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The following is an op-ed by Taxpayers' Union Researcher Connor Molloy
ACT claims to be the party of principle, but when it comes to indexing income tax brackets to inflation, it appears they have lost their way. After rightly criticising the National Party for their U-turn on abolishing Labour’s 39% top tax rate last month, ACT has now done a public U-turn of their own.
Last year, David Seymour supported Simon Bridges’s member’s bill to index tax brackets to inflation. Then, in August this year, Mr Seymour said that tax bracket indexation is “a good start” but that it didn’t go far enough. And now ACT has said they don’t support the policy at all. That’s quite a shift in the space of a year.
But Seymour and ACT have it wrong this time.
When inflation occurs, the prices of goods and services increase, which diminishes the purchasing power of each dollar we earn. This means that if you receive a pay rise in line with inflation, you are not actually earning more income in terms of what you can buy but you end up paying more tax.
Governments of all stripes have been happy to cash in on inflation when individuals’ tax bills increase as a result of being pushed into higher tax brackets or paying a higher proportion of their income at their top marginal rate. Without any consultation or justification, the government is able to receive automatic, unlegislated tax hikes by stealth. This is known as ‘tax bracket creep’ and it makes us all poorer.
ACT’s November newsletter argues against tax bracket indexation on the basis that focusing on taxes without reducing spending leads to more government debt, which is effectively just higher taxes in the future. We agree that tax relief should be funded by savings in government expenditure, but ACT misses the point.
Indexation is not a tax cut. Without indexation, governments get a free pass to increase spending because it is already paid for through bracket creep. Indexation does not reduce the total tax take, it simply doesn’t increase it.
ACT’s new found opposition to indexation stems from confusion because they wrongly conflate different policy issues that should be looked at separately – indexation, distribution of the tax burden, and government spending.
In a system that has indexation, there is nothing to prevent a party from implementing policies that shift the tax burden or cut spending.
ACT’s alternative budget addresses the latter two issues by proposing cuts to government spending, significant tax reductions and a simplification of income tax rates. We support the principle of their proposals but the problem of bracket creep will persist.
ACT argues that “[b]racket creep is not a problem in itself, it is a symptom of progressive taxation.” It’s true that if we all paid a single income tax rate, we would not need indexation. But ACT’s proposed tax system is not flat. Mr Seymour has abandoned his own 2019 tax policy of a single income tax rate. Mr Seymour’s 2022 policy is designed in a way that, over time, taxes would steadily increase year on year.
If ACT’s new tax proposal had been in place since 2017, someone earning $80,000 today would be paying $1050 more tax each year than someone on the same real income in 2017.
ACT could easily advocate for their newly proposed two-tier income tax regime to be implemented and then be indexed to inflation to ensure that the real tax rates remain constant unless changed by Parliament.
It is difficult to understand how ACT reached their current position on this policy when they accept that bracket creep is a tax increase by stealth. Each of their concerns arise from other factors that can be addressed through policies that are not incompatible with tax indexation.
If Seymour truly thought his proposed tax settings were the best for New Zealand, he would commit to indexing them. Otherwise he needs to show some courage and campaign for his 2019 flat tax proposal that would fix this issue completely.
Seymour is clearly positioning himself to play a major part in the next Government. But this U-turn is wrong both in terms of principle and in politics. He should rejoin the cause that even the Nats agree with us on: ‘No taxation without indexation!’
The New Zealand Taxpayers’ Union calls on Government to provide greater transparency over their crime prevention fund for local shop owners.
In May earlier this year, the Government announced their “Crime Prevention Package”, a $6 million programme aimed at preventing ram-raids and other forms of retail crime. Since then, however, there has been a complete lack of initiative in rolling out the fund.
The announcement of the package responded to a significant increase in ram-raid numbers through 2021 as well as further surges across early 2022. Its purpose was to ensure security upgrades such as the bollards, fog cannons and toughened glass were distributed to those most vulnerable to retail crime and who would otherwise lack the resources to upgrade security on their own. Around 500 stores across the country were identified as being likely eligible for the fund, with each store set to receive an assessment to determine what measures would suit them best.
The announcement at least revealed signs that the Government was taking the problem seriously. Although nearly 4 months on and retailers are still suffering from the same flurry of occurrences. Auckland had an incident a few days ago, the third time this year the shop had been hit, and just a few weeks back, Hamilton saw 4 ram-raids happen on the same night with another one just several days later. For owners, it’s no longer a matter of if but when they will next get hit.
Retailers were told that help was on the way, that the Government was going to provide some much-needed backing. Yet after sitting helpless for weeks on end, there are no signs that any relief is on the horizon. Astonishingly, it was revealed recently that just 5 stores had received any security upgrades since the announcement, and out of the $6 million fund designed for the package, not a cent of it had been spent.
Ram-raids have devastating effects on retailers. Many are left traumatized, terrified and in deep financial hardship. Those who fall victim to these attacks are often from small family businesses who work long hours just to stay afloat. They cannot afford to keep dealing from these setbacks, especially coming out of a worldwide pandemic. With many of them living in the same building as their stores, some are even being woken up in the middle of the night to the destruction of their shop before them. These people are living in absolute fear and the Government is barely trying to help.
Photo credit: supplied to Newstalk ZB
Countless efforts have been made by retailers to speak with the ministers, yet in most cases, their concerns are met with silence. There is now widespread confusion within the retail community on what to do about their situation. Some have taken it into their own hands, spending thousands just to ‘feel a little bit more secure’ and others have held off from upgrading their security altogether as they wait patiently for Government’s promised support.
David Lynch, acting assistant police commissioner, says police are working on a procurement plan and are training a dozen officers to carry out security assessments over the coming weeks. But why wasn’t this done sooner? With ram-raids being one of New Zealand’s most prominent forms of crime, this surely must have been prioritized more strongly than it has been.
Lynch also mentioned that the focus is on ‘past victimizations’, but this could exclude some of the shops that need help the most. These include the hundreds of retailers who might not have been targeted before, but nonetheless live in vulnerable areas known for ram-raids. The criteria for receiving support are clearly ambiguous, and it starts to seem like the only way to get help is to get hit. Furthermore, if only some retailers are upgraded, it leaves those who don’t receive upgrades even more vulnerable than before, considering they will now be the easier targets.
A lack of connection between Government and those affected doesn’t help the process either. Why hasn’t Chris Hipkins sat down with any of these retailers to truly understand the pain and fear they are experiencing? If National MP’s Shane Reti and Mark Mitchell can spend time to meet victims, ministers can and should too. These people are crying out for some transparency, and they are having the door slammed in their faces.
Ram-raids are a growing problem too, up 500% since 2018, and shockingly, the vast majority are being committed by kids, despite a stark decrease in youth crime over the last decade. There are certainly more appropriate long-term solutions than to simply barricade every shop. Government’s recent ‘Better Pathways’ package for instance, aimed at preventing youth crime, might provide some relief in the future. Still though, programmes like this will take time to implement, and retailers don’t have that kind of time.
Chris Hipkins and Government need to provide more transparency on which retailers are receiving the fund and when they should expect to have their new security installed. It is cruel enough that shop owners have had to wait this long for upgrades, at least provide them with the information that lays out the process.
The New Zealand Taxpayers' Union is disturbed to see the Human Rights Commission suggesting economic policies for which they clearly have no knowledge or understanding of.
The Commission recently called for urgent action on rent control, an idea normally spouted by economically-illiterate far-left organisations such as the Green Party.
There is strong consensus among economists, along with substantial real world evidence that shows rent controls reduce housing supply, cause deterioration in quality and harm those who are struggling to find accomodation. The government's own advisors warn against rent controls stating that "evidence from overseas shows that there are significant adverse consequences in the housing market, such as disincentivising supply, driving up prices in parts of the market where rents are not controlled, and reducing incentives for landlords to maintain their properties."
Economist Assar Lindbeck famously said, "in many cases rent control appears to be the most efficient technique presently known to destroy a city - except for bombing" – we agree.
Economics 101 will tell you that when you reduce the price of something, the supply of that thing will reduce. In the case of rental properties this is clear and can be logically explained.
Firstly, rent controls reduce the potential return that landlords and developers can get on their investment. This disincentivises them from investing in building new properties or renting out those that are currently vacant. At a time where we need to be building more houses, discouraging people from doing just that only makes our housing crisis worse.
When the price for a good is below the market price, there are more people wanting to rent and less people willing to supply rental properties to the market. This creates a shortage of rental properties making it difficult for those who are not currently locked in to rent-controlled accomodation. This results in reduced mobility in the rental market as people know they will be unable to find new accommodation.
Because people are unwilling to leave their current properties, we end up with a large number of people in living situations that are neither suitable or efficient. Families who have more kids or people getting into relationships stay in their small overcrowded houses, not willing to risk being thrown onto the street. Similarly, empty nesters are less likely to move out of their rent controlled properties and end up living in larger properties that would be better suited to more people. This has other wider societal effects such as people not moving to areas with more job opportunities or for education.
Landlords are also more likely to sell their properties to owner-occupants in order to realise the full market value of their property. This results in the supply of housing moving away from those most in need of affordable housing towards young professionals who are fortunate enough to afford a deposit, perhaps with some help from the bank of mum and dad.
Some may argue that the impacts of this can be mitigated through exemptions for new builds or certain kinds of property. This is also a bad idea because, in a rent controlled market, any properties not subject to controls face high rental prices, pushed up by the spill-over of people unable to win the lottery of a rent controlled house. Furthermore, overseas analysis says that when these kinds of exemptions are in place, landlords convert properties to be compliant with exemptions or even demolish them completely to rebuild as uncontrolled new builds.
The final point is that the conditions of homes will deteriorate. When landlords get less return on their properties, they invest less in them. When there is a shortage of housing it is easy to find new tenants so anyone complaining will be turfed out, tenants are unlikely to risk this.
If the price of groceries is too high, we don't put a cap on the maximum price for a loaf of bread. Instead, we look for ways to increase competition in the market such as by reducing barriers to entry as recommended by the commerce commission. The same thinking should be applied to renting.
If you want cheaper rent and better conditions, the simple fact of the matter is that we need more houses. We want a renters market where landlords are competing for tenants, undercutting each other with lower prices and higher quality. In the mean time, we can create more competition in the market by significantly reducing the regulations on rental properties.
Allowing people to rent out properties that are not compliant with current standards provides lower cost alternatives to those who want it. These kinds arrangements won't be suitable for everyone but provide a low cost alternative to those who are willing to accept it while simultaneously reducing the demand (and cost) of all other available properties. Reducing red-tape on constructing and renting out 'tiny houses' on vacant land also provide quick, low-cost solutions in the short term.
We invite anyone from the Human Rights Commission, the Green Party or any other organisation advocating for rent controls to join us for a debate on our podcast. In the mean time the Human Rights Commission should stick to their remit and take some time to listen to our podcast on this issue with Brad Olsen.
The New Zealand Transport Authority have targeted a Featherston family with threats of enforcement action over a "Stop Three Waters" banner erected on private property.
Here is a photo of the banner in question:
An email to the family from South Wairarapa District Council says NZTA have "raised concerns about the wording of the sign, specifically the large red STOP that could cause potentially safety issues along the State Highway":
The email finishes:
NZTA might be morons, but Kiwis are not.
The idea that motorists will slam on the brakes when they pass a 'stop three waters' banner is frankly laughable. NZTA need to pull their head in, and stop acting as lapdogs for their political masters trying to suppress New Zealanders' ability to express their views on a radical policy proposal that will result in high water costs and less democracy.
Any action that is taken against any one of our 180,000 subscribed supporters via NZTA relating to one of the Stop Three Waters signs purchased from our website will be defended, by judicial review if we must, by the Taxpayers' Union.
What makes this action particularly offensive is the fact that NZTA has not just a history of trying to suppress speech on the centre right, but actively promotes pro-government messages including on NZTA signage. Throughout 2020 NZTA allowed its digital signage networks to be misused with politically loaded “Be Kind” messages. That's to say nothing of the multi-million dollar ad campaigns they blast into Kiwis' living rooms promoting the Government's 'Road to Zero' policy.
Hundreds of fantastic New Zealanders have erected Stop Three Waters banners in every corner of the country. Is NZTA going to threaten every one of them?
The courts have been very clear that political speech is that which ought to be the most precious from a human rights perspective. If NZTA really wants to have this fight, we say bring it on.
New Zealanders with great roadside locations can purchase a Stop Three Waters banner of their own at www.taxpayers.org.nz/shop.
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