. That’s the way the cookie crumbles, that’s fine.

    The same citizens for years complaining about the consequent schemes and attendant and future problems? They shat in our nest big time and ignored that deed but certainly they didn’t STFU about how things should be. Being the experts and all. To me that’s not fine.

    • “The terrible legacy of that National government bites every day.” Sure does ,and it still hurts many of us Oldies. Those cossacks dancing across the screen every night in that campaign won the election for Muldoon. As usual their “Dirty Tricks brigade” won it for them even though it was an outright lie.
      Labour made up for it in 1984 by letting Rogernomics take us over. Now we can’t even shake that off.
      We were shafted by both sides. What has that left us with? A Parliament full of mediocre incrementalists going nowhere other than downhill.

  3. Perhaps – reduce/get rid of GST, and put in place a Land Tax- for residential owners, say at 1% to 5% per year…it would help, failing that, try Capital Gain Tax…?

    • Those where solutions for falling interest rates. Now that interest rates are at it near zero. Plans must be drawn for what happens when interest rates begin to rise. And no, you don’t want negative interest rates, that we’ll just make Bitcoin come sooner.

  4. I would like to see the age of entitlement to the old-age pension reduced to 63 which is when most people have just about had enough of working at their jobs. But the pension should be pegged to other income people are earning or have in assets. In regards to the latter, not to an extreme extent but something reasonable. If this is a disincentive for people to work past the age of 63, then well and good. It means their often good jobs (few people keep on working past the age of 65 is their job is unpleasant to them) will instead be available to younger people.

  5. Perhaps – reduce/get rid of GST, and put in place a Land Tax- for residential owners, say at 1% to 5% per year…it would help, failing that, try Capital Gain Tax…?

    • Rodger Douglas and Richard Prebble were embedded into the labour party by the then Business round table. Look at the party they set up after they left (ACT) to see that they were never really “Labour”

  6. By not eating cake, treats or gifts except very very seldom like once in a blue moon, the poor will be better off.
    An uncontrolled appetite for unhealthy foods and drinks is not a good thing, and leads the unwary to poverty more than anything else.
    Let them have food for the spirit.

    Thanks and Praises
    Jah Bless!

  7. I’m back!
    Just a wee thing.
    I wonder? Do normal AO/NZ’ers understand just how dysfunctional and psychiatrically mad in a certifiable way many of our powerful politicians and their privateer mates really are?
    They are quite fucked in clearly defined and easily recognisable ways.
    I have two friends. One friend is a Dominatrix. I’ve known this person for many years and she’s a wonderful human being with many a tall tale and true to tell of an evening when bugger all’s on the tee vee.
    I can tell you, there’s many a politician who’re beyond the imaginative mind for their deviancies and macabre yearnings that being blindfolded then hog tied and left in a cupboard for 12 hours is merely a warm up.
    My point is, they make, and made, policy that directly involves our most vulnerable. And the not so vulnerable too. We’re not all on the bones of our arse’s but then we do lead uncertain lives in uncertain times if we must be honest.
    My other friend. A lovely fellow and certainly not dull minded but like many people is plagued by bad luck.
    He started out in life with fantastic advantages but despite his hard work and creative mindset he had his inheritances, money and social positioning flattened by a series of very unfortunate events well beyond his control. I’m talking gape mouthed incredulity stuff.
    He worked hard but lost his business in the Earth quakes. He rented his business premises so didn’t get a fat check out of the tight anus of the EQC Golems. He like wise rented his house in a fancy part of town so nothing there. Fortunately, he owned a house further south he’d bought for his parents which he’d maintained for more nearly thirty years.
    Once at that house he told me stories of his loneliness, poverty, depression, anxiety, and of a looming and dangerous loss of hope.
    Then praise be to the baby Jesus ! He turned 65 ! The gravy train just pulled up at the station. It was to be 60 but Jimbo The Banskters Bimbo Bolger gave those five years and $300 million dollars to the BNZ and their buyers, the Fay/Richwhite Group who then on-sold it to National Bank of Australia aye boys?
    But I digress:
    My friend’s most enduring reward for years of hard work, mostly in feeding foreign currencies back into AO/NZ, was poverty.
    He gets a stipend back for his years of hard work in the form of superannuation and he has a gold card too which gives him pathetic discounts at shops. A card which is nothing more than a loyalty card swindle with added humiliation for him.
    My old mate’s life in his autumnal years is nothing short of a daily struggle to find the enthusiasm to not test the tensile strength of rope that he ties his dog up with when he must entertain the tut tutters and God botherers who hang around like blow flies over something on its last legs.
    And I’m forced to look at little jonky. In his pasty skin bobbing about in his swanky swimming pool.
    Jonky and his swanker mates must be tipped upside down and shaken by us until their pocketsessssss are empty.

  8. Equitable taxation. Redistribution of wealth. It’s an age old problem, ain’t that the truth. CGT; WFF; tweaking the NZS; reforming personal tax rates; imposing a land tax for residential owners; addressing corporate tax avoidance; taxing overseas companies earnings in NZ: not that the mugwamps in Wellington don’t have the ‘tools’.

    I half-heard a story the other day, about one of those ‘controlled’ psychological studies akin to the Milgram experiment. You know the one about obedience and authority where under the right circumstances normally rational folk will obey unjust orders and punish their fellow brother and sisters. Except in this case it was about the board game Monopoly, you know the one folk my age all played as kids – and indeed as adults with our kids and grandkids– on rainy winter afternoons and in summer holiday batches. The great race rush to personal and corporate wealth, eh. Can’t remember anyone setting out to be poor. I wish I had noticed such an individual who mocked convention. Too focussed on winning. In the experiment the researchers gave a leg up to half the players by giving them double the start-up cash and doubling the pass-by Go prize. No surprise what became of that. Equally unsurprising was that the ‘winners’ became mean as. No compassion when the others folded. But after the winners had cleaned up and when asked by the researchers what was the making of their success, to a person they said ‘good decisions’ and ‘skill’. Not one considered the possibility they had a helping hand from the start. I suspect that was the main finding.

    The story is ripe for interpretation. I have a wish the mugwamps in Wellington hear it and take notice. In a civil society it could be argued an important role of government is to redistribute wealth. But I think they know this already. We are not living in the middle ages or a 19th Century Dickensian world. Neoliberialism doesn’t help. Its a modern day scurge. But there are tools. Sadly not the political will, not the will that really makes a difference. There’s as role for charitable organizations too. But I get the impression a good many orindary folk are a bit indifferent. Roll the dice and watch the portfolio grow. To hell with the others.

  9. That pic of Key in his pool riles me too.
    I really resent the lie propagated by his PR machine and believed by the public, that Key donated his P.M salary to charity…..the reality was …’a portion’!

  10. I’m not sure what problem you’re trying to fix here. The rich pay far more than their share of the tax, they create jobs and for the most part don’t commit crime. So why not leave them alone to do their thing?

    The main problem in NZ is not rich people, it’s poor people, but surely we have enough evidence now, gathered over a century, that taking from the rich to support the poor just creates more poor people, more failure, more crime.

    • “The rich … for the most part don’t commit crime.

      It could be argued that the poor for the most part don’t commit crime, Andrew. Although it must seem to some that an unrepresentative number of the poor are incarcerated for their crimes. But take away gang affiliations – and some would argue the historical effects of collonialism (visible everywhere indigenous peoples have been fucked over) and our prisons would be half empty, wouldn’t they. For the most part its not the poor in prison but the disenfranchised. Anyway, the rich ain’t impervious to crime. They for the most part just commit different crimes and get away with it better.

    • “… we have enough evidence now, gathered over a century, that taking from the rich to support the poor just creates more poor people, more failure, more crime…”

      So we have more poor people, more poverty and more crime now than ever before. That’s because we’ve taken more than ever from the rich?

      • “So we have more poor people, more poverty and more crime now than ever before. That’s because we’ve taken more than ever from the rich?”

        Ahh so we have been looking at this all wrong. The trickle down theory was right all along?…

        Why Trickle-Down Economics Fails
        Critics believe that the trickle-down policy has done damage to the U.S. economy more times than it has helped. It has met with disastrous results when applied at the federal and state level.

        Kansas is a case in point. Business taxes were cut by almost a third, which left the state’s income in the red. The benefits have gone to a handful of the wealthy, who did not invest much to spur the state’s economic growth. Because the state’s revenues are markedly decreased, Kansas’ education budget has been significantly curtailed as well.17

        The International Monetary Fund (IMF) also rejects the trickle-down theory. In its report authored by five economists, it argues that “…increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20% results in lower growth—that is, when the rich get richer, benefits do not trickle down.” The IMF’s fight against income inequality revolves around the fact that expenditures of middle-to-low-income sectors are the drivers of the economy. Even a mere 1% increase in wealth for 20% of low-income earners yields a 0.38% growth in gross domestic product (GDP). On the other hand, increasing the income of the top 20% high-income earners results in a 0.08% decrease in GDP.18

        The rich get richer because they hold onto their money, invest, increase their wealth no one else.

      • The Panama Papers and the recent Paradise Papers?
        Have you heard of these multi-billion dollar frauds perpetrated by thousands of people, mainly rich people peter?

    • can you please turn the old tory 45rpm over andrew, the side you keep playing is dusty scratched and has too much hiss and crackle.

  11. You will never see change in law because the people who change the law also accept donations from rich people and businesses and it seems these donors get whatever the hell they want.

  12. Its sad that I chose not to pass on my hereditory disability and had my tubes tied.
    Really stuck in limbo in this country, you have WFF for couples with kids, the boomers can work and have assets and savings and it doesnt matter if one is working and the other isnt, both get the pension regardless but if you’re like me you get zero tax break for being responsible and because Im married to someone who works I dont get any support whatsoever, Im pretty much housebound and unemployable yet the system wont help me but completely different story when it comes to the boomers. Im Gen X, the generation that got to see the boomers rip up everything that helped them through their working lives, they ripped them up to pay for all the services they benefit from in retirement at the expense of everybody else.

  13. NZ is officially a “Tale of two cities” with the bottom 50% owning just 2% of the wealth. Due to a nearly 40 year neo liberal state and culture, perpetuated by consensus between all major Parliamentary parties, and the support of fifth columnists in the top echelon of the Public Sector, and the weak state of the central labour organisation–NZCTU.

    The other factor is the very large middle class urban and provincial, and the preponderance of petit bourgeois small businesses–these seem the voices heard most loudly during COVID. As a group these people are intolerant and unhelpful towards other citizens less fortunate (as some of them collect their NZ super–which you better not call a dirty filthy benefit!) Those on the other side of the digital and wealth divide barely get heard unless they can be demonised in some way.

    Reviews and tinkering will not achieve the change needed to drastically reduce alienation, poverty, and blighted lives in this land of plenty. Political disruption is what is needed between now and the 2026 Election to achieve a rolling back of the neo liberal state and laws such as State Sector Act, Social Welfare Act 1964 etc. etc.

    NGOs, public intellectuals, academics, community leaders of all stripes must be recruited to a new political movement that seeks to unite all who can be united to take this country in a different direction. Boomers have a long tail but are no longer the absolute majority voting block they once were. New gen voters need to step up or they will be in precarious employment and over priced rented dumps all their lives.

    –Roll back the neo liberal state
    –Retire WINZ/MSD, Basic income for all citizens, new agency for special needs
    –Free Wifi and devices for working class families
    –Return power generation and supply to full public ownership
    –State house and apartment mega build, tiny house precincts for homeless
    –Tax housing speculation till it hurts

    • I have suggested a new informal movement called The Gruntles (opposite of Disgruntled) to go charging forward with a positive and practical attitude with the discipline of The Light Brigade (could we manage this without fancy uniforms and horses?). Let’s put the effort into planning method for a real New Zealand/Aotearoa, the old one is perished, the balloon is on the ground.

  14. agreed tiger except cut the ageist bullshit it’s tired and innacurate

    I would remind you their is nothing inherently virtueous any group.

    the famous nazi book burnings … organised by ns STUDENT organisations, NOT goebbels or the party.
    the seizure of grain during collectivisation, largely YOUNG komsomol activists in concert with ‘the organs’
    ……and the red guards of the cultural revolution..nuff said?

    let’s just hold back on the identity politics huh….all groups have good and bad…..well maybe not all, but the majority.

    • Yes there are delineations among most groups. I am a “boomer” myself and have been near enough a life long unionist, activist and anti capitalist, not a property speculator or ladder puller. The generational labels XYZ etc. as used by media and certain academics are not fair or accurate on those that don’t fit the categorisations and generalisations.

      Language is important even in these “yeah, nah, eh, bro!…” times. No excuse for using boomer apart from common usage perhaps. I had an ageing gay friend and he used to say sometimes “I am just an old poof but…” to make some point, if however someone had called him a “poof” he would have let them have it. Fair point gagarin.

  15. Well, fuck the silly ‘upper’ class.

    As long as NZ exists we will put upper between speech marks. While acknowledging in our marrow the neglect of Maori.

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