Taxpayers Rights Bill

August 11th, 2011 at 10:00 am by David Farrar

Audrey Young at NZ Herald reports:

A bill capping core increases to the rate of inflation and population changes was introduced to Parliament yesterday as part of National’s support agreement with Act.

But it is not expected to pass a second reading after consideration by the finance and expenditure select committee.

The Spending Cap (People’s Veto) Bill was introduced by Regulatory Reform Minister and former Act leader Rodney Hide.

It was referred to in the confidence and supply agreement as the Taxpayers’ Rights Bill.

It provides that the only way the cap can be lifted is by majority vote in a referendum.

I like the principle behind the bill – that spending should be capped in real terms, and you need public permission to go higher.

There’s a few countries in Europe that could have benefited from such a law.

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43 Responses to “Taxpayers Rights Bill”

  1. Viking2 (10,713 comments) says:

    so do ya reckon key will whip the boys and girls into line and get it passed this year?
    Like he did the voting down of youth rates?

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  2. krazykiwi (9,188 comments) says:

    Bill introduced 33 months into the 36 month term. National paying lip service to structural reform?

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  3. RightNow (6,338 comments) says:

    This is what ACT need to campaign on.

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  4. Griff (6,263 comments) says:

    Received a rates bill lately. were does it all go bureaucrats don’t seem to have any regard for the spending of other peoples money

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  5. petronorway (6 comments) says:

    This would be a great way to force the government to act pro-cyclically with the business cycle i.e. amplify the moves up and down so the smart money can fleece the majority.

    Government as the monopoly issuer of the currency should not have a fiscal straight jacket applied. It should be running surpluses in a credit expansion and deficits in a credit contraction.

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  6. Graeme Edgeler (3,216 comments) says:

    Why is it not expected to pass its second reading?

    The wording of this bit of the National/ACT supply and confidence deal is pretty clear:

    [National agrees to] Support, within six months, the referral of ACT’s Taxpayer Rights Bill to the Finance and Expenditure Committee of Parliament as a government measure with the aim of passing into law a cap on the growth of core Crown expenses.

    Contrast this with the one on three strikes:

    National agrees to introduce the ACT Three Strikes Bill as a part of this package of measures, to receive submissions and consideration in the select committee.

    National further agrees to give the ACT bill a fair hearing in the committee based on the evidence and give due weight to the submissions received.

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  7. peterwn (2,934 comments) says:

    As NZ moves towards a written constitution, this is an important issue. During the Bill of Rights debate in the late 1980′s there were those wanting to include things such as health, education, welfare, etc as ‘human rights’ despite the ability of the nation to meet the cost. These advocating this either assumed that money grows on trees or that taxpayers have infinitely deep pockets.

    It is bad enough that similar advocates have persuaded UN agencies to adopt conventions calling on state parties to give very generous welfare benefits, when no doubt nations in support have no intention or no way of implementing this, but then ‘other nations’ (as ‘other people’ in public transport debates) can supposedly afford it, so why not.

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  8. Pete George (21,806 comments) says:

    Government as the monopoly issuer of the currency should not have a fiscal straight jacket applied.

    That concerns me too.

    Without a rapid response system in place – referendums take far too long – this doesn’t seem practical. When the recession hit in 2008 how long would it have taken to get public approval for emergency action?

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  9. Sonny Blount (1,829 comments) says:

    Why not require government spending to be limited to within 20% of long term GDP and require a 2/3 majority to exceed it in any year.

    If you cap the rate of growth then they are going to take the full rate of growth every year because of the inability to correct easily.

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  10. mikenmild (8,790 comments) says:

    I guess this is a question of what constraints you wish to place on a government. We elect MPs to, amongother things, makes decisions about the level of taxation and expenditure. I fail to see how a law tying spending to inflation and population changes really helps. We could write all sorts of other strictures into law and constrain government action. It’s inflexible, takes no account of other changes in the environment that might impact on tax and spending decisions and would either have ways to circumvent it or simply be changed in necessary.

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  11. Sonny Blount (1,829 comments) says:

    Pete George (10,794) Says:
    August 11th, 2011 at 10:43 am
    Government as the monopoly issuer of the currency should not have a fiscal straight jacket applied.

    That concerns me too.

    Without a rapid response system in place – referendums take far too long – this doesn’t seem practical. When the recession hit in 2008 how long would it have taken to get public approval for emergency action?

    A super majority parliamentary vote can be done overnight and is easy to achieve for any economic or security emergency.

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  12. Sonny Blount (1,829 comments) says:

    mikenmild (1,783) Says:
    August 11th, 2011 at 10:45 am
    I guess this is a question of what constraints you wish to place on a government. We elect MPs to, amongother things, makes decisions about the level of taxation and expenditure. I fail to see how a law tying spending to inflation and population changes really helps. We could write all sorts of other strictures into law and constrain government action. It’s inflexible, takes no account of other changes in the environment that might impact on tax and spending decisions and would either have ways to circumvent it or simply be changed in necessary.

    Creeping government growth is an existential threat to all developed countries.

    You can’t rely on temporary officials to conscientiously manage this danger without constraints.

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  13. lastmanstanding (1,154 comments) says:

    Id prefer to see government spending limited to 20% of GDP and the maximum tax rate at 20% for individuals companies trusts et al.

    This represents one day in five of a working week. So an individual would have the remaining 4 days earnings to do with as they wish.

    What we really need is better quality spending from central and local government. IMHO at present we have waste and bad spending decisions by people who have no competition and no customer focus.

    They dont need to. When you have no competition the mind set is ‘stuff them they get what we want to give them’ and we see this attitudeall around us in this sector

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  14. mikenmild (8,790 comments) says:

    Yes Sonny, the growth needs periodic trimming. But this kind of measure approaches it from the wrong way. If taxpayers demand responsibility from elected representatives we are more likely to see constant pressure for performance. Imposing artifical constraints could lead us to the sort of debacle we’ve just seen in the US over the debt ceiling.

    If we followed this sort of line, why would it stop at this? We could have laws mandating the maximum size of the public service, Police and miltary, regulate the number of overseas trips MPs could take and make it illegal in a whole lot of ways to waste resources. I prefer to have a government able to govern within quite broad constraints – they should have the best information available to make decisions and exercise judgement, and we in turn can judge their performance.

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  15. Viking2 (10,713 comments) says:

    If we followed this sort of line, why would it stop at this? We could have laws mandating the maximum size of the public service, Police and miltary, regulate the number of overseas trips MPs could take and make it illegal in a whole lot of ways to waste resources. I prefer to have a government able to govern within quite broad constraints – they should have the best information available to make decisions and exercise judgement, and we in turn can judge their performance.

    Well what a good idea MM.
    That’s 50% of you lefties having to look for a new job.

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  16. mikenmild (8,790 comments) says:

    We’d just have all whole host of extra laws being constantly changed every time circumstances changed. If voters don’t think governments will manage properly – change the government.

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  17. nasska (9,505 comments) says:

    I’m uncertain that central government should be restrained by legislation but I’ll be watching any debate with interest. What I am certain of is that a bill curtailing the largess of the parasites who run local bodies is well overdue.

    Year after year the rates bills grow. Legislation to cap increases to the rate of inflation (or less) would be welcome.

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  18. RRM (8,988 comments) says:

    Interesting idea.
    Giving it such a dicky title as the Taxpayer’s Rights Bill suggests the involvement of zealots with spittle-flecked chins however…

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  19. georgebolwing (493 comments) says:

    I suspect that Rodney may be in trouble with the truth in advertising people.

    If you read the actual text of the Bill (http://www.legislation.govt.nz/bill/government/2011/0315/latest/DLM3934108.html), it doesn’t cap expenditure at all.

    All it does is require the Minister of Finance to include a “cap”, which is a number that increases last year’s level of expenditure by two indices, in the Budget Policy Statement and then to report to the House on the actual level of spending compared to the cap in the Financial Statements of the Crown.

    Nowhere does the Bill place a legal cap on spending. All it does is increase ever so slightly, the political pressure on the Government to explain why the actual level of expenditure is what it is.

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  20. KevinH (1,128 comments) says:

    Legislating fiscal responsibility is at best an inact science determined more by political activism than political pragmatism. Would such a law, on the books, curtail spending programmes of incumbent governments embarking on fiscal reform, such as slashing welfare whilst subsidising the corporate sector. Plainly no.
    An example of such a law has been well evidenced this last few weeks in the impasse Capitol Hill had in passing legislation that would enable the raising of the credit limit for the US Treasury. It was, as witnessed,a complete fiasco that had implications for the wider global economy.
    In my view the ballot box is the appropriate place to set limits.

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  21. RKBee (1,344 comments) says:

    The only way the cap can be lifted is by majority vote in a referendum.

    This is putting the cart before the horse… better to have binding citizen in initiated referendum first.

    Then there would be no need for the bill.

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  22. Pete George (21,806 comments) says:

    … better to have binding citizen in initiated referendum first.

    Politicians won’t voluntarily introduce a system that tells them what to do, maybe a citizen initiated referendum would be required to pressure them into it.

    The system would have to be using this century technology, the current way of doing referenda is far too slow.

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  23. Sonny Blount (1,829 comments) says:

    An example of such a law has been well evidenced this last few weeks in the impasse Capitol Hill had in passing legislation that would enable the raising of the credit limit for the US Treasury.

    You call moderating spending yourself before your creditors do it for you a fiasco?

    Europe is a fiasco, the recent debt limit debate was a milestone for the US.

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  24. Griff (6,263 comments) says:

    When times are good run a surplus ,times are bad aim for as neutral as possible would be nice to have legislated. A cap on spending would just give the bastards an excuse to run to the limit every year you know “Oh we were just under the limit” when they should be running surpluses. No use depending on the electorate they have been known to vote liarbor or the Watermelons. Trust them to have half an idea you must be joking

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  25. mikenmild (8,790 comments) says:

    Ha ha Griff. Ultimately the electorate must be trusted in any event. Any such law brought in can be changed. In any event, this post was another beat up, as georgebolwing pointed out above. In the unlikely event of it being passed, it merely makes the Minister of Finance announce a ‘cap’ and then announce the following year whether actual spending was underor over the cap. Just a half-hearted sop to ACT.

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  26. Griff (6,263 comments) says:

    Hell mm this is a right wing blog wot do you expect some here haven’t even realized that they are being spoon fed
    lets not tell them eh

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  27. Sonny Blount (1,829 comments) says:

    You roll over blow outs into the next years budgets.

    Any officials who breach a constitution should undergo an impeachment process and be subject to recall.

    Simple Democracy is not appropriate in all things which is why you have a bill of rights. A cultural majority should not be able to vote different laws for themselves than for a majority. In the same manner 51% of people should not be able to vote themselves the money of the other 49%, which just happens to be about the point most western democracies have got themselves.

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  28. Sonny Blount (1,829 comments) says:

    Minority sorry.

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  29. Viking2 (10,713 comments) says:

    Its not a right wing blog. Its Labours heir apparent in training wheels.
    Now you fellows and fellesses have abandoned red Blurt and the Standard you must feel right at home.

    We are here to remind you that you are just socialists in another colour.

    Go to work and pay some tax.

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  30. tas (527 comments) says:

    In the US they vote on everything—spending, taxes, education, gay marriage, infrastructure, animal rights, etc. It paralyzes the govt and has achieved nothing. In fact, it makes the govt more bloated and inefficient, because reforms are impossible to pass. Direct democracy doesn’t work.

    I’m so glad Brash rolled Hide.

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  31. freedom101 (439 comments) says:

    One of the problems of democracy is that there’s a tendency for voters to vote for free lunches and for politicians to willingly supply them. The inevitable result is rising taxes and debt. This has been going on for years in the Western world. In almost every country debt and taxes have been rising relentlessly for 40 years. Obviously there is a theoretical limit to how far this trend could go. What we are finding now is that the limit has been reached.

    Every tax increase reduces the marginal incentive to do the right thing. Evey dollar of welfare spending increases dependency. Every dollar of spending creates a constituency for that spending to continue and increase.

    The irony is that “we” (the collective majority) voted for all this. I myself did not, but that’s the system we live in.

    The ACT bill is very sensible. There’s absolutely no doubt that government can easily live within its means. If there’s no cap then there’s no limit to the things to spend money on. Emperical evidence is that the optimal tax burden is around 20-25% of GDP. The cap should therefore go further and target a reduction in spending to this level over a 20 year period.

    National has so far made no progress in dealing with high spending and debt. This is incredibly disappointing. If it cannot do it now with the Labour party in complete disarray and all the reason in the world (earthquake, GFC etc) then obviously it never will.

    That’s why ACT’s bill is so important and necessary.

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  32. mikenmild (8,790 comments) says:

    Let’s suppose for a moment that 25% of GDP was an ‘optimal’ tax level. What would a law reducing expenditure actually achieve that could not be done in any other way? It is quite difficult to put in place, under our constitution, laws that have a special status. Any government with a majority in the House of Representatives can change virtually any law. So a government that didn’t wish to comply with a legislated expenditure cut (and there could be many reasons why it did not wish to do so, or why it would not be prudent to do so) could simply change the law.

    Such legislative mechanisms just invite the sort of chaos seen in the US over the debt ceiling.

    If citizens want lower taxation and expenditure, they might wish to vote for parties offering those policies. It’s a bit futile for people holding such minority positions (like ACT) to wish for a magic law that suits them. It’s a daydream.

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  33. krazykiwi (9,188 comments) says:

    freedom101 – excellent comment. 100% agree.

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  34. freedom101 (439 comments) says:

    Mike – it’s a maxim in life that if you keep doing the same things you will get the same results. What is your proposal? Simply suggesting that people vote for ACT isn’t particularly helpful as they are just one party in parliament. What we need, I believe, is a different way of doing business.

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  35. Griff (6,263 comments) says:

    @freedom101
    The point of voting act is to encourage a more responsible approach from National if there was no choice I would vote National however we have MMP

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  36. freedom101 (439 comments) says:

    Yes, anyone who cares about this issue should be voting ACT.

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  37. Sonny Blount (1,829 comments) says:

    If you expect the solution to come through the national election mikenmild then what you are going to get is people voting things for their benefit from people who don’t get to vote, ie the next generation.

    And again what chaos in the US over the debt ceiling? Do you prefer the Greek model for managing national debt?

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  38. mikenmild (8,790 comments) says:

    Sonny
    What I mean by chaos in the US is a legislatively imposed debt ceiling that created an artificial point for partisan argument. The failure to resolve the impasse there resulted in a credit downgrade. Such a scenario is unlikely in NZ, partly because of our inherently more flexible constitutional arrangements, but also because of the relative fiscal discipline of recent governments.

    freedom101
    It is not always necessary to have a superior proposal to point out the flaws in something else. In this case, though, the status quo is actually better than the nonsensical illusion that is proposed.

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  39. freedom101 (439 comments) says:

    Mikenmild
    We are all struggling for solutions here. We know that the status quo does not work. So what will? It’s plainly obvious that we are well beyond the level of government spending where an additional $ of spend adds $+ of value. We need to find a way of winding this back to 20-25% of GDP. Do you have any ideas? The ACT bill is good in that it at least generates helpful debate, and if the bill passed and was in place for 20 or 30 years then we would get spending down.

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  40. mikenmild (8,790 comments) says:

    Firstly, I don’t necessarily agree that government spending should be at the level. While wasteful spending should be eliminated, and this requires continual attention, overall NZ is is a fairly healthy fiscal situation.

    Our challenges lie ahead, in what sort of country we want. We aren’t addressing a whole host of questions – environment, immigration, welfare, health, defence, Maori – in no area do we see much sign of longer term visions. So I don’t see a desire to fixate on one fiscalpoint to be very helpful in this complete vacuum of ideas.

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  41. cha (3,534 comments) says:

    Daniel A. Smith exposes the truth about the American tax revolt. Contrary to conventional wisdom, recent ballot initiatives to limit state taxes have not been the result of a groundswell of public outrage; rather, they have been carefully orchestrated from the top down by professional tax crusaders: political entrepreneurs with their own mission. These faux populist initiatives–in contrast to genuine grassroots movements–involve minimal citizen participation. Instead, the tax crusaders hire public relations firms and use special interest groups to do the legwork and influence public opinion. Although they successfully tap into the pervasive anti-tax public mood by using populist rhetoric, these organizations serve corporate interests rather than groups of concerned neighbors. The author shows that direct democracy can, ironically, lead to diminished public involvement in government. Smith looks at the key players, following the trail of money and power in three important initiatives:Proposition 13 in California (1978), Proposition 2 1/2 in Massachusetts (1980), and Amendment 1 in Colorado (1992). He provides a thorough history of tax limitation movements in America, showing how direct democracy can be manipulated to subvert the democratic process and frustrate the public good.

    Tax Crusaders and the Politics of Direct Democracy by Daniel Smith.

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  42. freedom101 (439 comments) says:

    Mikeenmild
    Perhaps DPF should start a separate debate about the optimal level of govt spending. There is a lot of research about this. What matters is maximising community welfare in the broadest sense. It’s not simply about money or tax or spending, it’s about maximising community welfare – social, environmental, economic. The research shows that there is an optimal level, beyond which community welfare diminishes, and, of course below which community welfare also diminishes. The experience in the communist eastern block shows what happens at one extreme where spending and control was way too high – it’s clear that on all measures these societies were poorer – social, economic, environmental.

    This research is very important and we ignore it at our peril.

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  43. Griff (6,263 comments) says:

    @MM
    The problem with government spending is for every dollar they take they squander 20% this puts stress on our efficacy the more they take the more they waste

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