On Parker’s Tax Plan And Musk’s Twitter Purchase
Such is our devotion to the ordinary Kiwi battler, we ruthlessly tax the wages they earn and the stuff they buy, while letting people who amass wealth from speculative investment (and stash it in trusts) to go on their merry way, largely untroubled by the tax department. In the latest round of this dance of injustice, Inland Revenue has been told by its Minister to go forth and gather more robust data on the sources, extent, and locations of personal wealth in this country. In oh… Maybe five years or so, a Tax Principles Tax will have enshrined the findings.
Good to have, I suppose. Not that Revenue Minister David Parker seems to be overly interested in Inland Revenue’s eventual findings. Let's assume for the sake of argument that Inland Revenue – despite its relatively limited resources – would somehow be able to defeat the battalions of corporate tax lawyers and can penetrate the forest of trusts and shell companies and offshore tax havens, and figure out an accurate estimate of the nation’s wealth that has been derived from speculative investment.
None of the massive effort required to create this trove will be rewarded because - in the same breath this week - Parker has confirmed that the Labour government would not be using such data to impose a capital gains tax, or a wealth tax, or any other kind of new tax. The info will be nice to have, but too perilous to use.
On tax, Labour instinctively falls into a defensive crouch lest it be painted as a bunch of tax-and-spend liberals. For much the same reasons, Labour throws billions of dollars at the armed forces and security agencies, lest it be painted as a bunch of vegetarian peaceniks. When it comes to a meaningful capital gains tax, Labour has been gunshy for decades, spooked by its own focus group findings and by the media consensus about the likely political fallout:
At the political level, commentators have long stated that the enactment of a comprehensive CGT in NZ would be “[a] sure-fire path to political suicide”. Indeed, former Prime Minister, the Rt Hon David Lange, is reputed to have characterised “a capital gains tax policy as one likely to lose you not merely the next election, but the next three”. After the defeat in the 2014 election, the (then) Labour Party leader, Mr Andrew Little acknowledged that their CGT policy may have alienated voters in that election.
So… When it's New Zealand First partner opposed the CGT recommended by the Tax Working Group, Labour quickly killed the idea with an almost audible sigh of relief, amid variations on “They Made Us Do It.” Overall, there has been a bi-partisan reluctance to address what happens when a low wage economy like New Zealand’s relies so heavily for the bulk of its revenue on (a) taxing wages and (b) taxing consumption. The result is not only socially regressive, but it delivers insufficient money to spend on a range of public services. Pharmac for instance, gets to offer a limited range of cancer drugs, compared to what a wealthier, higher wage country like Australia can afford to subsidise.
As Parker pointed out yesterday… Contrary to the prevailing myths, New Zealand is not a very highly taxed country. He may be alone however, in thinking it to be a good thing that the tax burden hardly varies regardless of whether a Labour or a National government happens to be in office. As Parker put it in his speech this week:
New Zealand is not a highly taxed nation. We sit in the middle of the OECD pack for total taxes. Our total taxes don’t change hugely as a percentage of GDP, and have ranged between 30 and 36% in recent decades. Boom times and recessions often have a larger effect than government changes to tax policy. Even now, after the trauma of the COVID pandemic, New Zealand’s taxes are about 32.2% of GDP, which is close to identical to the 31.6% of GDP under National in 2012 after the GFC.
Tax Bad, Wealth Good
As mentioned, there isn’t much use looking to National for fresh policy ideas on this front. Of late, Christopher Luxon has been burnishing his “ordinary bloke” credentials by professing his disinterest in thinking about things too deeply. He gets “confused” by complex issues and details. Yesterday, Luxon couldn’t see what Parker was on about since in Luxon’s view, the current tax system is both “progressive” and “fair.” Apparently, only spendthrift liberals would want to detect, let alone to tax, the large amounts of wealth that our most affluent citizens pile up from sources other than wages.
So it goes. While claiming to oppose wasteful government spending, Luxon is proposing to give high income earners (including himself) a huge tax cut that he has conceded he/they don’t need. While crying tears about the hurdles faced by first home buyers, Luxon is proposing to reward landlords (he owns seven properties himself) by easing the rigours of the bright line test, and by restoring the ability of landlords to write off interest on their property investments – ie, two measures introduced to dampen property speculation, and thereby give first home buyers a fighting chance.
For its part, Labour continues to be hamstrung by the fear of being seen to be tax-and-spend liberals – even though it gets depicted as such anyway, regardless of its dutiful best efforts at conservative economic stewardship. Tellingly, Labour’s recent deviation from those norms – the Covid support measures it pursued in tandem with the Reserve Bank – managed to keep the economy afloat and profitable throughout the pandemic.
Yet those measures are now being depicted by its centre-right opponents as reckless and extravagant. As yet, there hasn’t been a peep of support to the contrary from the business sectors that benefitted hugely from the government’s Covid support measures.
In other words, if any and all progressive actions of a Labour government are going to be portrayed as extravagant, no amount of pre-emptive caution will prove otherwise. And here’s the thing: for every voter who thinks taxation is theft, there are ten voters who believe tax to be the essential trade-off for better public services. Most of the electorate would willingly embrace that trade-off, if the argument for it was boldly put. People are waiting for Labour to lead from the front and aggressively promote the social benefits that a fairer taxation system would deliver.
In the meantime, and as Parker says, New Zealand remains an outlier in the developed world for not having a meaningful capital gains tax. As a result, we continue to tax wages more vigorously than we tax other significant sources of wealth, and that situation is neither progressive, nor fair.
Footnote: The problem isn’t simply that income from wages gets taxed here more severely than wealth gained from speculative activities. (Why invest in productive enterprises when you can make out like gangbusters in property speculation, untaxed?) New Zealand is also a weird outlier in the way it treats the virginity of the GST system as being more important than providing the exemptions that would make healthy food more affordable for low income people.
Madeleine Albright, Not Alright
Earlier today, the US Establishment celebrated the lifetime achievements of former Secretary of State Madeline Albright, the first woman to hold the job. But Albright also deserves to be remembered for this response to journalist Lesley Stahl, during a 1996 interview about the effects on the Iraqi population of the harsh sanctions the US imposed in the aftermath of the Gulf War:
“We have heard that half a million [Iraqi] children have died. I mean, that is more children than died in Hiroshima,” asked Stahl, “And, you know, is the price worth it?”
“I think that is a very hard choice,” Albright answered, “but the price, we think, the price is worth it.”
After all, what’s a half a million dead children if the Clintonian policy objective – keep Saddam Hussein in office, but subdued – was achieved?
Musk Buys Twitter
Is Twitter’s new owner a reliable defender of free speech? Well, Eion Musk would defend to the death your right to agree with him on all the key points. Just ask the guy he fired from Tesla for posting on Youtube a video the guy made with his own software about some safety problems he’d encountered with his own Tesla. Or the employee he fired for practicing his legal right to talk to fellow employees about organising a trade union at a Tesla plant, Or the columnist he banned from being able to buy a Tesla, because Musk didn’t like something the columnist wrote. Or the blogger he silenced by threatening to sue him. Try to reconcile a commitment to free speech with this contractual “agreement” that is reportedly conditional for employment at Tesla:
“You agree not to disparage Tesla, the Company’s products, or the Company’s officers, directors, employees, shareholders and agents, affiliates and subsidiaries in any manner likely to be harmful to them or their business, business reputation or personal reputation.”
Musk, though, describes himself as “a free speech absolutist. ” In practice, that means he is just as intolerant as any other billionaire (Jeff Bezos, Peter Thiel, Starbucks CEO Howard Schulz) of opposing viewpoints, especially if they promote union activity.
If Musk means that the Twitter he owns will have no moderation at all, he is being culpably naïve. Every social media website that accepts user content has to have some rules on how that content is to be moderated, plus an ability to enforce those rules. Inevitably, the rules will be controversial, as Mike Masnick of Techdirt recently pointed out:
If you do [no moderation] at all, not only will you face legal problems (child sexual abuse material, copyright infringement, etc.), but your service will turn into a cesspool of spam, abuse, and harassment, driving users away. So every website has to create rules, and then has to create policies and train teams and technology to enforce those rules. And, as always, that’s where the impossibility of content moderation at scale comes into play.
Some people are always going to disagree with moderation choices. I frequently think that Twitter, Facebook, YouTube, etc. make serious mistakes. But, again, that’s because any site is going to make “mistakes.” Sometimes those mistakes are because they mess up the rules. Sometimes it’s because people interpret rules differently. Sometimes it’s because we don’t know all the details. And sometimes it’s because everyone judges things differently, and so there’s always going to be a level of disagreement about how to enforce any rules.
Musk seems likely to turn Twitter into a mirror of his own ideological beliefs. It seems likely to operate with a lower threshold for dis-information, and for speech that tries to silence the speech of others. In New Zealand. This means that the toxic dis-information we saw during the Parliamentary occupation is likely to find Twitter to be a receptive home. Is Musk’s ownership of Twitter going to be bad for the Christchurch Call? Almost certainly.
Footnote One: Amazon chief Jeff Bezos, hardly a credible watchdog on human rights, has claimed – on Twitter, no less – that under Musk’s ownership, the Twitter platform could become a vehicle for Chinese influence in the West, given Tesla’s reliance on electrical batteries made in China, and on the huge “Gigafactory” Tesla construction plant in Shanghai.
Bezos then proceeded to make the exact opposite point that owning Twitter is likely to make it harder for Musk to do business in China, rather than result in him censoring Twitter. Indeed, a lot of Twitter content is bound to get under the notoriously thin skins of the party leadership in Beijing, which has banned Twitter ( since 2009) for allegedly being an organising tool of the Uighur resistance.
Footnote Two : Either way, Bezos has no credibility on this point:
….A 2021 Reuters' investigation… found that Amazon had worked with the Chinese government to restrict negative reviews on texts written by China's President and Communist Party leader Xi Jinping, in order to expand its business in the country.
The Reuters' investigation found that in 2019 Amazon agreed to a request by the Chinese government to turn off ratings and delete reviews on Amazon.cn of books written by the country's leader. Amazon.cn then showed only five star reviews of these books…
Meanwhile, the April 14 edition of the North Canterbury News reports this important breakthrough: