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October 16, 2007 4:04am by David Farrar

General Debate 16 October 2007

For general discussion on issues that don’t have a specific blog post about them. Normal rules of discourse still apply.

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RossK

Should superannuation be abolished entirely? I am going to nail my colours to the mast here and say yes. Social welfare is supposed to be needs based. The scheme is breaking down, the tax base of people in work is eroding, and the only way I can see the over 40’s being able to keep the system running (at least long enough to take something out of it for themselves) is to screw over the younger generation even more – probably by throwing open the floodgates and increasing migration into the country exponentially. Don’t think they won’t do it. We are talking about a section of our society (people now between 40 and 60) who took free education, generous welfare schemes, cheap housing (and yes there were high interest rates but that is not such an issue when your house costs 3 or 4 times your income instead of 7 or 8 times) and then when it was their turn to pay decided to skyrocket tertiary tuition fees (and cheekily ask us to consider them good guys on the basis that they were prepared to lend us students the money that used to be given to them gratis), pass legislation which strangled the supply of land for cheap housing (the RMA), impose local body rules for similar effect, both of which thereby artificially maintain high property prices (although they cheekily tell us that this is about preserving the environment and not their privileged position), chastises us for lacking loyalty to employers (ignoring the fact that for us wages have languished and advancement has been slowed compared to their experience). Abolish superannuation completely. Right now. Immediately the taxes of the productive members of society i.e. those who make money by working as opposed to solely owning will be reduced and we might actually see some light at the end of the tunnel.
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October 16, 2007 6:41am
Deborah

Congratulations (again) DPF, on setting this up, especially starting up a new one each day, so the conversation changes.
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October 16, 2007 6:42am
kevin_mcm

As someone in the 40-60 agr bracket I would point out that I have paid taxes for the last 30 years, often at rates higher than what exists today, far in excess of what I have used. I pay for private medical cover, paid for private school for my child, and do not use government services to any extent. I accept that some of those excess payments are for the general benefit of society and I do not have an issue with that. However, the deal that was made with me was I paid taxes to cover super costs of those who needed it and then I got super when it was my turn. Happy to have that removed – as long as you give me back all the money I have paid in.
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October 16, 2007 6:58am
vto

RossK – you have lobbed a few big bombs in there but the general thrust I agree with.

The argument that superann people have paid taxes all their life and now they are due back holds no water. None of the governments those people voted in actually put money aside for that. They voted for govts that spent it all right there and then.

It is quite clear that super should be means-tested. Why on earth should hardworking taxpayers have to pay babyboomer and other multimillionaires an extra bit of super each week? There is a large inequity there.

But you know what – the babyboomers and older are the dominant voting block so don’t expect any change. That is the greedy part of human nature coming out. Rather, expect instead the continued but slowish drain of the younger and competent from our fair shores. To be replaced by immigrants from all and sundry.

NZ – retirement capital of the world.

good topic. I’m sure there will be no replies as all has now been said.
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October 16, 2007 7:07am
Pascal

vto: The argument that superann people have paid taxes all their life and now they are due back holds no water.

It doesn’t? Well fuck me sideways. To my mind, there is an implied contract with the government of New Zealand, not the government of the day. You pay your taxes, you get all the services that the government offers.

vto: That is the greedy part of human nature coming out.

But yes, taking the money that was supposed to aid their retirement away from the elderly certainly *sounds* like a good idea. Definately not greedy. Wish there was a way to make this drip with sarcasm, but I’m struggling here.

If you wish to abolish it, do so by all means. Bear in mind though that you have to give me an out of that contract as well then. Like not paying tax for the rest of their lives, as those in the 40-60 bracket will now have to scramble to make up 20 years of savings and interest in what remains of their life before retirement.
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October 16, 2007 7:26am
vto

hey hey easy wobbly. dont get me wrong. Super for those that need it goes pretty much without saying, but not for millionaires and others that can provide for themselves.

It is a difficult situation as the way demographics are going the taxpayers will not be able to support the retirees, and this has been ignored by govts for eons. hence the difficulty.

and anyway demographics change sometimes, so dont panic.

But what gets me is that I hear people I know come up with this argument that – I have paid my taxes and now I am due back. and to me that is seriously flawed.

perhaps explain what is so wrong about some form of means testing?
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October 16, 2007 7:45am
Fletch

I have been thinking about this EFB thing (I don’t understand all of it).
If it does go through, would it not be possible to set up a ‘dummy’ political party (eg, the Party for Free Speech) and authorize speech and advertising from either Right or Left for those that want to speak?
I think someone may have mentioned this before, but I’m not sure.

But is it correct that if you’re a registered political party, you’re allowed to advertise whatever you want?
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October 16, 2007 7:56am
David Farrar

I think you will always need some state provision of super. And those say over 40 have not got time to change their savings habits so should get super as it stands today.

But those 40 and under should be encouraged to save for their own retirement. Kiwisaver alone if gone into at 18 will give you arguably a bigger income than state super. What I would do for those under 40 is say state super will be:

CPI adjusted but not wage indexed
Means tested
Age of eligibility slowly moved to 68
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October 16, 2007 8:22am
RossK

“However, the deal that was made with me was I paid taxes to cover super costs of those who needed it and then I got super when it was my turn. Happy to have that removed – as long as you give me back all the money I have paid in.”

That is my point though. If the system is going to fail because it is simply not supportable (aging population, ever decreasing worker / taxpayer base, and a super scale that is linked to average wage at one of the highest levels in the world) how should the system be dismantled and who should bear the heaviest burden of the transition. As far as people under 30 can see we are being asked to pay into a scheme that has not a hope in hell of ever paying us back so why should we continue to pay at all (would you have continued to pay in? – from your comments it seems not). You could say that young people have longer to save for the future but against that there is a lot of data that suggests that our society squeezes young workers / people far harder than it ever used to. At the same time to explain why younger people today do so much worse and older people so much better commentators / researchers make the unsupported leap to the conclusion that today’s young people will have a greater proportion of their lifetime income loaded onto their later working years. That is one possibility, true, but it is no more obviously true that the possibility that the people who are under 30 and being screwed today will be screwed the whole way through their lives. Given the uncertainty of the future surely the safest way of deciding who should bear the burden of dismantling the super scheme is looking at who is well off now (and for that I need point no further than the “Oh, my house went up in value by $[INSERT EXCESSIVE AMOUNT HERE] last year” brigade.)

Also I don’t buy the “I paid much higher taxes”. I’ve had to face 10% to 12% GST my whole life and an effective marginal tax rate of plus 10% because of that education I had to get to get ahead (or at least that is how it was represented to me, as it turned out I would have been better not to bother).

Someone is going to have to bear the pain for this country to get back on the right economic track. For what it is worth, after busting my hump to keep my student loan as low as possible and finally repaying them, I still believe that the best thing this country could do for itself is wipe all existing loan balances completely. Oh for the same amount of selflessness from the older generations.
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October 16, 2007 8:23am
ManukauMum

“None of the governments those people voted in actually put money aside for that.”

Well they did until Muldoon trashed it:
http://www.scoop.co.nz/stories/PA0702/S00418.htm
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October 16, 2007 8:27am
vto

yes manukau mummy that is veryt famous that episode
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October 16, 2007 8:39am
krazykiwi

fletch, yes this is possible. needs 500 members. i’d be keen to be involved in something like this if it becomes necessary.
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October 16, 2007 8:48am
cubit9f

The tax super issue.

Yes and we baby boomers paid the super for the generation of oldies when we were younger.

The real issue is not the few millionaires getting super (most of whom probably give it away anyhow) but the vast number of beneficiaries (other than superannuants) and very low paid.

My generation (and subsequent generations) would have been well prepared if the Rowling scheme had been allowed to continue from the 70’s. But Rob Muldoon stuffed that to buy the vote of the then older generation who he believed deserved a good ride. Remember the qualifying age was 60 and the rate was very high. Travel amongst the aged was never higher.

Funny thing was the Labour party in the 80’s didnt change anything. Probably didn’t suit their constiuency then.

Bottom line is that long term savings schemes cant be messed about by short term political agendas. Therefore the cry to cut it now for the generation who are just about commencing to get it is just another short term political gut wrench
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October 16, 2007 9:46am
RossK

I don’t agree with that. There is a demographic issue facing the country. More people eligible for super and less people working to pay for it. That means that, on current levels, there will be a shortfall in the future. That will have to be made up by either higher taxes or borrowing (which will lead to higher taxes). And what sort of tax increases do we think the grey electorate will vote for? Asset taxes? I don’t think so. The greying electorate will mobilise and vote for higher income taxes. It is also wrong to draw a distinction between superannuitants and beneficaries generally and then try to say that the problem is too many beneficaries. It is superannuation that comprises the greatest part of the social welfare spend and that is the area that will increase the most moving forward unless something drastic is done.

What irks me is that you guys keep saying “Well, we paid for previous generation’s super so we should get super” without addressing what I am saying which is “We don’t believe that there will be any way for the younger generation of today to be able to raise super from the next generation that follows them (for the reasons canvassed) and therefore we don’t see why we (the younger generation) should be paying for yours”.
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October 16, 2007 10:22am
kevin_mcm

Rossk, understand what you are saying and there is some validity in your arguement. However, I think an immediate cessation is unfair. I suggest instead that there is a phased implementation of reductions to national super combined with some level of means testing (not sure what the current taxes situation is with national super – used to be highly regressive). Then give everyone tax cuts but force them to go into savings instead of expenditure so the problem eventually goes away.
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October 16, 2007 11:13am
Right of way is Way of Right

Or we could eat the rich!

Assuming someone is too old to work, or to ill to work, if they have paid taxes (as I have) in the reasonable expectation that the state will contribute to their welfare in thier anticipated time of need, then more power to them. I certainly think them to be more deserving than the countless cases of DPB mothers who pump out another child as soon as a pay rise is required, or those who simply rort the DSW every chance they get!

If you cease Super, you may as well set up euthansia departments at public hospitals, might clear the waiting lists too.

Imagine, let’s deprive the elderly because it’s too hard!
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October 16, 2007 11:36am
virtualmark

cubit9f, the problem is demographics and the bulge of baby boomers. When the boomers were in the peak of their earning power every 100 boomers was probably supporting, say, 20 superannuitants. But the generations following the boomers are smaller, so every 100 Gen X/Gen Y are going to have to support, say, 40 boomer superannuitants. And save for their own retirement at the same time. It’s an unequitable burden falling on to a shrinking taxpayer base.

For that reason I support means-testing national super. I accept that that’s penalising the people who’ve been prudent and provided for their own retirement, while possibly being overly generous to those who’ve not been so sensible. But there’s too heavy a burden being placed on the taxpayers aged 20-50.

Don’t forget, we’re also going to be asked to pay for the boomers huge medical bills as they age too. Seems I’m going to be going through my working life carrying a small tribe of superannuitants on my shoulders.
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October 16, 2007 12:30pm
Sam Dixon

what do you jokers think about John Key threatening that petition that wants him to apologise for his comments on the Iraq War for its ‘unauthorised use’ of his image.

http://www.thestandard.org.nz/?p=481
http://kiwiblogblog.wordpress.com/2007/10/15/a-humourless-git/

Clear case of fair use from a legal persepctive of course, but what does this say about the nature of Key and his advisors?

My thoughts:

a) a bully mentality
b) can’t handle some pressure
c) legally inept
d) politically unwise (it don’t look do it? ‘Key threatens bloggers’)

your thoughts?

[DPF: More link whoring. As John Key is overseas I doubt he even knows about this. In fact even if he was in NZ, I’m damn sure they wouldn’t bother the Leader with such trivial stuff.]
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October 16, 2007 1:57pm
Castafiore

Reposted because it shows the rogues that are manning the bridge of the good ship HM New Zealand.

Cullen and H1 are complete HYPOCRITE’S !!!!

Cullen has just said in answer to Flavells questions about the raids “New Zealand stands for the right to have peaceful protests against Govt policy and it has a long history of that” and that that right it is not under “threat”.

CULLEN NEEDS TO TAKE THE HYPOCRITIC OATH. Different from the hippocratic oath that Dr’s normally take

I still cannot see the justification for their EFB when all the EB’s did was advertise completely peacefully about government policys that they didin’t agree with.

And right now Chris Finlayson has just said at QT that the restrictions placed on New Zealanders by the EFB are the most restrictive of all developed countries with the exception of North Korea !!!!
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October 16, 2007 2:09pm
Ross Miller

Only problem Sam is that no-one is taking too much notice of your rants. BTW, are you going to amend your petition so as the centure Clark and Goff for saving exactly the same thing?
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October 16, 2007 2:42pm
Sam Dixon

Ross Miller – not my petition.
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October 16, 2007 3:15pm
francis

Here’s some more link-whoring 😉 Bill did a little video today about taxes and choices – check the front page of http://www.ntv.co.nz and give him some feedback.
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October 16, 2007 7:13pm
tolpuddle

Four researchers who culled through 50 years of research literature about the psychology of conservatism report that at the core of political conservatism is the resistance to change and a tolerance for inequality, and that some of the common psychological factors linked to political conservatism include:

* Fear and aggression
* Dogmatism and intolerance of ambiguity
* Uncertainty avoidance
* Need for cognitive closure
* Terror management
http://www.berkeley.edu/news/media/releases/2003/07/22_politics.shtml
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October 16, 2007 8:39pm
Lee C

Sam: There is very little that will induce me to go back and look at the Standard again, regardless of how many titillating little titbits of titllation are dangled before me. It fabricates non-stories then reports on them. Waste of my time. But by all means continue to plug it.
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October 16, 2007 8:46pm
RossK

Kevin,

I agree. Obviously in reality immediate cessation is a little too arbitrary and I can appreciate that people nearing retirement would feel like the carpet has been pulled from under them. Of course there would still need to be some social welfare support (means tested as you suggest) which would remain as a permanent feature for the elderly. The implementation phase of winding down super however would need to be quite quick so that the burden of getting less out of the system than you contribute is at least spread between the two groups of workers today (i.e. the 20 to 40’s, and the 40 to 50’s). I guess my concern is that addressing the super issue is seen as being political suicide. I don’t know whether the 40 – 60 year olds of today will be able to countenance a reduction in their flashy lifestyles. I think about the 70 year olds I have known and they have all been incredibly frugal even though some of them are very well off. The 40 to 60 year olds though tend to live a high life. (Don’t get me wrong us 20 – 40 year olds do that too.)
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October 16, 2007 8:58pm
RossK

I’ve never believed that there are very many women on the DPB making a conscious decision to pump out babies for the money. There may be the occasional one but I doubt that it is significant. Any mother is going to tell you that baby / child care is hard work. I think mums on the DPB is more a function of social breakdown than a deliberate choice to”free load”. And of course you might take the view, as I do, that money that helps support a young child is at least money well spent (even if it doesn’t seem to be giving them the good start that one might hope for). I am not suggesting that we leave the elderly to languish. What I am saying is that if there is a couple in their 50’s now say, and they own a nice three double bedroom house in Auckland, mortgage free, and they have a few savings / investments starting to accumulate then I am not sure that I, a penniless 30 year old professional should have to continue to be penniless to keep them in the lifestyle they have become accustomed to. I don’t think people appreciate the bitterness felt by a generation that has seen the ladder pulled up before they could get on it.
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October 16, 2007 9:11pm
PaulL

On super. If it cannot be afforded, then it won’t be paid. There are two ways this can happen:
1. Raise taxes to try to pay for it, the young leave, those remaining get higher taxes, vicious cycle, everyone leaves but the old and the poor. Sooner or later someone would have to mean-test super

2. Inflation. We pay super at x rate. We have lots of old people buying products and services, and too few people to provide them. Market rules, price of labour goes up. So the young get paid more (inflation), but we leave the old on a fixed income. The value of super goes down until it is affordable. I think the current arrangement is based off average wage, so there may be a built-in ratchet that prevents this.

On DPB: I have a cousin (actually a couple) who have children, from the same father, but doesn’t live with him or marry him. Both because she reckons he isn’t mature enough to be a father (so why have babies?), and because if he moved in she couldn’t get DPB and him keep the dole. And the govt is paying for her to get an education, but I’m pretty sure she has no intention of using it to get a job. Not sure what went wrong in the family there – my grandparents worked damn hard and never would have considered that acceptable, my parents passed that down to me, but not sure that it got to the whole whanau. It may not be widespread, but that doesn’t make it acceptable.

The underlying problem to my mind is that there is no incentive at all for her to work even part-time. The abatement rate means that it is worth nothing to her. Abatement rates should be a key platform of any National election policy – create incentives, not punishment. I’m sure Tane and Nome can find a way to object to taxing the poor less, not sure why the hell they cannot see that tax breaks are good for the poor. Usual argument is that it is all part of a secret masterplan by the VRWC, so whilst it looks good on the surface, before we know it all the family silver will be sold and the rich will be getting tax cuts. Gets boring after a while.
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October 17, 2007 12:53am
kehua

RossK.
As a penniless 30yo professional you are obviously living way beyond your means. Recommend less lattes, wine and whining as I probably funded your education.
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October 17, 2007 9:46pm
RossK

Kehua, that is nonsense as each year of students funds an increasingly large proportion of its own education – anyway, panic driven late 20’s professionals are partly funding the riculous house price rise you are getting so that make us even, wouldn’t you say?

The truth is that most young professionals nowadays have to take on substantial debt to get into their professsions and yet the pay in the early years has remained flat to the point of being borderline exploitative. People just can’t get their head around the fact that lawyers and accountants can be on a measly 30 to 40 thousand for several years (less than the teaching, nursing, and fireservice professions for whom there seems to be an unlimited amount of public sympathy and good will) after years of earning nothing at all. Doctors and dentists do make more but I would not want to be in their excessively debt burdened shoes for all the tea in china.

There is little doubt in my mind that I (and many like me) will be 40 before I (we) am (are) as well off financially as I (we) would have been if I (we) hadn’t gone to university so really all I (we) did was swap 20 better years early on for the sake of being marginally better off in the latter half of my (our) working life. But here is the kicker – is the benefit from having a flashy house at 50 as (opposed to a merely comfortable one), as great as the benefit of having any house at 30 (as opposed to none at all). Frankly I doubt it and yet that is the b/s deal that my generation got sold (and the flashy house is not even guaranteed!)
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November 24, 2007 3:02am

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