Hooton on paying for Christchurch

March 4th, 2011 at 2:00 pm by David Farrar

says he’ll pay higher taxes for Christchurch in his column (offline):

With horror still unfolding, it’s too soon to be arguing over how to finance the rebuilding of Christchurch but already politicians are being forced into positions against the public interest.

The government’s opening position was correct.  It would rule nothing in or out. John Key initially applied that policy to a national tax but, within days, media pressure had him limiting likely new imposts to increasing the $60 annual Commission levy to $180.

Bill English also tried to hold the line, refusing to rule in or out cuts to Working for Families and interest-free student loans but was immediately over-ruled in theDominion Postby “a highly placed government source.” “A highly placed government source” with the credibility to over-rule Mr English surely had to be someone who outranks him.

Needless to say, after another day of media hysteria, Mr Key went public and as good as ruled out any interest on student loans.  He limited discussion of changes to Working for Families to those on higher incomes.

This is the point I was trying to make a couple of days ago. Ideally the Government should not rule anything out or in until we actually have a better idea of the fiscal and economic cost. But no Government can risk days of scare-mongering headlines such as “Govt considering tax hike” or “Govt considering abolishing interest free loans”.

Hooton then puts up his case for change:

It’s unconscionable that fit, healthy 65-year-old chief executives will get superannuation when Christchurch primary schools need rebuilding.

Interest-free student loans mean the taxpayer is paying to cut the real value of the loans of doctors, lawyers and accountants rather than rebuilding Christchurch Hospital. They should at least be adjusted for inflation.

The problem with Working for Families is not primarily that it gives welfare to high income earners (although that’s ludicrous) but that it churns billions of dollars and creates massive effective marginal tax rates.

I’ll happily pay higher taxes to rebuild Christchurch. In return, the government ought now to take these issues seriously.

My view is somewhat different. I also believe that the age of super should increase, that there should be interest on student loans and that WFF should be reformed – not because of the earthquake – but because it is good policy to do so.

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34 Responses to “Hooton on paying for Christchurch”

  1. magic bullet (776 comments) says:

    Agreed david. NZ is one of the most inequitable countries in the developed world. But Key has gone soft on the poor and progress has stalled!. We need less wealth redistribution, so that eventually all we will have is poor people eating road kill, and rich people living in fortresses guarded by private armies who sit 24/7 in machine-gun turrets.

    Top marks farrar. I can’t stand sharing either. I’d rather live in Somalia than share.

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  2. Manolo (14,086 comments) says:

    My view is somewhat different. I also believe that the age of super should increase, that there should be interest on student loans and that WFF should be reformed – not because of the earthquake – but because it is good policy to do so.

    I agree with DPF’s views. and I would go even further with the suggestion we get rid off WFF altogether.

    Let’s wait for the howls of despair from some weak-kneed and timid National supporters who want their party being everything to everybody all the time. The timorous are bound to cry: “But we would lose the election, political power and the coalition with the racists”.

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  3. magic bullet (776 comments) says:

    The market can fix this. The rich could sell coffin-size plastic boxes that the poor can afford. The lazy unemployed who were effected by the earthquake can then rent small pieces of front lawn from land-owners where the said scum can sleep. Simple. See – the market provides every time.

    [DPF: Stop trolling or you’ll get demerits. if you are unable to intelligently debate the issues raised in the clumn, then go post elsewhere]

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  4. Fishfurta (15 comments) says:

    This Mickey Mouse Government hasn’t got the Guts to make hard decisions .

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  5. Manolo (14,086 comments) says:

    The lazy unemployed who were effected (sic) by the earthquake…

    Add uneducated and unable to spell to that too. :-)

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  6. MT_Tinman (3,263 comments) says:

    WFF must go!

    Replacement assistance for those in real need by way of tax cuts, once again eliminating the middle man, can and should be organised.

    The rest I agree with.

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  7. JC (973 comments) says:

    “not because of the earthquake – but because it is good policy to do so.”

    Agreed. And its a separate issue to Canty.

    My biggest fear is the media is no longer reporting but advocating, and my second worry is we are all getting too invested with Christchurch. The town and region has its own resources, it has the EQC, the insurances, the people etc, and the rest of the country will only put in something like 15-20% of the total cost.. but increasingly we are getting views like Hooton that want to commit us to increased tax, increased concentration on Canty and far too busy trying to tell the Govt and Chch what to do before we have finished the first stages of the emergency.

    JC

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  8. magic bullet (776 comments) says:

    What about people who correct spelling mistakes on blog comments? They must be a drain on society….

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  9. magic bullet (776 comments) says:

    You cannot be a true classic liberal Mr Farrar, or you would have applauded my simple and effective market solution to the earthquake.

    They should have had insurance. I also thought that Wakenhut could be brought in from the US to build temporary housing for the poor? What do you think?

    [DPF: You were warned but ignored it – 20 demerits]

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  10. JeffW (327 comments) says:

    Re magic mushrooms, when will the left ever learn that government cannot make everyone equally rich, it can only make the “people” (i.e. apart from those at the top who dispense the favours in a socialist economy) equally poor? If the left could show me how welfare had resulted in a large proportion of beneficiaries moving off welfare and becoming productive members of society, I would look at it more kindly. And before magic mushrooms starts moaning that there are no jobs, of course there won’t be when government moves stop the market clearing (government policy known as the minimum wage). I wouldn’t have any dole (apart from circumstances like those in Chch now), and no minimum wage. Allow the market to clear, and top up even $1 per hour jobs through tax credits. That is, no work, no income. Pain at first but in the longer run much more healthy society – work provides a lot self-esteem; less time for sitting around consuming drugs and alcohol, and medium term less crime.

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  11. Grendel (1,005 comments) says:

    shit thats the closest thing to correct you have ever said magicmoron.

    They should have had insurance, you are absolutely right. no one who took no insurance should get money to cover areas others have insured.

    Did not get house cover, no money to fix your house from the tax payer, same with contents and business interruption.

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  12. magic bullet (776 comments) says:

    I agree Jeff – if Somalia has shown us anything, it’s that things only get better when the government steps out of society.

    You’re also right that asymmetric power-relationships usually give high self-esteem to the one with the least power.

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  13. Manolo (14,086 comments) says:

    if Somalia has shown us anything, it’s that things only get better when the government steps out of society.

    So, North Korea must be paradise to you, mustn’t?

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  14. magic bullet (776 comments) says:

    Manolo – the Labour Party would turn us into North Korea if they could. They say that they believe in liberal capitalist democracy, but really they want an autocratic communist police-state with hereditary rule.

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  15. david (2,564 comments) says:

    But hey Helen has no offspring to inherit the mantle has she? What’s that you say, Phil who? Isn’t there an adopted son with ginger hair also in the wings?

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  16. JeffW (327 comments) says:

    Magic muchsrooms @ 2:43; did I say anything about the govt getting out of the way? Caricature of the argument is not a good debating style. Obviously, govt has a major role to play, which might be broadly defined in 3 ways (1) protection of individual property rights, which covers law, courts, police, courts, defence, even the diplomatic service if defined broadly enough (2) setting standards in matters such as education and health and (3) funding for those who cannot pay for private medical insurance and private education. The small size of NZ means that govt probably needs to fund infrastructure such as roads.

    Somewhat off topic, sorry DPF, but part of the necessary debate we need to have to both rebuild Chch and set the economy in a manner which allows it to flourish and provide the standard of living I would like to see in this country, with all better of than we are now.

    And by the way, magic mushrooms, do you think that communism provided relationships which were not assymetric?

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  17. jinpy (226 comments) says:

    Unless the demand for labour increases raising the super age will just add to unemployment. Im also guessing our society is already top heavy with careers often about people establishing themselves in comfortable positions by power brokering rather than a merit-based system with fair competition for desirable jobs. Im betting theres plenty of examples of this in govt depts for example.

    What about giving more younger people a chance to rise through the ranks by having attrition at the top? Certain people obviously retain important institutional knowledge and general wisdom past retirement age but this can be overrated IMO. Its like the old adage that noone is really unexpendable as many workplaces find out when their boss goes on holiday.

    Inflation adjusted student loans, or low interest and limits to WFF I would be happy with.

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  18. Murray (8,847 comments) says:

    Just ban the idiot now and save time DPF.

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  19. Monty (980 comments) says:

    Although i am against WFF I think the country would accept that it could be scaled back to the original scheme that Cullen put in place. The extension of WFF was nothing but pork barrel politics from a desperate Labour Party who would have done anything to remain in government. To a large extent the same goes for Student loans being 100% interest free. Maintain interest free for the time of study at university but then charge interest at the rate of inflation plus 1.5% or 2%.

    And although it is politically untenable increase the age of retirement to 67 over the course of 8 years (three months every year) and for those over 65 and earning a very reasonable income of say $100,000 plus there is an abatement scheme up to $140,000 to diminish the amount the pension would be paid for. I see no reason why Jim Anderton with all his massive wealth and already gold-plated pension scheme should also get superannuation paid for by the struggling family in Struggle street in New Brighton who are already burdened with paying for repairs to their house.

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  20. s.russell (1,646 comments) says:

    Monty,
    If you apply a means test to super you seriously damage the incentive to save: something New Zealand needs to increase, I think. And you punish the responsible people who have saved, in order to reward those who have not. There’s a moral problem with that too.

    As for the old argument about those who can afford it paying more: how about thinking really hard about what those words mean? Someone earning $400k pa pays over $2500 a week in income tax. Many on average incomes with kids pay none. Both get the same benefits from Government for their tax. On my accounting “fair share” would mean the “rich” paying less.

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  21. wreck1080 (3,972 comments) says:

    Ummm, dpf, thought you didn’t want to discuss this yet….

    “I’m not against a debate on how we pay for the earthquake damage, but to my mind here’s the rough order of priority after the earthquake:

    Find and heal the wounded
    Provide emergency assistance to the survivors who need it
    Find and bury/cremate the dead
    Work out the cost of rebuilding Christchurch
    Decide how to pay for it”

    You seemed pretty outraged before, yet you are doing exactly the same as others.

    [DPF: Sigh, don’t be an idiot. When every single newspaper is running stories about paying for it, then it is stupid to ignore that reality. Also my outrage was having Russel Norman start promoting tax increases within 72 hours of the quake – this is a full week after that]

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  22. mudrunner (92 comments) says:

    it’s pathetic that the Goverenment allowed themselves to be bullied into closing off options so early on.

    We are taking many years of recovery, surely that means some reasonable time for assessing the size of the bill and then the manner that the country can deal with it.

    I’ve backed Key as best for us, and he still is, but these are not good actions of the best leader of the earthquake post-crisis.

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  23. Anthony (798 comments) says:

    I don’t think Hooton was necessarily meaning the age of National Super should be raised but why in hell should those still working and earning a good income get it? Especially anyone already on the public payroll or getting public funded superannuation – like retired judges, MPs, Police, etc? National Super should be renamed the Old Age Welfare Benefit because that is what it is and old people should have to apply for it on the grounds that they need it to survive!

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  24. Nigel Kearney (1,051 comments) says:

    These ideas are nice but we all know what National is going to do.

    For the last two years before the earthquake, National has borrowed hand over fist so that we can live beyond our means and nobody has to get upset by missing out on anything they want. Now, after the earthquake and in an election year, of course they are going to promise even more and borrow like crazy to pay for it.

    The only responsible solutions involve a considerable drop in our standard of living, i.e. working longer hours and/or spending less. Most NZers aren’t willing to accept that when they can happily spend much more than they earn by effectively making their children pay for it. And they don’t have to accept it because they can and will vote Labour or even Winston if need be.

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  25. IHStewart (388 comments) says:

    I can’t see how having a public holiday will help pay for Christchurch or help us come to terms with it.

    http://www.stuff.co.nz/dominion-post/news/4729981/We-may-get-day-off-to-mourn-Christchurch-victims.

    Sure it will help us focus on the tragedy but I think most of us are already focused on it. Let’s work and the Government can ring fence tax for the day and stick it into a Christchurch fund. I would rather work for Christchurch than take a day off. I don’t object to days off, but somehow this just doesn’t feel right

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  26. Manolo (14,086 comments) says:

    Hide is correct in his assessment of the economy. It’s now time to put the heat on Labour-lite.

    These are grim times for Canterbury, and indeed for New Zealand. Our second largest city is devastated and the people of Christchurch are enduring the hardest of times.

    We are now forced to make hard choices, to focus intensely on only the highest priorities – we need to face reality.

    Our starting point is not good. Our government has been borrowing a massive $300 million per week simply to keep afloat. That’s almost $200 per week for each and every Kiwi household. And now we have Christchurch to rebuild.

    However it’s not just government that overspends – as a nation we have built up overseas debt of $162 billion, 85% of GDP.

    We have seen the economic and social turmoil in the most highly indebted European countries. The future has arrived for them. Those in deep trouble were the countries with the highest current account deficits, the highest levels of overseas debt and the highest levels of government debt. If you need to know what the future holds on our present track, just look at the so-called PIIGS: Portugal, Ireland, Italy, Greece and Spain.

    The reason we have so much wasteful, pointless and counterproductive government spending is that politicians have every incentive to spend more, and promise too much. As voters we encourage them.

    The middle class want free childcare. Students want interest-free loans. Pensioners want pensions and gold cards. On and on it goes. Every interest group wants their own government department or agency. Helen Clark’s Labour government perfected the art of spending money on key interest groups to hold on to power at all cost.

    We couldn’t afford that before the earthquakes and we absolutely cannot now. Government capital spending is going to increase as we rebuild Christchurch.

    We must ensure now that the general good prevails over narrower self-interest. Government must live within a budget as tight as the budgets that ordinary households face.

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  27. jcuknz (704 comments) says:

    It may be and probably reasonable to abate the superannuation for that 65yo CEO but it is completely inhumane to not pay it to somebody who has worked their body to a shell in manual work and is given maybe just a couple or three years of peace in retirement. In any case Superanuiation is hardly life style rather a subsistence. Since it would be hard with many anomallys to separate the fair from unfair it is worth pointing out that the CEO has most likely saving and private income and the super he gets will be clawed back by taxation. It is just a stupid cry from the petty minded selfish individuals who think only of themselves and the so called injustice by theft of their money instead of accepting willingly their responsibilities as a citizen.

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  28. jcuknz (704 comments) says:

    I cannot see how anybody cannot be well aware of Christchurch with the media circus getting on its high heels almost to the exclusion of other happenings in the world even if, as I have, cut the power to my TV to save the waste of power from it being on standby and not being turned on this past week and likely the next week or more. Another day of lost production so the stuffed shirts can stand in front of the TV cameras …. Urrgh!

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  29. jcuknz (704 comments) says:

    The problem with Anthony’s suggestion of having to apply for an ‘old age benefit’ is that it negates any reason for the ordinary person to save if becuase they have deprived themselves today that tommorrow their savings income will abate chances of super which after all is just a subsistence allowance and certainly not a life-style.

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  30. jcuknz (704 comments) says:

    I don’t know what Somalia shows us BUT I know that with the populkation the world has now there has to be government to keep order and share the limited resorces. So all you individualistic guys … put a peg on it and reduce the worlds’ population back down to the numbers in 16th century and you can go for gold again.. A great inheritance for your great gandchild if not for yourself. But you are too selfish to think beyond your nose … sad really.

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  31. Paulus (2,672 comments) says:

    Having had many years of involvement with the EQC it should be realise that the exisiting funds (at a modest annual cost )have been built up since 1945 and has now been dramatically eroded, and must be built up rapidly before another serious quake. Accept that it is much admired worldwide for its simplicity.

    25 years ago there was great reluctance by the then Labour Government to allow the commission to buy Reinsurance (wholesale insurance cover). This was finally eroded and reinsurance was placed overseas principally in Lloyds, USA, Germany and Switzerland, and elsewhere, to protect the commission.

    Now like any insurance policy cover is being used up, with a massive influx of overseas currency (converted to NZ$), to support the commission, but like any insurance claims used the premiums have to be increased to top up the cover – hence an increase will be needed not only for that, but to renew the underlying commission share. This must be achieved quickly – reinsurers will expect their increased premiums to reflect their losses now being paid.

    Finally the Insurance Companies paying the primary losses and excess EQC claims, are also Reinsured and they will have to stand to support cover by increased premiums. People buying insurance will have to pay possibly quite large increased premiums to cover this tragic loss.

    Another large earthquake could occur tomorrow – no cover????? Government to find another FULL loss of say $20bn.

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  32. pq (728 comments) says:

    from my reply to Bryce Edwards, google Liberation NZ

    The question of how much the earthquake is going to cost, and how the government – and hence, ‘us’ – is going to be able to pay for it is starting to be fought over

    Well, after the September earthquake, we had figures originally of 2 billion dollars which quickly rose to 5 or 6 billion.

    Now, our City is destroyed, fundamentally .
    The only reason present estimates are about 16 billion is because the idiot TV megalomaniac sanctimonious Bob Parker, reads you the news, and politic is politic not reality.
    Our central City is destroyed
    Our entire sewer system is gone on the East side.
    Our entire roading is wasted in the East.
    The people there are disinherited.
    Costs of recovery over a generation will be at least total NZ GDP for one or two years.
    Ten per cent or more people will leave here.

    Pray that Australia will adopt us.
    Expect a revolution in social welfare .

    Peter Quixote

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  33. jackp (668 comments) says:

    New Zealand will be another Greece when the inevitable will happen. In 2005 government spending was 48 billion, now it is up to 65 billion a year and rising. National government increased spending by 2 billion a year. The population is the same, I don’t quite understand why it has gone up so much even with inflation. A pragmatist would look at the difference and with the current economic environment, start try to find ways to head back to that original number which would take courage and that person would need to be principled. Key has neither qualities. He is not a visionary.

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  34. Luc Hansen (4,573 comments) says:

    jackp

    You are an economic illiterate, going by your posts.

    National walked into the GFC and, so far, hasn’t done too badly, although I quibble at the margins.

    NZ is not a PIG, by any means. We have a base income certainty far in excess of the PIGs – ie that derived from grass-fed food.

    And our governemnt debt is low by any measure.

    You know, this fact lays bare the bankruptcy of globalisation and Treasury thinking. We have been a poster child of economic liberalisation, our governments have been conservative, and our high overseas debt is largely private sector debt.

    Why is private sector debt high?

    Because we have been classically rational economic actors, merely following the price signals of the new economy.

    To call us a PIG is to deny the effectiveness of globalisation.

    Surely you can’t be serious!

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