Friday, January 23, 2015

Trotter vs Whyte

Yesterday Chris Trotter responded to a NZ Herald opinion piece by Jamie Whyte.

The post was moving down the Daily Blog list but as Whyte has replied, it is now featuring back at the top.

Worth a read.

Another Pickett theory goes west

The mainstream media lap up so-called evidence of the evils income inequality generates. Pickett and Wilkinson's Spirit Level, and local poverty guru, Max Rashbrooke, get plenty of coverage. But the following wasn't reported.

This week the Social Policy Evaluation and Research Unit released a report about the teenage birth rate in NZ. It contained  this revelation:

Pickett et al (2005:1182) found that teenage birth rates were positively correlated to OECD income inequality ratings (a correlation of 0.73).
However, more recent trends in income inequality and teenage birth rates do not show this relationship, with New Zealand showing a small decline in income inequality since 1990 and a large decline in teenage birth rates, but the US showing increasing income inequality despite declining teenage birth rates (OECD, 2013).

Yet another Pickett theory goes west.

Thursday, January 22, 2015

Tax and redistribution

Two recent items from NCPA have particular relevance to New Zealand.

Capital Gains Taxes Should Go Down, Not Up

January 21, 2015
The president wants to raise the top tax rate on capital gains and dividends to 28 percent. What's wrong with the proposal? It will hurt investment and hurt the economy, says Diana Furchtgott-Roth, director of Economics21 at the Manhattan Institute.
What happens when the capital gains tax is raised? The capital gains tax is a tax on the sale of an investment. With high rates, people will retain assets rather than sell them, limiting government revenue. Moreover, firms will limit their investments in order to limit their tax liability, and small firms will struggle to get financing.
The president should be lowering, not increasing, the capital gains tax, says Furchtgott-Roth, as such a move would boost the economy as well as federal revenues. She notes that rate reductions in 1997 as well as 2003 resulted in more asset sales -- and higher tax revenues.
Source: Diana Furchtgott-Roth, "Raising Taxes on Capital Hurts the Middle Class," Economics21, January 20, 2015.
The arguments against raising the tax are the very same as those for not introducing it in the first place. No doubt that battle will replay in 2017. But this piece serves as a reminder that if a capital gains tax was introduced it's just another tax the government can increase arbitrarily; another method by which the government can redistribute more....if there is any more to redistribute!

And why the constant need to increase taxes?

Growing Numbers of Americans Are Receiving Means-Tested Benefits

January 20, 2015
There has been a huge change in the size of the American welfare state over the last three decades, and Nicholas Eberstadt of the American Enterprise Institute says America's anti-poverty programs have become more about redistributing wealth than combating actual poverty. Eberstadt offers a staggering look at the growth of entitlement spending:
  • From 1963 to 2013, government transfers from entitlements were the fastest growing source of personal income. Entitlement transfers were just one of every 15 personal income dollars in 1963, but in 2013, they were responsible for one out of every six personal income dollars.
  • As of 2012, more than 49 percent of the American public lived in households receiving at least one government entitlement.
From 1983 to 2012, the number of Americans participating in entitlement programs increased by 20 percentage points. According to Eberstadt, the jump had nothing to do with more Medicare and Social Security beneficiaries due to an aging population -- those two programs were responsible for less than one-fifth of the increase during that time period. Instead, the growth came from means-tested programs aimed at combating poverty. According to Eberstadt's research:
  • From 1983 to 2012, the American population grew by 83 million. During that same period, the number of Americans receiving means-tested benefits grew by 67 million.
  • In 2012, one out of every six Americans were living in a home receiving food stamps.
  • One out of every four Americans today receive Medicaid. From 1983 to 2012, the program grew by 65 million.
  • As of 2012, over 35 percent of Americans were receiving a means-tested welfare benefit.
Does this mean more people today are in poverty than they were in 1983? No, says Eberstadt: 15.2 percent of Americans were below the poverty line in 1983, while 15 percent were below the line in 2012. In fact, he says aid has increasingly gone to people not classified as poor: in 2012, there were twice as many people receiving means-tested benefits as there were people living below the poverty line.
Source: Nicholas Eberstadt, "American Exceptionalism and the Entitlement State," National Affairs, Winter 2015.

Ditto NZ. Growing numbers on New Zealanders receive means-tested benefits. In 1980 fewer than 100,000 people received means-tested benefit. Today it's just over 300,000. Yet the population has only grown by 40 percent (if Working for Families was included the number would more than double.)

Tuesday, January 20, 2015

Anne Tolley makes a fine start

The DomPost has a page 2 piece about families feeling the pinch at the start of the school year.

Kauri Hori starts at a Wellington college this year and his mum, Aurora Hori, is feeling the pinch on an already tight budget....
Hori, who lives with Kauri, her 4-year-old son Tawera and 3-month-old baby girl Te Huriwai, receives $400 a week on the benefit.
Of that $300 is spent on bills which includes rent, power, phone and paying for wood in advance for the winter.
The benefit figure make no sense. Why don't journalists do a bit of research and question its veracity? Otherwise the rest of the article is a waste of time.

In the absence of a mentioned partner I will assume she is receiving sole parent support of $299.45 a week

Then the three children would qualify for family tax credit sum of $220

Then she will receive an accommodation supplement to help with rent. It would be individually calculated but for argument sake, according to Paula Bennett late 2013,

An average sole parent with two children under thirteen, living in South Auckland would receive around $642 on benefit, including accommodation supplement and a minimal extra allowance for costs.
Despite living in Wellington, where the maximum AS rate is lower than Auckland, why would a mother of three children be receiving far less?

The only explanation might be that she has debt to Work and Income. Even then they generally deduct it at a manageable level.

Anyway the journalists went to the Children's Commissioner and a charity and got the usual bleating.

But not from new MSD Minister Anne Tolley who quite clearly and uncompromisingly said

"We have a very generous welfare system . . . I don't think that any of us should back off from the fact it's parents' responsibility to feed their children," she said.
One other thing, both  mothers featuring in the article appeared to have had their youngest while already on welfare. Whose choice was that? Yours and mine? These mothers and all their apologists need to get real.

We are constantly being harangued to care about and pay for similar unhappy situations, which number in the thousands across the country, yet are powerless to prevent them. Only the individual at the centre can make a lasting difference.