Archive for the ‘Uncategorized’ Category

T is for Tax

July 12th, 2014 at 4:00 pm by David Farrar

One of the big ones. Tax.

Taxes are one of the most tangible links between the government and civil society. We all pay taxes in some form, and in exchange we expect the government to provide certain goods and services: roads, infrastructure, the courts, law enforcement, education, and support for society’s most vulnerable.
 
From this perspective, the oft-quoted declaration ‘taxes are the price we pay for a civilised society’, widely attributed to Oliver Wendell Holmes, rings true.
 
However, it is a common misconception that a dollar taxed is a dollar that can be spent by government on goods and services. In reality, a dollar taxed is a dollar that must be spent on collecting tax, ensuring tax compliance, public administration of policy and, of course, the actual public policy.
 
Besides, increases in tax rates do not automatically lead to an increase in tax revenue, as illustrated by the Laffer curve. Named after Arthur Laffer, this curve popularised the notion that higher tax rates may actually cause the tax base to shrink so much that tax revenues will decline. Conversely, a cut in tax rates may increase the tax base so much that tax revenues increase.
 
How so?
 
Taxes distort behaviour by influencing the personal decisions people make about their work and consumption. For instance, people who would prefer to work longer hours or at a higher pay may work less or refuse a pay rise to avoid being taxed at a higher rate. Higher personal income taxes encourage workers to substitute their preference for work to economic activities that they would otherwise not prefer.
 
This is known as the deadweight loss of taxation, where the tax system causes individuals to pursue actions they would otherwise not prefer. To gain maximum tax revenue, there must be a careful balance between low rates with a greater tax base, and high rates with a smaller tax base.
 
There is also the issue of tax incidence, which describes who bears the cost of the tax. For example, increasing the tax on high income earners may not necessarily mean that they bear the cost of the tax. If workers are receiving less money in their pocket, for an equal or greater amount of work, employers may feel compelled to raise their wages to ensure employees receive the same take-home pay. Thus it is employers who bear the burden of a higher rate of income tax.
 
Taxes are not the price we pay for a civilised society. At best they are the price we pay for a civilised government. But they are also the price of overly bureaucratic procedures, unpredictable outcomes, and the loss of freedom to make our own decisions.

 

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Artifical milk

July 12th, 2014 at 12:00 pm by David Farrar

Stuff reports:

A new milk could threaten New Zealand’s $17 billion dairy export industry.

Made in the lab from yeast, and due to be on shelves in 2016, it will be a product virtually indistinguishable from cows’ milk.

Because it will have the same proteins, fats, sugars, vitamins and minerals, it will also taste the same, according to Perumal Gandhi, co-founder of Californian research and development company Muufri.

But the milk will be able to be made without the typical cholesterol, allergen lactose and bacteria in cows’ milk, meaning it will be healthier and won’t need to be refrigerated, giving it a much longer shelf-life.

Soon after its introduction, it would become far cheaper than its cow-made rival, Gandhi said.

I don’t think in the short term, people are going to swap to artificial milk. But we should not discount what the future may hold. As we crack more and more DNA and the like, our ability to create things will expand exponentially.

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General Debate 12 July 2014

July 12th, 2014 at 9:03 am by Kokila Patel
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Rates to go up under Labour

July 12th, 2014 at 7:00 am by David Farrar

The Herald reports:

Homeowners and landlords could see hundreds of dollars added to their rates bills under Labour proposals for a sweeping overhaul of the disaster insurance regime.

The policy unveiled by Labour’s Earthquake Commission (EQC) spokesman Clayton Cosgrove would see EQC levies gathered by taking them off insurance premiums and adding them to rates bills so all residential properties are covered.

The levy is currently $207 a year for most homes but Mr Cosgrove said Labour would also lift the maximum payout by EQC from its current $100,000 cap.

Which will see the levy increase. So that may mean you rates end up going up by over $300 a year.

He acknowledged that the resulting increase in EQC’s total liability would mean the levy would probably have to rise but that insurance premiums would not necessarily fall to reflect the fact they would not include the EQC levy.

“I’ve never seen an insurance premium go down.”

So Labour is proposing that our rates go up by $300 or so but that our insurance premiums don’t go down.

Another winning policy.

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General Debate 11 July 2014

July 11th, 2014 at 8:00 am by Kokila Patel
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General Debate 10 July 2014

July 10th, 2014 at 8:00 am by Kokila Patel
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General Debate 9 July 2014

July 9th, 2014 at 8:00 am by Kokila Patel
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General Debate 8 July 2014

July 8th, 2014 at 8:00 am by Kokila Patel
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Hide on unions and Labour

July 7th, 2014 at 1:00 pm by David Farrar

Rodney Hide writes:

The true donations scandal in New Zealand politics was reported this week without comment. It’s the Engineering, Printing and Manufacturing Union’s $60,000 donation to Labour.

The EPMU is one of the six unions affiliated to Labour. The affiliated unions pay fees and fund the Party through donations. The donations and fees total hundreds of thousands of dollars.

More significantly, union staff campaign for Labour and the unions run parallel campaigns. For example, Labour is campaigning for the “living wage”. In a parallel campaign the Services and Food Workers Union spent more than half a million dollars last year promoting that exact policy.

It would be interesting to add up the total amount spent by unions on political campaigns. It would be well into the millions.

The union funding of Labour totals in the millions. And what does Labour provide in return? In effect the entire party. The unions get to determine the party’s leader. Their say counts for 20 per cent of the vote. That’s the difference between winning and losing by a wide margin.

Affiliation also buys a seat at the table. The affiliated unions have a guaranteed vice-president position on Labour’s all-powerful New Zealand Council.

They also get their people as MPs. The Labour Party enables the unions to parachute members into Parliament. Labour list MP Andrew Little headed the EPMU for 11 years before entering Parliament.

Imagine the outcry if business lobby groups got to vote on the leadership of the national party, could bus people in to their selection meetings, got a vice-president of the party and get a vote on the list ranking.

And the unions get policy, lots of policy. In 1999 the EPMU gave $100,000 to Labour. The following year the Labour Government passed the Employment Relations Act. This act gives the unions incredible power over Kiwi workplaces as well as easy access to workers’ pay packets.

The Employment Relations Act nicely closes the loop. The act was provided by the Labour Party. It gave the unions access to workers’ pockets, and that’s the money the unions now tip into Labour’s coffers.

Indeed, in the state sector it’s policy for Government to give union members a bonus to cover their union fees. You and I pay their union fees.

This is sadly true. Taxpayers bribe people to join the union.

Unions and Labour are guilty of “cash for policy”, “cash to sit at the table”, “cash to decide the leader” and “cash to parachute members into Parliament”.

The rort serves to bolster Labour and entrench the power of union bosses.

Unions are highly politicised organisations that only exist now because of the legal privileges bestowed by Labour governments.

The rorting of our democracy by the unions and Labour would make a great expose.

But don’t expect anything soon: it’s the EPMU that represents journalists in this country.

That’s right, our journalists – through their union – help fund the Labour Party.

To be fair the journalist fees don’t get paid directly to Labour. But they help fund the EPMU overall, which allows them to campaign more for Labour.

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General Debate 7 July 2014

July 7th, 2014 at 8:00 am by Kokila Patel
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General Debate 6 July 2014

July 6th, 2014 at 3:31 pm by David Farrar
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S is for signalling

July 6th, 2014 at 2:00 pm by David Farrar

From the NZ Initiative:

If you have ever bought a used car, you will be familiar with this problem. The seller, of course, knows whether the car is reliable, he may know the previous owners, and he would also be aware of any hidden flaws.

For you as the buyer, the situation is a bit more complicated. At first sight, a gem is difficult to differentiate from a lemon. With a bit of polish and some new car scent spray, you can put a nice gloss even on a dud.

In such situations, which economists describe as ‘asymmetric information’, markets do not work well. Buyers, not knowing whether they will get good or bad quality, have a reduced willingness to pay. But for the price buyers are prepared to pay, the owners of good quality cars would not be willing to sell them. As a result, we end up with a market where poor quality cars trade at low prices.

This is the dilemma described in George Akerlof’s classic paper ‘The Market for Lemons’, and it is here where ‘signalling’ comes into play. In order to overcome the problem of asymmetric information, the sellers of higher quality goods, whose quality is difficult to ascertain prior to use, need to find ways of showing their quality.

In the case of used car markets, a credible signal for the quality of the car would be a warranty. If the buyer is confident that the car is not a lemon, he could promise to cover all repairs for the next couple of years. In doing so, he could justify charging a higher price.

Such quality signals are far more widespread than you may first think. Advertising is the most obvious example.

If you have ever wondered why companies hire celebrities to endorse their products, think about it this way: The reason why actress Andie MacDowell promoted L’Oreal was not because it had stopped her from ageing but because she was worth it. Paying her handsomely signalled that L’Oreal was serious about the quality of their products. For the same signal, the company could have also publicly burned $100 notes as well (but it would not have looked so good).

Academic titles fall in the same category. Some of us get them because we are interested in learning and knowledge. The real value of a PhD lies elsewhere, however. It signals that you are capable of achieving things that require a sustained effort. That’s why people get PhDs – and that’s why companies hire PhDs.

Doctorates, warranties and Andie MacDowell may differ in many ways. One thing they have in common: They are strong signals.

Next week is T for Tax.

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Two UK jail terms

July 5th, 2014 at 1:00 pm by David Farrar

Rolf Harris gets 69 months for 12 offences against young girls, and Andy Coulson gets 18 months for phone hacking.

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General Debate 5 July 2014

July 5th, 2014 at 8:00 am by Kokila Patel
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General Debate 4 July 2014

July 4th, 2014 at 8:00 am by Kokila Patel
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How did they get away with it?

July 4th, 2014 at 7:00 am by David Farrar

It seems incredible that both Rolf Harris and Jimmy Saville both abused scores, if not hundreds, of young women and girls, and only decades later has it come to light.

It makes you wonder what were the circumstances that allowed them to get away with it for so long. Here’s my 2c on it:

  1. The times. Nowadays if a celebrity perved on you, more and more girls would kick them in the nuts (as they should) and Facebook or tweet what happened. Back in the 50s, 60s and 70s, it was far harder to tell people
  2. Their charity work. They often preyed on girls while doing charity work. That probably played on their guilt, that they didn’t want to say anything in case it harmed the charity
  3. Would they be believed? They didn’t realise hundreds of other girls had had the same thing happen to them. Why say anything, if you’ll not be believed.
  4. The Police. The UK Police seemed to have a see no evil, hear no evil attitude in those days, when it comes to celebrities.
  5. Institutional cover ups. The BBC, the hospitals and others had all heard the rumours. Some were open secrets. Rather than act on the rumours, they preferred to just hope they weren’t true. They were wrong.

Could this happen in NZ today? I hope not.

One can only feel for the scores of victims who had to spend decades thinking that this had happened to them only.

UPDATE: National MP Maggie Barry has revealed that Rolf Harris groped her when she was interviewing him, when she was in her 20s. Again, so many victims.

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General Debate 3 July 2014

July 3rd, 2014 at 8:00 am by Kokila Patel
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General Debate 2 July 2014

July 2nd, 2014 at 8:00 am by Kokila Patel
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General Debate 1 July 2014

July 1st, 2014 at 8:00 am by Kokila Patel
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Monday Motivator – The Taj Mahal

June 30th, 2014 at 1:27 pm by Richard Hume

Monday Motivator 26

The Taj Mahal, Agra, India

Having spent several days in Agra and photographing this iconic building from several different perspectives, it was time to tackle the classic viewpoint. One challenge was that tripods are not allowed into the Taj Mahal grounds – so this picture was taken with my large medium format camera balanced delicately on my camera bag.

It took ages for the early morning mist to clear a little and as it did I started to photograph a moody interpretation of this amazing building which itself is an ageless dedication to love.

Click on the image for a larger view of this photograph.

Cheers

Richard [richardhume.com]

YouTube: Timeless – A Panoramic Journey

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General Debate 30 June 2014

June 29th, 2014 at 9:59 pm by Kokila Patel
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R is for regulation

June 29th, 2014 at 4:00 pm by David Farrar

This week is R:

Regulations govern conduct and a well-regulated society is a well-ordered and civil society.  But bring up the topic of government regulation and expect passionately polarised responses for or against more rules or less red tape.

Government regulation can be particularly controversial when the community is deeply divided over some regulatory choice that must be made, such as the rules affecting abortion, compulsory military service at the time of the Vietnam War, or to allow or ban the Springbok tour in 1961.  But a prime role of government is to find a response that best preserves community peace and cohesion.  A society without government regulation is a fantasy.

More generally, government laws and regulations can displace, for better or for worse, rules in privately-agreed arrangements for regulating conduct, such as employment agreements, school rules and rules governing gated communities.  They can similarly displace long-accepted common law rules.

Government regulations are sometimes categorised as social (eg abortion laws), environmental, or economic.  Views about their desirability differ, particularly through time.  A major change in recent decades in New Zealand, and elsewhere, has been a rise in restrictive environmental regulation offset by major economic de-regulation.

Today much government economic regulation is ostensibly aimed at stopping businesses from exploiting or misleading suppliers, employees, customers and investors.  Yet economic research finds that businesses may support some of this regulation, perhaps judging that it most hurts competitors.  For example, the regulation of quality can raise costs disproportionately for SMEs, hurting consumers overall.  Economists call this the capture theory of regulation.  However, the theory may not explain regulations that are opposed by business.

Another proposition is that governments care not one fig about interest group pressures or contributions to political campaigns, but regulate solely for the benefit of the wider community.  This is called the public interest theory of regulation.  A major regulatory textbook dryly observes that a large amount of evidence refutes this naïve proposition.

In contrast, the mainstream economic theory of regulation proposes that interest groups lobby for changes in regulations that will particularly benefit them and politicians respond rationally to these demand since they want to get re-elected.  Political parties merely differ with respect to their favoured constituencies and ideologies.  Outcomes can be difficult to predict since they depend on the voting balance between contending considerations, but the national interest is not centre stage.

Whether a particular regulation does best serve the overall community can be difficult to determine.  Economists use cost-benefit analysis for this purpose, but it has well-known limitations.  Any analysis should anticipate the Law of Unintended Consequences – the adage that intervention in a complex system commonly creates unanticipated, often undesirable, outcomes.

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General Debate 29 June 2014

June 29th, 2014 at 8:00 am by Kokila Patel
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General Debate 28 June 2014

June 28th, 2014 at 8:00 am by Kokila Patel
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Friday Photo: 27 June

June 27th, 2014 at 8:54 am by Chthoniid

Last week we got a pic of one of our smallest arachnids, so this week it’s one of our largest.  This is our native tunnelweb Hexatheles hochstetteri.  They emerge out of their tunnels at night to wait for prey to stray close to the web.  Which introduces the technical challenge of trying to photograph when it’s actually pretty dark.  They have the more basal features of four book-lungs and paraxial fangs.

Click for larger, higher res image

 

 

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