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What does the future hold for New Zealand - TOP

Yesterday I talked about how the reform of our tax and welfare system is central to TOP’s long-term objective. But people have also asked me a much bigger question – we have a tonne of policy but what kind of society we are trying to create? 

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There are a couple of easy answers. Our current crop of politicians are perfectly competent at running things day-to-day, but they all fall down on tackling the long term issues. They want to look like they are doing something, but don’t want to upset the apple cart so tend to propose stuff that simply doesn’t solve the problem. TOP are focussed on fundamental, evidence-based enduring solutions to our issues.

But what kind of society do we want to create? The short answer is one that is both more prosperous and fair. That’s right, we can have both, indeed in the long run a society needs to be fair in order to be prosperous. Let’s explore why that is the case, starting with what kind of society we have now. 

As I mentioned yesterday’s blog, people are struggling. Today seems a long way from the caring form of capitalism that New Zealand championed in the first half of the 20th century. The long overdue liberalisation via Rogernomics in 1984 has made way for the uglier, self-centred neoliberalism that has given free market economics such a bad name. Ask any economist and they’ll tell you that efficient economies have free and competitive markets.

By contrast the holy grail of neoliberalism is where markets are free but ‘competitive’ doesn’t matter. This leads to a world of oligarchies and corporate exploitation of the paid workforce. It’s a world where “trickle down” is always promised but has no reason ever to happen, a world where political power of corporate lobbyists is well beyond their numbers at the ballot box. It’s a world that describes New Zealand 2017.

This neoliberal experiment has failed. The Government can trumpet their economic credentials all they like, but the recent productivity figures from Statistics NZ reveal the true picture. Our national income is increasing, but mostly because we are working harder, longer and have more people through immigration. We aren’t working smarter, nor are we really lifting our incomes. Our rockstar economy has only managed to fill the stadium by not charging anyone for the tickets. We may have a loud screaming crowd, but we aren’t ringing the cash registers.

As far as we can see, this failure is because our economic system is no longer rewarding hard graft and innovation. Instead it is rewarding those who invest in assets that are sheltered from tax (particularly housing and land), those who invest in building positions of power and lobby government to entrench that power.

What is the result? An economy that is morbidly dependent on foreign debt in order to prop up our addiction with housing and land. We are the fifth richest country in the world, but 30th on income, which means that our return on investment is appalling. No wonder when all of our money goes into housing, rather than businesses that can innovate, export and provide well paid jobs. We also have an economy that is dominated by a few large players. Instead of challenging that dominance, in many cases our government protects it.

The same policies that are driving the gap between rich and poor are those that are choking our economy. We need to close the tax loopholes, and reduce income tax to reward those that actually work for a living. We need to make sure all young people have the health, education and housing they need to achieve their potential. They are our greatest asset, but we aren’t investing in them. Do the little John Key’s out there in state houses today have the opportunity to grow up to be a merchant banker and Prime Minister? We doubt it.

If you combine all our policies you should be able to see the “flavour” of what we’re on about. We want to invest in our young and then give them the maximum opportunity to shine. The closest model that we see of this internationally is probably in Scandinavia. These economies are amongst the wealthiest in the world, the most harmonious societies and the most prosperous and fair. What is there not to like?

The ethos of the Scandinavian model is that fear is replaced with aspiration. Instead of us being on a grindstone of paid work, house ownership and retirement provision, the civil side of society ensures that healthcare, education, accommodation and retirement provision are far more surely underwritten by the State. This leaves people free to pursue their personal aspirations of wealth accumulation, family development, community care, or arts and cultural advancement.

Of course the downside that is often pointed out is the high income tax rates in these countries. We think we can do better than this, which is why TOP are advocating broadening the tax base to include all returns from assets rather than increasing tax rates on income.

The statistics speak for themselves – it is a model New Zealand used to pursue but has lost sight of since the me, me, me self-reliance-or-bust ideology of the neoliberal experiment ascended. Unless we kill that off, we’re going nowhere as a society.

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    • Alistair Newbould
      commented 2017-04-24 22:52:57 +1200
    • Alistair Newbould
      commented 2017-04-24 22:45:50 +1200
      The equality trust (https://www.equalitytrust.org.uk/) has some very interesting information on the detrimental effects of an unequal society. This is a UK based organisation, but (according to “The Spirit Level” available from the a/n website) inequality in NZ is close to that of the UK. USA is stand out bad! Scandinavian countries are among the most equal. Inequality is directly proportionate to health and social problems. So good on ya TOP for looking to a Scandinavian model for future NZ
    • bob atkinson
      commented 2017-04-08 22:22:00 +1200
      Capital gains on primary residence? No problem with that because you only pay the tax on the price increase. No increase = no tax and nobody should complain it they are taxed on an unearned profit. Stop the ‘tulip mania’ aspect of housing and then a house is just a place to live not an investment.
      Capital gains tax on all houses and land would bring very little money in to the IRD but it would stop the vicious spiral of increasing prices.
    • Michelle Taggart
      commented 2017-04-03 17:45:37 +1200
      In principal I agree we are loosing tax in all kinds of ways from write offs and capital gains. I would not tax a primary residence as surely we want 1 way to live somewhere and hope to have some retirement $ left. However to follow european models what about setting rental limits for properties via the reserve bank and inflations and ensuring they stay at no more than 40-50% average income? Along with this get housing NZ to do something useful and support rent to own schemes for employed workers. This would lower the ‘revenue’ from being a landlord, increase the cash burden of residential investment and therefore reduce the demand for residential investment properties which make up over 30% of all residential Auckland sales. Freeing up more stock for individuals to buy. If there were some means tested rent to buy support schemes avail in the residential market I am sure we’d see this shift the balance of access to housing. There are a lot of NZers working, paying taxes but they can’t get anywhere because of the exorbitant free market rents they have to pay to live in a house.
    • Steve Cox
      commented 2017-03-30 17:03:40 +1300
      I hear you Kim and am in total agreement. A transaction tax to replace all GST is what is needed.
      We need to return money to its function of being a medium of exchange, and not a commodity to be traded for no constructive purpose.
    • Oliver Krollmann
      followed this page 2017-03-30 12:26:23 +1300
    • Robbie Siataga/Kavanagh
      commented 2017-03-30 09:14:42 +1300
      Rock star economy ?…More like a covers band economy!

      …rehashing other countries outdated one hit wonder policies and sticking to a formula, like rockstars do, until they become caricatures of their former selves, essentially becoming their own tribute covers band as current parties are want to do.

      We ought to have a cutting edge electronica stars economy, keeping pace with changing trends, technology and the needs and wants of the youngers. We need to walk to the beat of our own drum with fresh policies that have wider economic appeal !

      In that respect, i feel only TOP is offering anything remotely fresh and appealing to reinvigorate our covers band economy and liberate people to create and invest in new business rather than aspiring to be a wealthy slumlord with a neo liberal rock star ego to boot.
    • Kim Shaw-Williams
      commented 2017-03-30 02:17:32 +1300
      Gareth mate, stop digging in the same old holes….your asset tax is just another word for capital gains tax….that’s how Labour lost their elderly voters at the last election….when the hell are you going to mention a financial transactions tax….which is really just an extension of GST…which should be lowered to nil on basic foodstuffs. Stop making it all so complicated and tax all the old money/ permanently retired/share market gamblers!!!? At 1% per dollar? Yeah I know National MP Ruth Richardson tried to bring in all those years ago and immediately disappeared. How unsurprising. But THAT is what needs to happen, because there is all this unproductive money-making by just playing around with money, a game that could not exist if the societies that made this game possible did not exist. They owe the original workers and governments that organized it for the future. Oh and by the way its a flat tax…no write-offs no nothing….every time the button gets hit on their laptops saying “confirm”….1% goes into government funds. After all every worker in this country( on wages that is) pays their 15% down at the local dairy and 25% when they collect their pay, and none of it reclaimable, was by all the generations of workers before that made the roads, logged the bush, planted the pine trees,, and so on. Without the infrastructure built by generations before them, their whole gambling life way could not exist (I understand the entrepreneurial spirit is needed of course) But these people are true parasites (oh yeah and don’t get me on to foreign exchange dealers like our ex-prime minister, prematurely resigned, John Key.
    • David Wilson
      commented 2017-03-30 00:34:02 +1300
      TOP seems to be putting forward a viable vision for New Zealand as a society. Looking at a few of their policies I can see they have put a good lot of thought into it. I don’t fully understand the thought behind adding a tax to primary residences, but I do see the value in curbing investor enthusiasm for the unoccupied housing market. I’ll take the hit to the benefit of owning my own home if you can stop the expletives inflating the residential property market out of the reach of those of us who have yet to get our hands on a home to live in. Seems like a trade-off I’d be willing to make.
    • Peter Jamieson
      followed this page 2017-03-29 19:39:41 +1300
    • keith cook
      commented 2017-03-29 18:58:22 +1300
      Sweden has an unusual take on taxes, I did not find the 70%+ given below but taxes 44% average to as high as 60% and 25% sales tax.
      this link: https://www.aol.com/article/2014/05/13/why-swedes-love-high-taxes/20884303/
      shows a big difference in mindset in regards to paying taxes, it also shows an equatable society is held in high regard over self serving interests. The state and community well being is paramount and paying for it is not a hindrance but a cost/reward/ benefit to the population. Kiwis will find this hard to fathom because trust is a prerequisite for it to work and there seems little of it in our government / officials to deliver.
    • Anne Cornish
      commented 2017-03-29 12:42:24 +1300
      I’ve been saying something similar for years, and most people I’ve spoken with say it’s too idealistic. I always counter with we should have ideals because that gives us something to work towards. I might have to look more closely at TOP. It could be they get my vote which was previously Green.
    • Colin McGregor
      commented 2017-03-29 07:24:09 +1300
      This is refreshing. Regardless of whether one agrees with the particulars, it illustrates how rarely and poorly most political parties construct and articulate their overall visions and long term thinking.
    • Tom Southall
      commented 2017-03-28 21:20:01 +1300
      @james march
      I read your comment and it really startled me. “That can’t be right” I thought. So I did some research. Turns out none of the things you said were correct…
      Here is a list of all countries in the EU with their EU contributions and benefits. Sweden recieved E1.69bn in 2014 and contributed E3.82bn. https://en.wikipedia.org/wiki/Budget_of_the_European_Union#
      Sweden has never paid or fought a war? https://en.wikipedia.org/wiki/List_of_wars_involving_Sweden
      70%+ tax? Mate just google that one…
      Your arguments against the ideas put forth in this article are false. Strange how frequently these kinds of statements are made that can be debunked in 5 minutes but so many people take them on face value and REPEAT them :( ahhhh

      Overall I think a good vision for the future. Must be the trickiest thing for a political party to try to stand out on..
    • Ross Pelham
      commented 2017-03-28 20:10:36 +1300
      Scandinavian countries Harmonious ?are you kidding ?Try importing thousands of Muslims to NZ and you will soon see how Harmonious we can be too Gareth!
    • James March
      commented 2017-03-28 15:05:02 +1300
      If you are talking about Sweden and Denmark you will,firstly, need to factor in the billions being ‘given’ by the EU to those countries at the expense of the UK, the German and the French tax payers. Furthermore Sweden has never had to fight or pay for a war. That aside do you really think that Kiwis will put up with 70% + tax?
    • Steve Cox
      commented 2017-03-28 14:27:52 +1300
      Why the continual neoliberal idea of income tax cuts? How about instead reduce the GST rate. This would help out the poorer as GST hits them disproportionately.