Monday, March 21, 2016

Labour's $40 billion policy (updated)

The universal basic income.

$40 billion. Yes. That's roughly what it will cost to give every New Zealander aged 18 or over $11,000 annually.

Putting aside questions of affordability, who will vote for this?


It's well under what Super pays so I don't think so - not en masse anyway.

Beneficiaries? There's mention of supplementary transfers for the most disadvantaged. Vague. I doubt it.

Students? Possibly. But they'll have to be convinced to pay the substantially higher tax such a policy demands. After all they expect to form the most highly-taxed bracket ultimately.

Self-employed and business owners? They won't be keen on higher taxes either. And they aren't silly. They understand the senselessness of pay without productivity.

You would think there was some sort of massive employment crisis yet the unemployment rate is 5.3%.

Not 15.3% or even 10.3%

Time and again there have been points in history when technology has been tipped to make man redundant. Yet jobs keep inventing themselves.

And what would the effect on other services be? Education, Health, Law and Order?

Credit to Bill English for calling it without equivocation:

National's Finance Minister Bill English said a universal basic income "would be very expensive and likely discourage work".
Well, perhaps he could have been a tad more dismissive.

But nobody could put it past Labour, with their mid-2000s record of bribery, to craft this craziness into policy in time for the next election.

Update; I had forgotten Treasury's work in this area. The following is a comment I just posted at Kiwiblog 

At the request of the Welfare Working Group Treasury did some modelling on Guaranteed Minimum Incomes in 2010:

“An income of $300 per week is just over the average (mean) benefit income – therefore a plausible minimum income. However, paying a guaranteed income of $300 per week to every New Zealander aged 16 years and over, excluding superannuitants, comes at considerable fiscal cost. The fiscal cost
of the GMI proposed in the first model (Model 1) is $44.5 billion (including the cost of all social transfers – in particular, New Zealand Superannuation payments, would cost $55.5 billion), requiring
a flat personal tax rate of approximately 45.4%. Note that this tax rate and the others considered below are cost-neutral – not fiscally neutral – as personal taxes currently raise approximately $6
billion in excess of current social assistance costs.
However, a consequence of Model 1 is that the higher personal taxes rates lower post-tax New Zealand Superannuation payments by approximately 44% on average. Therefore, a second model
(Model 2) was developed that removed New Zealand Superannuation and extended the GMI payment to superannuitants. As expected, the fiscal cost of the GMI increased to $52.6 billion ($55.6 billion including all social transfers) requiring a higher flat personal tax rate of 48.6%. However, it did  improve the outcomes for superannuitants, evident by declining poverty levels.”

Treasury concluded:

“The GMI scheme proposed by the Welfare Working Group is a significant policy change with large
economic consequences. The scheme is fiscally very costly and would not necessarily achieve its  main goal of reducing poverty. The high personal tax rates required to fund the scheme are highly
distortionary to the labour market and to savings and investment decisions, and would be likely to
induce a significant behavioural response. This has damaging effects on the tax system and economic
growth. “


Jd said...

"jobs keep inventing themselves". yip a bucket was a robot

Anonymous said...

You would think there was some sort of massive employment crisis

Yeah well there is a massive employment crisis: NZ's employment is far too high with vast numbers of the population subsidised by a very small fraction of nett taxpayers. We need real employment and labour reforms in NZ to get wages down and productivity up --- and that transition will necessarily push the unemployment rate to at least 15% (as under Thatcher) or 18% under Ruuthanasia...

Anonymous said...

And as for this crazy, crazy Labour policy, it is absolutely backwards

WFF was bad enough: turning everyone earning less than around 100K into bludgers.

This policy just makes everyone a bludger

The single biggest issue now is to remain competitive with even countries like the UK and eliminate all corporate taxes.

Then we need to eliminate benefits, starting with the dole and super and education and healthcare.

I can't believe not one NZ politician has even commented on the latest UK budget - or what it means for NZ!

Jigsaw said...

Certainly makes everyone a bludger - little incentive to work and I personally can't see that it wouldn't be incredibly inflationary as well. On radio today Grant Robertson seemed very reluctant to put any figures to it all seemingly saying that that was going into detail and he didn't want. I can't see how you can't go into detail to make it debatable.

S. Beast said...

FFS this is worse than the flag debate.

In any case what do they think the extra money will be spent on? For those in greatest need there will be a corresponding RENT INCREASE. Morons.

twr said...

It might be worth noting that Roger Douglas proposed exactly the same scheme not so many years ago. Luckily nobody was listening.

twr said...
This comment has been removed by a blog administrator.
Lindsay Mitchell said...

Did Roger propose a negative income tax system in line with Milton Friedman's? I don't remember. I know that the Wgtn Libertarianz went with a similar policy in 2008.
I don't like it because it assumes and affirms a role for the state in redistribution.
But libertarians can and do mount persuasive arguments for it - including Charles Murray most recently.

Anonymous said...

Douglas proposed a "Guaranteed Minimum Income" in the '87 budget that was nixed by Lange.

Bond said...

An earlier manifestation of this was the "Cloward-Piven strategy" poopooed and forgotten forever (or we thought so) in 1966. Won't ever completely go away though.

Might work (though I doubt even this) if the whole world did it at once.

But otherwise when maximum tax rates become 66 percent, then people will simply migrate away from such usurious rates. And your country becomes the next version of the current Venezuela. Hello basket cases.

"Government coffers fly out the window when usurious tax rates are at the door"

Anonymous said...

Maximum tax rates in NZ historically hit 99% - and probably up to about 105%.

Current NZ top tax wedge is about 53%, top effective marginal tax rate is still around 95%