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Briefing paper: The jobs cost of taxpayer-funded projects

The New Zealand Taxpayers' Union can reveal that the $11.7 million payment to the Green School will result in 25 fewer jobs in the private sector.

This calculation was made based on a new briefing paper, The jobs cost of taxpayer-funded projects, released by the Union today.

Union spokesman Louis Houlbrooke says, "Our latest research examines work by the Treasury and New Zealand economists estimating the 'deadweight loss' of our tax system this is the measure of the cost of taxation that is not the amount of money taken from the private sector, but the way the taxation motivates people to work less, and spend and invest less, leading to economic distortions."

"Because government spending is funded via taxation, we can examine the deadweight loss of handouts such as that announced by James Shaw last week."

"Research from local economists leads us to a conservative estimate that the deadweight loss of tax (or the spending it funds) is about 15%. That means the Green School handout didn't just take $11.7 million from taxpayers; it cost the economy an additional $1,755,000."

"So how many jobs did this eliminate? Based on the government's own job creation estimates, a job can be created for around $70,000. That means the deadweight loss of the Green School handout cost the economy 25 jobs." 

"Too often, our politicians fall into the trap of thinking they can create employment with increased spending. But if that were true, high-spending countries like Greece and Spain wouldn't be facing employment crises. While it's true that economic stimulus is needed in the era of COVID-19, this needn't come in the form of giant cheques. Leaving this money in the economy via lower tax rates will allow money to circulate in a way that creates jobs passively, without costly perverse incentives."

Spending items singled out as examples in the briefing paper include:

• The $72.5 million support package for the racing industry generated $10.9 million of deadweight loss and cost the economy 155 jobs.
• The $1 billion annual allocation for the Provincial Growth Fund over the last three years has generated $150 million of deadweight loss per year and cost the economy 2140 jobs per year.


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