Tuesday, May 27, 2008

Maori Party and Poverty Elimination

Has the Maori Party poverty elimination policy been costed???

My goodness. This (I notice it is not co-issued by Tariana Turia AND Pita Sharples which is usually the case) puts the Maori Party to the left of the Greens.

The Maori Party says:

* Provide a universal benefit for parents raising children. If families are already well off, recoup the benefit from tax on higher incomes. (Universal benefits reach the neediest families most effectively.)

* Set a baseline for poverty at 60% of the average wage, and a deadline of 2020 to eliminate child poverty.

* Exempt the first $25,000 of income from tax.

* Raise the minimum wage to $15 per hour.

* Remove GST from food. (The government says this would make the tax system too complex, but that argument hasn't stopped them granting all sorts of exemptions from the Emissions Trading Scheme.)

* Investigate other sources of revenue - capital gains tax, bank transaction tax.


I will attempt some VERY crude costings and please feel free to put me right if I err.

1/ A universal benefit for parents. Which parent? How much? In 2006 there were 515,000 families with dependent children. A modest universal benefit of $20 per week would cost $536 million. But why should a parent with one child receive the same as a parent with 5? The old family benefit (scrapped in the early 90s) used to be paid per child. In which case it would cost over $1 billion.

2/ Set a baseline for poverty at 60 percent of the average wage. The average income from wages or salary was $893 a week in June 2007. So at 60 percent every family head (employed or otherwise) would receive $536 a week. That's around double the current benefit rate. With roughly 114,000 parents on a benefit, instead of $1.5 billion the welfare bill would be $3 billion (and that doesn't include family support and accommodation supplement.)

3/ Exempt the first $25,000 from income tax. That would cost (very roughly) about $11 billion.

4/ Raise the minimum wage to $15. (Cost to business about $1.2 billion)

5/ Remove gst from food. $2.4 billion (DPF figures)

That's $15.9 billion. To be raised from incomes and income over $25,000. That's about 1 million workers paying an extra $15,900 a head in tax.....

...or whatever effort and wealth-creation tax the Maori Party prefers.

When they have driven all the workers away they won't have to worry about divvying up the pie any more. There won't be one.

Having talked this through with my own 'economic adviser' he wonders whether this isn't a cultural policy designed to return NZ to the economic approach that prevailed before colonisation.

10 comments:

Anonymous said...

Don't oppress her with your colonist math and predictions of an economic Holocaust!

Sus said...

Hey, Lindsay .. I love the idea of the first $25,000 of income being tax-free. I love the idea of (admittedly partial) removal of GST. Do you think Tariana's been reading Adam Smith? :)

The rest of it's typically socialist idiocy. Note the "elimination of child poverty by 2020".

Why not now, Tariana? Why condemn present and future children to another 12 years of soullessness, Pita?

Ah, but they "care" for people. Care? Wrong c-word, kids. Try control.

Lindsay said...

Sus, Fine ideas if they were talking about cutting spending elsewhere. Perhaps they have overlooked that part of the policy.

Sus said...

But of course!

Anonymous said...

I love the idea of the first $25,000 of income being tax-free. I love the idea of (admittedly partial) removal of GST. Do you think Tariana's been reading Adam Smith? :)

What on earth? Why would Adam Smith like either of these ideas. Both of them are socialist!

Rather better ideas are:
a) cap income tax paid at 30,000 per person. Once you've paid your 30K, you pay no more income tax no matter how much you earn.

b) Switch to a 10K tax per person including children. Every dollar you earn has no marginal tax. If you can't pay your 10K, well the state has a range of sanctions.

c) GST up to say 30%. Remove *all* income tax.

Anonymous said...

And no doubt the party will want more land which they will convert to gorse

Sus said...

Jeez, Anon 2, it's called tongue-in-cheek. Next time I'll point that out! (Don't you people have names, by the way?).

BTW, how the hell can tax-free be 'socialist'?

And as for your "rather better" ideas, you're still advocating legalised stealth, which ensures a continuation of big govt. Adding 30% to the value of everything is outrageously inflationary and hits those on low incomes the hardest.

Arguing for one tax over another is the proverbial deckchair rearrangement. Why not systematically remove the lot?

Allistar said...

How can you "eliminate child poverty" when poverty is defined as "60% of the average wage"?

It goes to show that defining poverty based on averages or medians is crazy. Why not define on access to basic resources like food, clothing and shelter. THAT is what poverty is about.

The current way of defining poverty see some in "poverty" owning TV's, computers and cell-phones. Anyone with such luxuries cannot be in a position of poverty.

Anonymous said...

BTW, how the hell can tax-free be 'socialist'?


More mathematically illiterate state-school educated posters. It's socialist because it makes the tax system extremely progressive. Turn it around: they say only people earning more than 25K should pay tax - and make everyone earning less than 25K into bludgers

On the other hand: a capped tax, or a flat tax with a maximum threshold than a zero rate is much fairer to everybody, ensures that everyone pays a share of tax, and rewards success!

And as for your "rather better" ideas, you're still advocating legalised stealth, which ensures a continuation of big govt. Adding 30% to the value of everything is outrageously inflationary and hits those on low incomes the hardest.

Well we still have to pay for the police, the jails, and the army somehow. At 30% GST would give a zero income tax. And, yes, those on low incomes will be hit the hardest because the existing tax system is biased so heavily in favour of them!
(this is of course why we have some many low income people in NZ)

How can you "eliminate child poverty" when poverty is defined as "60% of the average wage"?

Ahh. more mathematical illiteracy. Where did you go to school?

You can do this quite easily because incomes are Peano (power law) distributions with outliers that pull the average right up. Incomes are very flat on the left-hand side of the distribution (low incomes) but very steep on the right-hand side.
So basically you just have to ensure that everyone in NZ has an income that is within 40% of the average. If the average wage is something like 30,000, you'd only allow people to be paid between 18,000 and 42,000. With strong controls of what people were allowed to be paid within those ranges -

then no-one would earn less that 60% over the average wage (note that most of the people earning between 18K and 30K would be children on child benefit :-)

So you can do it; but only by shooting people.

Which I guess is green policy

peteremcc said...

Actually, some of this sounds like a (un-thought-through) Friedman style negative income tax.

Some of it is also rubbish...