Progressive tax - US versus Sweden

Funny how the word 'progressive' usually has good connotations. Not when it comes to tax (unless you are a socialist). NCPA reports;

U.S. Tax Code Is One of World's Most Progressive

The United States has one of the most progressive tax systems in the world, and has become much more progressive in the past 30 years, says Richard Rahn, a senior fellow with the Cato Institute.

* The top 1 percent of taxpayers pay 38 percent of all the income taxes despite having just 20 percent of the income.
* The top 10 percent of taxpayers pay 70 percent of the income tax while having just 46 percent of the income.
* At the other end, the bottom 50 percent of taxpayers pay just 2.7 percent of the income tax while having 13 percent of the income.

This has resulted in a situation in which a relatively small minority of taxpayers pay the bulk of the taxes, while most American pay little or no income tax. This is causing an increasing disconnect between benefits from government and what most citizens pay for. One result is a greater polarization in the political realm where a majority of citizens increasingly demand more government benefits for which they want others to pay.

The Swedes were on this same destructive path, but they reversed course over the last couple of decades and made their tax system far less progressive, even though their tax rates at all levels are above most of those in the United States. The result has been a tempering of demand for new government services as people at all income levels realize they will be the ones paying for those services and not some mythical "rich" person. The side benefit is that Sweden, as a result of tax and other reforms, now has one of the highest economic growth rates in the world, says Rahn.

Source: Richard W. Rahn, "Tax Inequity," Washington Times, April 11,2011.

And additional information from Sweden;

Sweden may need to push through tax cuts at every budget if it is to reduce unemployment further, Finance Minister Anders Borg said.

“We have a lot of work to do to secure full employment,” Borg said at an event today arranged by Svenska Handelsbanken AB (SHBA) in Stockholm. “It will require that we make changes to taxes and spending in practically every budget going forward if we are to come down to unemployment rates in line with the best European countries.”

The government yesterday raised its economic growth forecasts for 2012 and 2013 and predicted budget surpluses, allowing it to cut taxes when most other European countries are grappling with austerity measures. The fastest-growing European economy will expand 4.6 percent this year, 3.8 percent in 2012 and 3.6 percent the following year, Borg said yesterday.

The krona strengthened 0.2 percent against the euro to 9.0224 at 9:40 a.m. in Stockholm. It jumped 0.9 percent yesterday following the government’s forecasts.

Unemployment fell to 7.9 percent in February from 8.2 percent the previous month, Statistics Sweden said on March 17, citing non-seasonally adjusted figures.

My conclusion?

A lot less government is still preferable BUT where it exists, paying for it should be as equitable as possible. Nothing would persuade me that paying an average tax rate of 57.77% was a good thing. Those economic growth rates in Sweden are similar to what NZ had in the mid 2000s without paying exorbitant (relatively speaking) tax rates. And the US has had similar rates under similarly progressive regimes as described above. There are far more factors affecting economic growth than tax rates alone.

(Out of interest, in NZ, based on income tax alone;

* The top 2 percent of taxpayers pay 17 percent of all the income taxes despite having just 20 percent of the income.
* The top 12 percent of taxpayers pay 49 percent of the income tax while having just 46 percent of the income.
* At the other end, the bottom 45 percent of taxpayers pay just 8 percent of the income tax.)

Goff can't copy Gillard

Two months ago Australian PM Julia Gillard made her first major economic speech of the year about getting people off benefits.

She has just re-iterated her focus on work in a further address. This is how she defines what Labor, her party, stands for;

In her speech to the Sydney Institute last night, Ms Gillard said Labor was ''politically, spiritually, even literally the party of work. The party of work not welfare, the party of opportunity not exclusion, the party of responsibility not idleness.''

Immediately one mentally contrasts this to the New Zealand Labour Party, and reflects on the latest attempt by one of their own to define his party. Something to do with geese.

Uninspired political leaders often look overseas to see what their counterparts are doing. But there isn't a cat's chance in hell that Phil Goff will come out saying what Gillard said. It would be judged utterly implausible and generate further public derision.

Which is very sad because it was once quite true. Ironically, when we had an Australian PM.

Power goes too far again

According to the NZ Herald;

Extended family and close friends of child abusers could face up to 10 years in prison if they turn a blind eye to abuse and do not report it.

Justice Minister Simon Power yesterday introduced changes aimed at protecting children from abuse and neglect, including a new offence making people who are close to a family liable if they do not report abuse to the authorities.

Another step too far.

It'll be interesting to see where the Maori Party fall on this one. Given Turia's drive to make more families responsible for their own to reduce family violence, will she support National on this one? It could play either way. More state involvement always leads to less personal responsibility. On the other hand the new punishment might be described as enforcing greater responsibility. No. I hope, along with the Greens (ACT are hopeless in this area) the Maori Party will denounce this.

It is clear that getting CYF involved in family problems is not necessarily the cure-all. It isn't difficult to conjure scenarios where a family member might be loathe to go to them or the police preferring to deal with a situation themselves. What about a mother who sees one of her children abused by a violent partner but the others left alone? She can plan to leave. In the interim she suspects that bringing the police into the picture will exacerbate matters. Ramp up the violence. Involve the other children. She makes a choice to try and resolve her situation herself and with help from other close friends she trusts and tells about the violence. They are also now culpable.

They weren't "doing nothing" but they failed to report the abuse. Will the two parts of the equation be separated?

I see other problems as well. The threshold for abuse and neglect is legally very low. A grandparent who has always smacked to discipline, and still does, should be reported by the parent lest he or she risks a jail term? Yes, my objection sounds vaguely silly but it's valid.

And what about people involved with families as volunteers or mentors? Someone working with a violent family who's task it is to change that behaviour? What if they fail and the police become involved. Retrospectively, is that person - who has become a "close friend" - now culpable?

And was the abuse actually seen, or is 'suspected' enough to make an associate take a walk? Imagine the finger-pointing when one person is going down.

We all know what kind of people Power is trying to net here. But his solution is going to be fraught.

One last question. If it's such a good idea why has it taken until now to think of?

Dressing down CPAG

Oh joy. Someone other than me having a go at the Child Poverty Action Group. Big ups to Dr Rosy Fenwicke for her column in yesterday's DomPost;

OPINION: KIWI mothers are battlers too. Donna Wynd and Susan St John need to be enlightened about this fact before they consign all mothers in New Zealand to the state-funded victimhood they seem to be advocating in their column Enlightening the Welfare Working Group.

Sometimes events beyond our control conspire to undermine our abilities to look after ourselves and our children, which is where a caring community kicks in.

The Welfare Working Group seems to be offering hope with help and the Child Poverty Action Group is offering help without hope to Nikki - the solo mother example. It is the second option that riles me the most.

Let's look again at Nikki. She has two children aged six and three and works part-time at night to help support her family. Let's not talk about a nebulous no-good partner, but give the father of her children an identity - Sam.

Sam and Nikki, for whatever reasons, have decided to split. Nikki keeps her night-time job because she likes it and it is the place where she is treated like an adult after day-long childcare. Sure, she is tired but sometimes she gets help from her family.

It does not require magic to continue working and looking after children. New Zealand mothers (and fathers) do this every day and we cope. Support is nice but not always available.

Accessible, safe and affordable childcare close to the workplace is essential, or mothers of children aged under five are not able to work. Once this is properly addressed, there are no barriers, other than choice, to a mother working after having children. Lots of us do it (alone). We have to. Our kids are fine.

More

Blind to the forest for the trees

Details are boring and irrelevant when it comes to the government-run systems of benefits and tax. But those details keep thousands of people in employment. And they provide a focus for divisive politics. The two main parties are perpetually entangled in debate over details and rarely seem to take a breather step back and examine the underlying idea. Then the incongruous situations arise where one says my detail is better than your detail. But both are wrong.

This is highlighted in yesterday's blog about the unpaid parliamentary intern-ship organised by Carmel Sepuloni. Yes, it is a good thing for the young lady in question to be getting some work experience (in something other than how to run other people's lives would have been preferable), even if it was unpaid. But it clashed with the benefit rules (at least until the MP intervened). And the rules- aren't- really- rules perception of WINZ is at the heart of welfare misuse. By necessity, where government presides over people's lives, so do rules.

Today throws up another silly details scenario.

Child Poverty Action Group says the definition of ‘family scheme income’, which came into force on 1st April goes too far.

Spokesperson Susan St John says it is fair that income from trusts and ‘portfolio investment entities’ (PIEs) is now counted when calculating Working for Families, Student Allowances and the Community Services Card entitlements. “But the new definition includes regular gifts of money from other family members, for example, if an outside family member pays for something like the electricity bill.”

While gift duty is abolished for the rich, regular transfers which total over $5,000 to struggling low income families are penalised. Transfers totalling $5,001 means $1,000 loss of Working for Families tax credits.

These low income ‘working families’ are not the ones hiding money in PIEs and trusts. The government ought to be encouraging grandparents who can afford it to help their children. In the recession, without such help many more working families will resort to loan sharks and foodbanks.

CPAG also queries how such as scheme could possibly be administered fairly. “And there are other anomalies,” says St John . “For example, payments for daycare made by a working grandparent is captured by ‘family scheme income’. But if the grandparent looks after the grandchild themselves it is not counted. The overall value of the help is the same but the impact on the way IRD treat it is very different”

St John says “Under the changes one-off cash gifts are exempt, raising the prospect that families will be planning their transfers much more carefully in the future”

Unusually I agree with Susan St John's opinion that transfers of money between family members eg a grandparent paying for a grandchild's childcare costs, should not be means-tested for the purposes of WFF. But if WFF didn't exist neither would interminable wrangles over how it should be administered. The government shouldn't be interfering in people's private financial affairs full stop.

Every day the news is full of where lines are drawn, because the principle has long been ceded. Scrapping over screeds of ridiculous rules and regulations. Vast resources of wasted mental and physical energy; money and time.

Then if you have any energy left to point out the undesirability of the whole kit and kaboodle you are labelled an extremist. I give up.

Naive and arrogant Labour MP

A blunder by someone who should know better.

Labour MP Carmel Sepuloni expects someone volunteering in her office - because she has no money to employ them - should also receive an unemployment benefit. Then she chastises WINZ for enforcing rules regarding the compulsory attendance of unemployment beneficiaries at a seminar, which her 'intern' missed.

I have copied her post and the ensuing comments in case it disappears;

Get it together WINZ
Posted by Carmel Sepuloni on April 11th, 2011

So about three weeks ago a young Samoan women came in to my office asking ever so nicely if we could give her some work experience.

She recently completed a National Certificate in Business Administration but hasn’t been able to get work because she has no work experience.

I told her that I didn’t have any money in the budget to hire someone else but she pleaded with me to let her volunteer her time. I agreed to put her on a Parliamentary Internship to provide her with the work experience she needs as well as to support her in what ever way I can to assist her with getting in to paid employment.

Then what happened….

A week in to her starting I get a call from a WINZ case manager asking if I would agree to her being on a subsidised work scheme i.e. WINZ subsidise her being in paid employment for me. I told them - nope, I have no money and therefore can not pay her and I’m not even sure if parliamentary regulations would allow for me to do that anyway.

I explain to the WINZ guy that I will assist her as best I can with getting the work experience she needs as well as support her in trying to find work. I explain to him that I’ve even set it up, as a legit Parliamentary Internship. He tells me that he understands and that this sounds like a great opportunity for the young woman and that if she’s still actively seeking paid work, then that would be fine.

A week later (beginning of last week). I find out from this poor young woman that WINZ have cut her benefit. Despite the fact that the last case manager I’d spoken to, had said it was fine – another WINZ case manager had wrongly assumed that the young woman had deliberately (and without good reason) missed a WINZ seminar that she was suppose to attend as an Unemployment Benefit recipient.

I rang WINZ that day when I find out and leave a message (outlining the situation) on the phone of the case manager that had made this decision (a different case manager from the one I spoke to the previous week). I don’t get a response from her, but the very next day the young woman undertaking an internship in my office, gets her benefit reinstated.

Get it together WINZ! Not all of these poor young people are going to have an MP on their case, who can ring up and leave rather firm voice messages for you when these mistakes happen. The vast majority of our young people are wanting to be engaged with work or study but at this point in time, things are against them and they need additional support. Don’t treat them like criminals out to commit benefit fraud and/ or bludge of the system.
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This entry was posted on Monday, April 11th, 2011 at 12:43 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
6 Responses to “Get it together WINZ”

1.
jennifer says:
April 11, 2011 at 1:37 pm

Are these the new ‘front line’ services that big Paula keeps crowing about?
2.
Richard says:
April 11, 2011 at 2:49 pm

Surely unpaid internships are exploitation, or does Labour not believe in the minimum wage anymore?
3.
Frank says:
April 11, 2011 at 3:13 pm

On the information you just provided, you inappropriately excercised political influence over a public servant who appears(on the facts you have chosen to represent) to have done exactly the correct thing.

You cannot do voluntary work INSTEAD OF being available for full time employment:

http://www.workandincome.govt.nz/manuals-and-procedures/employment_and_training/programmes_and_services/voluntary_work/voluntary_work.htm

So maybe give some more details to prove that “WINZ got it wrong”? or maybe even better – ask Work and Income directly?!
4.
peteremcc says:
April 11, 2011 at 3:22 pm

How come you’re happy for this woman to work for you just for the experience and for zero pay, yet you don’t want to let me or her or anyone else work for the experience and $10/hour (which would be more than she’s getting at the moment from WINZ)?
5.
David says:
April 11, 2011 at 4:30 pm

How many other volunteers do you have in your office collecting a benefit ?
6.
Lindsay says:
April 11, 2011 at 4:49 pm

Someone on the Unemployment Benefit must be available for paid work. Your ‘volunteer’ must meet those conditions. It’s quite straight forward. It would appear Work and Income are doing their best to ensure unemployed beneficiaries are doing everything in their power to get paid work and you are attempting to thwart their processes.

Attitude

This headline from Radio NZ irks somewhat;

'Super-rich' yet to contribute to quake appeal

If I were 'super-rich', and in a position to make a substantial donation, I would be waiting for representations to be made to me about exactly how the money would be used. And reading on, it would appear that is the reason that donations haven't yet been forthcoming. But the headline plays to the knee jerk resent-the-rich sentiments of too many Kiwis.

Other people just get on with it. Like Catherine Bailey who organised a art auction fund-raiser at the local pub and called on Eastbourne artists and businesses to donate works and raffle prizes. When returning an easel and sample art to me Sunday (I offered a pastel portrait voucher which apparently went for $200) she said they had raised around $7,000. Good for her. That's what the country needs. More doers.

Susan St John - whiny, one-eyed economics

From today's NZ Herald;

Bernard Hickey's column last week elicited this response from Susan St John, associate professor of economics at the University of Auckland business school.

Bernard Hickey says dropping "middle-class welfare" such as Working for Families would be the fastest way to reduce the budget deficit.

His analysis displays no understanding of family economics at all.

Unfortunately, the antipathy to Working for Families is now widespread and he helps smooth the path for the Government to slash this programme.

But Working for Families tax credits simply adjusts tax to take account of family size and to share the costs of raising the next generation.

In Australia, one-child families, including those on benefits, receive maximum assistance of A$10,200 ($13,000) if there is a baby bonus paid, A$8815 for a child aged 1-4 and A$7738 for a child aged 5-13.

In New Zealand, if this one-child family is on a benefit the most they can get from Working for Families is $4472. A family defined as "working" qualifies for the In Work Tax Credit, but they can only get the full entitlement of $7592 if their total income is less than $36,868.

Contrast these with the Australian figures when our dollar is only worth about 75 per cent of Australian currency.

If we do away with the meagre Working for Families tax credits, how will we stop the exodus of our young struggling families to Australia?

And if we retain Working For Families which, remember, people somehow managed without before they were bribed by Labour in 2005, how do we stop the exodus of childless young to Australia and further afield?

I have two children. When we decided to have a family we didn't expect any financial help to do so. People similar to me are also leaving for Australia. They don't immigrate looking for handouts. They immigrate looking for better incomes from work and less whining from Susan St John types.

I am so sick of the hand-out mentality, the we're-raising-the-next-generation-of New Zealanders crap. How the hell do people know if they are raising the next-generation-of-New Zealanders when so many will live and contribute elsewhere. Thanks to the continuing screwing over advanced by socialists.