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Maxim Institute - real issues - No 222

Maxim Institute - real issues - No 222 14 September 2006


Who Should Pay For Politics?

No End In Sight To Street Soliciting Problem In Manukau City How To Fix A Leaky Tax System

In The News: New Report Highlights Essentials Of School Choice Policy Draft Un Convention On The Rights Of The Disabled

Who Should Pay For Politics?

The uproar over political campaign funding took yet another turn this week, as Prime Minister Helen Clark announced that Labour was considering "major campaign financing reform". The suggested reforms include tightening the law on anonymous donations and banning third-party spending which is not endorsed by a particular political party. Such moves would pose a serious threat to freedom of speech.

The restrictions on third-party advertising would mean that attack campaigns waged by special interest groups would have to be counted in a political party's election spending returns. This could potentially stop campaigns, such as those waged by members of the exclusive Brethren church and several trade unions in the lead up to the 2005 election, from happening in the future.

The other major proposed change is to prohibit donations over $250 to political parties, which are anonymous, such as those from trusts. It has been estimated that this would lead to a substantial decrease in the amount of funding that parties would receive from community groups who may not want their names disclosed to the public. To counter this decrease, the Prime Minister has suggested that the tax-payer make up the shortfall by increasing state funding to political parties at an estimated cost of $2.5 million.

Every citizen has a protected right to engage in free speech, and to try to persuade others of their views by putting out a pamphlet, writing a letter, or attending a political meeting. Political campaigns and political parties are the concrete expressions of people and their concern for the community they live in. As such, the closer they are to the people who make them, the better for everyone.

Community groups and individuals must retain the freedom to raise their voices; and that includes the right to open their wallet to do so. With democratic engagement a constant challenge, any move discouraging public involvement will only make political parties more remote and less accountable than they are already.

No End In Sight To Street Soliciting Problem In Manukau City

This week, the Local Government and Environment Select Committee recommended that the Bill to outlaw street soliciting in Manukau City should not be passed into law.

The Manukau City Council (Control of Street Prostitution) Bill was a response to concerns about the impact of street prostitution in Manukau City, including "increased littering, noise and nuisance, a reduced sense of public safety, and a decline in property values". The Committee acknowledged that these were "real concerns" but found that the enactment of the Bill would be problematic.

According to the Committee, a major problem with the Bill was that it would have meant that people would be subject to different criminal laws, depending on what part of the country (or even city) they were in. The Bill would have meant that street soliciting, while legal in central Auckland, would be illegal in Manukau. Another criticism of the Bill was that it would "re-criminalise" street soliciting which would be contrary to the Prostitution Reform Act, which decriminalised soliciting in 2003.

The Committee highlighted various other measures and laws that local councils could use to try and combat the problems associated with street prostitution. Significantly, the Committee acknowledged the importance of halfway houses which provide emergency accommodation, food and clothing to girls and women involved in prostitution, and also offer counselling and training to give them a fresh start.

Ultimately this Bill was a desperate attempt to solve the problems that have arisen following the passing of the Prostitution Reform Act, in one part of the country. A far better solution is to amend the Act itself to prohibit street soliciting, deal more effectively with under-age prostitution, provide opportunities for women to leave the industry and criminalise the purchaser of sexual services. A working group, formed as part of United Future's confidence and supply agreement with the Labour Party, now has the opportunity to consider these aspects of the Act's operation and will report to the Minister of Justice on their findings.


This Thursday, the Centre for Independent Studies (CIS) released a new report on taxation in New Zealand, called How to Fix a Leaky Tax System. The report states that "New Zealand's tax system has become complicated and distorted, with avoidance and evasion widespread." It places much of the blame on the progressive tax system and its four different income brackets.

The report suggests that the problem with any complicated tax system is that it encourages people to focus on how to reduce the amount of tax they pay, rather than on how to be most productive. For example, according to the report, incomes appear to peak at around $60,000 (the threshold for the top rate of personal income tax). When people earn more than this, they tend to find ways to avoid high tax rates, such as channelling their funds through trusts which are taxed less heavily.

The problem is that paying lawyers and accountants to set up these kinds of arrangements costs money which could be spent on more useful things. There are also costs involved with running and enforcing a more complicated tax system. The report suggests that the increase in the IRD's budget over the last five years has been driven by the costs of enforcing the complicated system.

As the report notes, having a broad-based, low rate taxation system makes things less complicated. Such a system has more than one source of taxation and taxes those sources evenly, with no exemptions or loopholes. This reduces the incentive for people to put their energy into reducing their tax burden.

The report is concerned that the corporate tax system may also move away from the broad-based, low rate principle if the tax incentives proposed in the government's Business Tax Review are implemented. It worries that this will "encourage businesses to spend time trying to minimise their tax returns and fit their activities into bureaucratic categories" instead of being more productive.

So what is the solution to the problem of complexity? Ultimately, the report recommends a flat tax, with one low rate for all levels of income, whether personal or corporate. Short of this, it considers that other moves to simplify the system, like scrapping the top tax bracket, would be an improvement. When designing a tax system, simplicity is not the only relevant factor. However, as the report shows, it is an important consideration.

For more detail and to read the report, How to Fix a Leaky Tax System, please visit:




The Education Forum and the New Zealand Association of Economists (NZAE) recently released a report by Harvard University Professor Caroline M Hoxby which details three essentials of a successful school choice policy.

Based on economic principles and drawing on empirical evidence, the report argues that for a schooling system to lead to general improvements in education, schools should have the ability to open, expand or contract according to demand; funding should follow the students; and schools should be independently managed and free to innovate in all areas of school operation.

To read the report, School Choice: The Three Essential Elements and Several Policy Options, please visit:



The United Nations recently agreed upon the draft text of a new Convention on the rights of disabled people. New Zealand delegates played a leading role in drafting the Convention and chairing some of the sessions. The Convention guarantees a range of rights for disabled people, including the right to life, and upholds, among other things, the right to medical treatment, food and fluid for all, regardless of disability. The draft text will now go to member governments for ratification.

To read the draft UN Convention on the Rights of Persons with Disabilities, please visit:



"If liberty and equality, as is thought by some, are chiefly to be found in democracy, they will be best attained when all persons alike share in the government to the utmost." Aristotle


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