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The Letter 21 July 2014

The Letter 21 July 2014

All tax and spend

All the political parties have now outlined their tax policies. NZ First has just released a “game changer” tax policy to make caviar tax free. It is very depressing. Other than ACT’s, every party’s tax policy is based on redistribution and the belief that they can pick winners. ACT has half of the political spectrum to itself.

Do not add up

Other parties’ tax policies don’t add up. Most are not even pretending to cost their policies. They require voters to wait untilafter the Election for this vital information. But The Letter won’t wait that long, so here are some pertinent numbers: removing GST on food would leave a $3 billion hole in tax revenue, the equivalent of cutting GST by three percentage points overall. Colin Craig’s Conservative Party wants a flat tax rate to be accompanied by a tax-free threshold set at $20,000. The threshold would cost something like $6.8 billion in lost revenue; alarmingly, for those tax cuts to be revenue neutral, everyone earning above about $36,000 would face a tax rise because the Conservative’s flat tax rate would have to be set at 34%! Moving on, the Green’s massive increase in corporate welfare and social spending is deficit-creating. Labour’s promises are not nearly as expensive as their would-be allies. The Internet/Mana party cannot see a problem that spending will not fix and say “the rich can pay”. Jamie Whyte’s comments on the Conservative policy are at http://www.act.org.nz/?q=posts/craig-what-will-the-flat-rate-be

Bad economics

There are two objections to crony capitalism: it is corrupting to have politicians pick industries to receive taxpayer subsidies and, second, subsidies don’t work. There is overwhelming evidence that corporate welfare does not work. Economic growth and prosperity would have been greater if the market had allocated the money instead of politicians. Apart from Jamie Whyte, no politician - including John Key - is willing to say to the electorate “you are better at deciding where to spend your money”. We have our would-be leaders making a claim we know is false, that by taxing us more and spending our money on their pet schemes the economy will grow faster. National is promoting building roads as the way to faster growth, Labour has picked forestry, the Greens R&D, and NZ First “exports” etc. Like all great heresies there is some truth to these claims. Yes, roads promote growth, forestry has potential, companies need to invest in R&D and we need to export. But not one of these solutions answers the big question, “How do we get the biggest bang for our bucks?” The answer is simple: markets allocate between these and other priorities better than any government.

We have moved to the left


The NZ Herald ran an article saying David Cunliffe is trying to move to the center and that the Green’s advocacy of R&D subsidies is “centrist”. If that is center where is left? As National has adopted the Clark/Cullen programme they have moved the whole political spectrum to the left. Labour has moved leftward to differentiate itself, which in turn has pushed the Greens/Mana parties even further left. No one is even talking about catching up with Australia.

Being in government was a mistake

Readers may not have noticed, and if so we are sorry to be the bearers of bad news, but ACT is struggling in the polls. This would seem surprising as the party now has the whole of the right/center to itself. The Letter thinks there is an organisational issue here. ACT joining National in government has compromised the party. In the last five years, what have we heard from ACT on the advantages of low flat tax to increase investment, growth and jobs? How many speeches have you heard on the advantages of free markets? It has taken having a leader outside Parliament to get ACT back to advocating the party’s core policies. Those policies remain ACT’s bedrock. Yet, it is a big ask to expect a new leader in five months to overcome five years of being too close to government.

TVNZ to the rescue

Just as we are despairing of the quality of political coverage we have learnt of TVNZ’s plans to use a new technique to cover the election. We do not want to break any embargo so we will let TVNZ announce their new “worm” for this election. We think it is the best new idea for covering an election. Put simply TVNZ has got the rights to a technique that will enable the channel to place all the parties on the political spectrum. Using the Internet in an interactive way, voters can determine what values policies are important to them and discover what parties best represent them. It will be a revelation. We are constantly meeting people who say things like “I am thinking of voting for the Greens” when we know as a sole trader they do not agree with anything the Greens support. ACT’s polling shows 17% of voters’ values are closest to ACT. The TVNZ new “worm” is great news for ACT and could be the game changer.

First we build our buildings


Jamie Whyte is announcing what is the first and only truly original policy of the 2014 election. It is a modest proposal but it could have far reaching impact. All around the Western World politicians are spending their governments to bankruptcy. Electorally there is no downside to spending more. ACT has a proposal that will force MPs and local councilors to spell out how spending is going to be paid for. Before any spending proposal can be implemented the proposer must say “but for this proposal, your income tax rate would be X percentage points lower”. These “constitutional” changes are very important. The Fiscal Responsibility Act has changed government finances and is part of the reason New Zealand escaped much of the GFC. “Honesty for Taxpayers” is an excellent speech and can be found at http://www.act.org.nz/?q=posts/honesty-for-taxpayers

Going to Wellington


Jamie Whyte and Richard Prebble are campaigning in Wellington this week. Auckland maybe the biggest city where elections are won but Wellington is the centre of politics, where the political opinion leaders live. This Wednesday (23 July), Jamie, Richard and ACT Candidate Sean Fitzpatrick are holding a function at Dockside, Queens Wharf at 5-30pm. All are very welcome to attend.


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