Questions for @grantrobertson1 on the #UBI @JordNZ
30 Mar 2016 1 Comment
in labour economics, labour supply, politics - New Zealand, poverty and inequality, welfare reform Tags: flat rate tax, New Zealand Labour Party, top tax rate, universal basic income
Labor Party finance spokesman Grant Robertson yesterday ruled out an income rate tax of 50% to fund a Universal Basic Income. Labour is considering a Universal Basic Income. It released a background paper for that purpose as part of its Future of Work Commission.
Source: Taxpayers’ Union rubbishes Universal Basic Income idea | Stuff.co.nz.
Questions arise as to how the Labour Party will fund its Universal Basic Income after ruling out a tax rate of 50%. As Brain Easton said:
Many advocates put the UMI forward without doing the sums. Those who do find that the required tax rates are horrendous or the minimum income is so low that it is not a viable means of eliminating poverty. Among the latter are New Zealanders Douglas, Gareth Morgan and Keith Rankin.
The Labour Party’s background paper already has said that the Universal Basic Income proposed by the Morgan Foundation is insufficient because many beneficiaries and all retirees will be much worse off. They receive much more in income support under the existing welfare state and they would under a Universal Basic Income of $11,000 per adult as proposed by the Morgan Foundation.
The solution proposed by the Labour Party is a supplemental income transfers to ensure no one is worse under a Universal Basic Income. This will greatly increase the cost of a Universal Basic income in comparison to the Morgan Foundation proposals.
https://twitter.com/grantrobertson1/status/711758860659240960
A series of questions come to mind that the Labour Party and its finance spokesman Grant Robinson must answer if they are to go anywhere with a Universal Basic Income;
- Is not the point of a Universal Basic Income to replace the welfare state, not supplement it?
- How will the Labour Party fund its Universal Basic Income plus the supplemental income transfers without introducing a $8 billion tax on capital income (including the family home) as in the Morgan Foundation’s proposals?
- The Universal Basic Income proposed by the Morgan Foundation requires $13 billion in extra taxes ($8 billion from taxing capital and $5 billion from a 30% flat-rate income tax) so how much more to that will Labour need for a Universal Basic Income plus supplemental income transfers?
- What is the maximum top marginal income tax rate that Labour will consider to fund a Universal Basic Income?
- Will the Labour Party’s Universal Basic Income be funded by a flat rate income tax or a progressive income tax system?
Source: How we pay for a universal basic income – Whiteboard Wednesday.It would have been my first point
@garethmorgannz’s #UBI finishes the job on #GenerationRent @JordNZ
29 Mar 2016 Leave a comment
in fiscal policy, labour economics, labour supply, macroeconomics, politics - New Zealand, population economics, poverty and inequality Tags: Edward Prescott, New Zealand superannuation, old age pensions, social insurance, timing inconsistency, universal basic income, welfare state
Gareth Morgan revealed today a hitherto unnoticed design feature in his Universal Basic Income of $11,000 per annum. It will be phased in over a long time. That will mean that Generation Rent will continue to pay taxes to fund a universal old age pension for their parents and grandparents, but will not be fortunate enough to receive that themselves.
Source: Morgan Foundation (2016) Taxpayers Union Critique of the UBI just bonkers – again
They are not left of their own devices. Generation Rent is expected to save the Universal Basic Income they receive over their working lives to avoid living in poverty in their retirement. Does not strike me as a political winner.
The Morgan Foundation does not understand the implications of time inconsistency for retirement savings policy:
- Which is better? Save for your retirement through the share market or save to own your own home and then present yourself at the local social security office to collect your taxpayer funded old-age pension?
- Under this fine game of bluff, you bleed the taxpayer in your old age and pass on your debt-free home to your children.
This strategy of not saving much for retirement is rational for the less well-paid. The family home is exempt from income and asset testing for social security. If you lose you bet, sell your house and live off the capital. For ordinary workers, this is a good bet. The middle class might prefer to live in a more luxurious retirement.
For ordinary workers, whose wages are not a lot more than their old age pension from the government, a government funded pension is a good political gamble. The old-age pension for a couple in New Zealand is set at no less that 60% of average earnings.
Edward Prescott argues for compulsory retirement savings account albeit with important twists because it is otherwise irrational for many to save for their retirement against the background of a welfare state:
The reason we need to have mandatory retirement accounts is not because people are irrational, but precisely because they are perfectly rational — they know exactly what they are doing.
If, for example, somebody knows that they will be cared for in old age — even if they don’t save a nickel — then what is their incentive to save that nickel? Wouldn’t it be rational to spend that nickel instead?
…Without mandatory savings accounts we will not solve the time-inconsistency problem of people under-saving and becoming a welfare burden on their families and on the taxpayers. That’s exactly where we are now.
1-Year Impacts of Charter Schools on Math & English Scores @GreenCatherine @DBSeymour
29 Mar 2016 Leave a comment
in economics of education, politics - New Zealand, politics - USA Tags: charter schools, School choice, school vouchers
Cost of High School Interventions and Effects on Graduation @ChrisHipkins @DBSeymour
29 Mar 2016 Leave a comment
in economics of education, politics - New Zealand, politics - USA Tags: charter schools, School choice, school vouchers
Robert Muldoon explained
27 Mar 2016 Leave a comment
in economics of media and culture, health economics, politics - New Zealand Tags: cranks, GMOs
@suemoroney the Maori economy is not $39 billion, it is much more @Maori_Party
26 Mar 2016 Leave a comment
in economic history, economics of education, human capital, labour economics, politics - New Zealand Tags: Maori economic development
Much of the non-European human capital in New Zealand is Maori and it far exceeded $39 billion 20 years ago or more. Attempts to quantify the Maori economy by counting up the value of Maori institutions and businesses distracts from the main priority for Maori economic development which is education, education, education.
Source: Lˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006), Table 4.6: Aggregate human capital stock by ethnicity.
@mattyglesias on why greedy drug companies are heroes
20 Mar 2016 Leave a comment
in economics of regulation, health economics, law and economics, politics - New Zealand, politics - USA, property rights Tags: avoiding difficult choices, drug lags, generic drugs, intellectual monopolies, invisible graveyard, patents and copyrights
Tax mix in New Zealand as percentage of GDP since 1965
19 Mar 2016 Leave a comment
in economic history, politics - New Zealand, public economics Tags: growth of government, size of government, taxation and entrepreneurship, taxation and investment, taxation and labour supply
That GST certainly played a major role since the 1980s. Taxes on corporate profits are on the up and up despite what you would believe from the grumblings of the Left down under.
Source: OECD Stat.
The impact of the 1986 GST on the New Zealand tax mix since 1965
17 Mar 2016 Leave a comment
in economic history, politics - New Zealand, public economics Tags: growth of government, GST, income tax, size of government, taxation and labour supply, VAT
The introduction of the GST in 1986 led to a major change in the New Zealand tax mix. There was no offsetting income tax cuts.
Source: Tax – Tax on goods and services – OECD Data and Tax – Tax on personal income – OECD Data.
Combined federal, state and local company tax rates across the OECD, 2015
17 Mar 2016 Leave a comment
in politics - New Zealand, public economics Tags: British economy, company tax rate, optimal tax theory
Britain will have the 2nd lowest company tax rate across the OECD by 2020. The 2016 British budget announced overnight reduces the tax to 17% by 2020.
Source: OECD Stat Table II.1. Corporate income tax rate.
New Zealand physical and human capital (by a skill level), 1986 – 2001
17 Mar 2016 Leave a comment
in applied welfare economics, economic history, economics of education, entrepreneurship, human capital, labour economics, politics - New Zealand, poverty and inequality Tags: pension fund socialism, top 1%, Withering away of the proletariat
New Zealand working class is wealthier than the entire capitalist class. Their human capital, shown in the chart below as the human capital of the unskilled and non-degree workers, far exceeds the value of the physical capital stock of New Zealand.
Source: Lˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006).
Only part of this physical capital stock is owned by the capitalist class given we live in the era of pension fund socialism. About a 3rd of that physical capital stock is owner occupied homes.
Source: Lˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006).
The only reason that the share of unskilled and non-degree workers is in any way declining is the withering away of the proletariat. More and more people are joining the middle-class and going on to higher education.
Andrew Little is looking to update Labour's definition of the 'working class': stuff.co.nz/national/polit… http://t.co/AQ9mJL7CQf—
NZ Stuff Politics (@NZStuffPolitics) November 30, 2014
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The value of New Zealand owner occupied homes, net capital stock and human capital stock since 1987
17 Mar 2016 Leave a comment
in applied welfare economics, economic history, economics of education, entrepreneurship, human capital, labour economics, politics - New Zealand, poverty and inequality, urban economics Tags: household wealth, housing prices, pessimism bias, top 1%
Tring Le found that the human capital stock was consistently 2.6 times the value of the physical capital stock of New Zealand.
I decided to apply that ratio to the net capital stock of New Zealand estimates of Statistics New Zealand back to 1987 to see what we get. It is pretty standard for the value of human capital to be two to two and one-half times the value of physical capital.
Source: National Accounts (Industry Benchmarks): Year ended March 2013 and Lˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006), Table 4.8: Human and physical capital stocks.
All the above chart says it is most wealth in New Zealand is held by ordinary people either as their human capital or the value of their homes.
The explosion of lead in the saddlebags of trade agreements @KennedyGraham @DavidShearerMP #TPPANoWay
16 Mar 2016 Leave a comment
in economics of bureaucracy, international economic law, international economics, law and economics, politics - New Zealand, property rights, Public Choice, rentseeking Tags: crony capitalism, customs unions, free trade agreements, international investment law, investor state dispute settlement, preferential trading agreements
Percentage of fixed and floating mortgages in New Zealand
16 Mar 2016 Leave a comment
in economics of regulation, industrial organisation, monetary economics, politics - New Zealand Tags: antimarket bias, mortgage interest rates, New Zealand Greens, New Zealand Labour Party, price controls, rational irrationality
I did not know so many people were on a fixed rate mortgage. Labour is risking its economic credibility on regulating the rates for a minority of mortgages.
Source: S8 Banks: Mortgage lending ($m) – Reserve Bank of New Zealand.
Capped mortgages cannot be linked to the current official cash rate of the Reserve Bank of New Zealand because they are based on expected future interest rates over an up to 5 year span, not current interest rates.
An important motivation for going onto a floating rate is you can repay faster. Fixed rate mortgages have penalties for early repayment.
Source: Price Controls: Price Floors and Ceilings, Illustrated.
In consequence, price controls linking floating rate mortgages to the official cash rate of the Reserve Bank would benefit better off mortgagees expecting to repay quickly. A typical policy of the modern Labour Party.
Utopia, you are standing in it! 
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