Spending of taxpayer money has gone through the roof as the Government helps businesses through the COVID-19 crisis. How concerned should New Zealanders be? And how does our response compare to other countries? Louis interviews local Economist Joe Ascroft and Daniel Bunn of the Tax Foundation (based in Washington DC) – who is leading their project Tracking Economic Relief Plans Around the World during the Coronavirus Outbreak.
As confirmed by the Government today, the New Zealand Taxpayers' Union is one of the many employers that have accepted the COVID-19 Wage Subsidy. This decision was made on the basis of our ethical obligations to staff during the government-mandated economic shutdown.
The decision to accept this subsidy was not as simple for us as for most organisations. Prior to COVID-19, we have stated on the record that we would never accept taxpayer funding. That commitment was, of course, made in a time few New Zealanders could possibly have anticipated COVID-19 and the ensuing economic situation.
After brief deliberation, the Taxpayers' Union board determined the welfare of our employees to be a more pressing immediate concern than ideological purity.
Moreover, we support the Government's strategy helping employers through the current crisis and we have not criticised any employer for taking this subsidy. It is important to distinguish between targeted corporate welfare, which we oppose, and across-the-board compensation for the effects of a government-mandated economic shutdown.
We stand with all employers affected by the lockdown and urge the Government to urgently advance an 'exit plan' that will create the conditions for all businesses to return to self-sufficiency.
Despite the national health and financial emergency, most councils are still planning to hike rates - some up to nine or ten percent. Louis interviews Hutt City Councillor Chris Milne & Christchurch City Councillor Sam MacDonald on their response to our campaign calling for a nationwide rates freeze and ways councils can save money.
Find out where your local (and regional) council stands on rates freezes in the table below.
Green means a council has signaled a rates freeze.
Orange means a council has signaled a reduction in planned rate hikes.
Red means a council has not signaled any reduction in planned rate hikes.
This dashboard is subject to ongoing updates. Please contact firstname.lastname@example.org if you have more up to date information.
In this episode, Jordan talks to Dr David Law (Research Fellow) and Dr Eric Crampton (Chief Economist) at the New Zealand Initiative thinktank. Dr Law has just published a paper, Policy Point: Short-time work to maintain employment and Dr Crampton a Research Note: Effective Treatment: Public policy prescription for a pandemic. Both join us to discuss their papers, as well as why current calls from leftwing groups for a UBI are misguided.
In response to the speed in which the economic and political environment is changing due to COVID-19, we have brought forward the launch of our podcast. The first interview was last Thursday and Friday with Damian Grant and Michael Ridell who take opposing views on the extent to which the Government should intervene to keep people in their jobs during the crisis.
You can subscribe to Taxpayer Talk via Spotify here (press "follow" after clicking the link). Apple Podcast approval is still in process.
We welcome your feedback / constructive criticism as we master the art of casting the pod from self-isolation!
The Taxpayers’ Union has launched a campaign aiming to force New Zealand’s mayors and regional council chairs to commit to a 12-month rates freeze in light of current economic challenges.
While the Government prioritises economic relief for struggling families and employers, most local councils are still planning significant rate hikes in the coming months. Some have plans to hike rates up to nine or ten percent from 1 July.
In the letter to mayors and chairs, Taxpayers’ Union Executive Director Jordan Williams says, “The Government is currently prioritising economic relief for businesses and households facing economic calamity. But rate hikes at this time of economic turmoil will serve to exacerbate immediate financial stresses and undermine the Government’s relief strategy. Any economist will tell you that a recession is the most damaging time to hike taxes.”
The letter advises councils to cater for the reduction in expected revenue with cuts to lowest-value spending, rather than borrowing. “Households and businesses are cutting costs and it is only fair that your council does the same — we must all cut our cloth to fit the new economic reality.”
A public petition has also been launched at www.RatesFreeze.nz.
The Ministry of Health has not been asking staff returning from overseas where they traveled, the New Zealand Taxpayers' Union has learned.
An information response from the Director-General's office confirms that "The Ministry has not actively recorded or captured personal travel of staff and Ministry staff have not been required to inform the Ministry of their plans when they take annual leave."
As a result, the Ministry was unable to inform the Taxpayers' Union whether any of its staff had traveled to or via China in the period leading up to 4 March.
We requested this information after receiving a tip-off that a staff member at the Ministry had recently returned from China and attended a social event with colleagues.
Requiring staff to report on their international movements costs nothing. It's a basic precaution that countless businesses up and down New Zealand are taking.
We fund the Ministry of Health to provide leadership for the entire health system. If this is the example being set by our top health bureaucrats, how do they expect other employers to be prudent?
The team have spent yesterday afternoon working through the Government’s COVID-19 response package. A couple of the staff are in self-isolation, so we’ve well and truly rehearsed using the virtual technology in preparing this note and our media commentary.
In summary, the package is not as comprehensive as many economists were expecting. On the eight measures we have been lobbying for, the Government has picked up some of the ideas but left many out. Grant Robertson has signalled more is to come on Budget Day (14 May) or even before then.
Overall, yesterday's package is not as focused on protecting jobs as we were expecting. For example, the wage subsidies to employers are effectively limited to organisations with 20 or fewer staff.
The Government also appears to have used COVID-19 to make some permanent policy changes. For example, while temporary boosts to income for beneficiaries and those most vulnerable are justified, the Government has increased benefits by $25 per week on a permanent basis (that is in addition to the normal annual adjustment for wage inflation).
The Winter Energy Payment (paid to all on any non-student benefit or NZ Super) is also being doubled to $40.91/week for singles and $63.64/week for couples. But in this case, just for this year.
Summary of Government's response package:
$500 million boost for health (the cost is equal to $278/household)
$5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today ($2,833/household)
$126 million in COVID-19 leave and self-isolation support ($70/household)
$2.8 billion income support package for our most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020 ($1,556/household in the first year)
$100 million redeployment package ($56/household)
$2.8 billion in business tax changes to free up cashflow including a provisional tax threshold lift, the reinstatement of building depreciation, and writing off interest on the late payment of tax ($1,556/household)
$600 million initial aviation support package ($333/household).
The New Zealand Taxpayers' Union is welcoming the temporary measures to ease pressure on employers contained in yesterday's economic relief package.
Yesterday's relief package is a vindication of the long-term fiscal prudence by a generation of finance ministers. Measures like temporary wage subsidies are extremely costly, but can be afforded thanks to successive governments' commitment to low public debt.
We're pleased to see the waiving of interest for late tax payments, and the increase to Winter Energy Payments which will help keep vulnerable older New Zealanders at home. We recommended these changes in our briefing paper released Monday. The lift in the threshold for provisional tax will also be a welcome relief to small businesses.
We’re open to increasing benefits for the duration of the pandemic, but COVID-19 is not an excuse for locking it in. For context, the cost of the benefit hike is around $2.3 billion — almost five times as much as the boost to the health system. Every extra dollar spent here means one fewer for the productive sector and frontline health services.
There are also policy measures such as the changes to depreciation treatments which, although we support them, seem totally unrelated to the immediate threats to business cashflow and New Zealand jobs. It suggests this was very much policy designed to be seen to be doing something, rather than policy targeted at the specific challenges we face now.
Elephant in the room: 1 April minimum wage hike
The big hole in this package is supporting businesses faced with higher costs due to the minimum wage going up on 1 April. The people who get slammed most will be the working poor, earning the minimum wage or close to it, who work for a large employer that doesn't qualify for the wage subsidy package or will only receive limited assistance.
The obvious measure is to pause the minimum wage hike until economic conditions allow.
For convenience, we have copied links to the Government’s announcements and factsheets below.
Government's media releases:
Minister's speech to Parliament
Responding to the developing threat of COVID-19 to the New Zealand economy, the New Zealand Taxpayers’ Union has released a paper outlining its recommendations in advance of the Government’s package being announced tomorrow.
As fiscal conservatives, it does not come naturally to call for a dramatic expansion of the size of state spending. However, a core role of government, and why we pay taxes, is to protect the citizenry at times of national systematic shock such as war and pandemic.
COVID-19 is the biggest economic event of my lifetime. It is essential that the Government takes all steps to protect lives and livelihoods now, but also our ability to recover quickly once the health crisis is over. It is with that in mind that our economic team has drafted these recommendations for emergency measures.
We accordingly urge the Government to adopt the measures outlined below, which are explained in our paper:
- Provide all New Zealand employees with one month of sick leave in addition to existing rights for the rest of 2020, paid for by the taxpayer;
- Use buyouts rather than bailouts. Taxpayer funds paid must be in return for the Crown taking a significant/majority or total shareholding;
- Scrap the 2020 increase to the minimum wage — but if the Government insists on going ahead, have it meet the costs to employers for the next 18 months;
- Fund unlimited childcare for health workers, aged care workers, and Police staff for the next 18 months;
- Partner with Progressives, Foodstuffs and Uber to make grocery delivery free;
- Give lump-sum payments to taxpayers by retrospectively cutting the bottom tax rate from 10.5% to 5% for the 2019/2020 tax year;
- Expand 'Winter Energy Payments' to begin immediately and continue through winter 2020; and
- Suspend interest and penalties for late tax payments from employers.