Friday, June 23, 2006

National's class-warfare policies

National is banging the Australia drum again, pointing out in yesterday's Herald that after-tax incomes in Australia are higher than before-tax incomes in New Zealand. But what's their "solution" to this? Employment legislation which would lower wages, and leave the average kiwi even worse off, combined with tax cuts for the rich which will reward the already wealthy. To call this counterintuitive is an understatement; these policies will widen the gap rather than narrow it. But then, closing the gap with Australia isn't really the point; instead, National is pursuing the same old agenda it always has: transferring wealth from the many to the few. There's an old and ugly and deeply unfashionable name for this, but one which is true nonetheless: class warfare. And judging by their policy pronouncements so far, National intends to pursue it with a vengeance at the first opportunity they get.


If National want to precipate a brain drain they should start emphasizing how much New Zealand salaries lag behind American ones. From the looks of it me and my spouse would be ecstatically rolling around in money (at least in relative terms) if we lived there and even got the median wages in our respective areas. Of course we'd have higher costs for health insurance and would have to be saving a lot for our kid to go to college- but still...We choose to stay in New Zealand because we want to live in an egalitarian society. I don't want a tax cut if it will undermine that. That said I must say I find all the warnings against so-called "extravagant" wage increases rather annoying.

Posted by Amanda : 6/23/2006 09:10:00 AM

It seems an astoundingly stupid tactical line to take. Sooner or later they're going to be the govt - and while they're the govt, the Aussie standard of living will continue to be higher than ours. I can already picture the opposition regaling the house with Brash and Key's 2006 comments on the subject.

Posted by Psycho Milt : 6/23/2006 12:47:00 PM

Key and Brash and National are doing nothing less than waging class war on the working people of New Zealand because they dislike the idea of the nation state as a vehicle for delivering outcomes and values at odds with their own globalised, homogenised and corporatist world view. If they can crush the spirit of New Zealanders, make them feel discouraged, helpless and disempowered they can delliver what globalised capital most craves: "Stability," "flexibility," "competitiveness," and all the other buzz words of the right. The sooner New Zealanders realise how deeply dangerous the ideology of authoritarian corporatism is and respond with a nationalistic backlash the better.

Posted by Anonymous : 6/23/2006 03:13:00 PM

For god's sake: how can people like Keys pretend to be making a point by analysing statistics if they can't even get the basic stats we teach out 14-year-olds right?

Because he can get away with it. Most people don't know or remember enough stats to know that he's talking shit, and the media certainly doesn't regard it is their job to point out the difference between the mediana nd the mean.

Posted by Idiot/Savant : 6/23/2006 03:44:00 PM

Yeah - people use statistics to say all sorts of thing - I have no great problem with Key (or any other politician, because they all do it) doing it, just a problem with journos repeating it verbatim without comment (from themselves or others).

I do get annoyed with people actually lying with statistic however, which, thankfully, Key doesn't appear to have done. He is probably correct that "the average after-tax income of Australian workers ... will be higher than the pre-tax income of the average New Zealand worker at $42,600". This probably isn't a good thing - the average pre-tax NZ wage being lower than the average after-tax AUS wage would just be worse.

Posted by Graeme Edgeler : 6/23/2006 04:42:00 PM

1. Good god what a confused discussion!

Average after-tax income = per capita after-tax income ?
After-tax income of the average worker = (per-capita pre-tax)-tax

That distinction's got *nothing* to do with the distinction between means and medians, and your suggestion that we mix medians and averages is just asking for trouble.

Do everything with Medians if you prefer:

Median after-tax income = 50th percentile of after-tax incomes ?
After-tax income of the median worker = (50th percentile pre-tax)-tax

It's perhaps less obvious that the inequality can hold in the median case, but to see that it can consider the possibility that the bottom 50% pay no tax and those above pay a pretty hefty rate. Then the After-tax income of the median worker will be higher than the Median after-tax income. You can rule that out with assumptions about average tax schedules (being monotonic increasing), but let's not go into all that.

So, Key appears to be sticking strictly with averages on the NZ end (no mistake there), and the only question is what he's talking about at the Australian end: is Austalaia's $44,700 the (equiv. of)

(i) per capita after-tax income
(ii) (per-capita pre-tax)-tax ?

I assumed it was (i) but his figure may be (ii).

Again, this has nothing to do with medians and without a bunch of assumptions both about the tax schedule and the income distribution either (i) or (ii) may be higher. They're equal generally if the tax schedule is flat. Under reasonable assumptions about incomes and given progressivity (ii) will be higher.

So, if I've understood Key correctly he's saying the stronger thing - the thing that should be lower, (i),

per capita after-tax income(Aust) > per capita pre-tax income(NZ)

It could be worse: it could be something about Aussie medians post-tax that's higher than us!

Graeme: You say
"the average after-tax income of Australian workers ... will be higher than the pre-tax income of the average New Zealand worker at $42,600". This probably isn't a good thing - the average pre-tax NZ wage being lower than the average after-tax AUS wage would just be worse."

But pre-tax income of the average New Zealand worker = the average pre-tax NZ wage unless you twist things a la Icehawk so average worker = median worker.
The thing you say would be worse is what Key *is* saying (i.e., following his numbers). The only indeterminacy is on the Aussie side.

2. The claim by i/s that any decrease in progressivity in the tax code is class warfare is completely absurd, just as it would be to describe the current situation as class war run in the other direction or as somehow perfectly peaceful. It's just bullshit, i'm afraid. Even more absurd is the view that any change in the tax-code is transferring away wealth someone legitmately has to someone else who doesn't. That's usually what crazy right-wingers say - what does one have to do to get a decent left in this country!

Key has a different view from Cullen about what consitutes everyone paying their share of the bill for govt. He may also have different views from Cullen about other matters including how much of the bill we all have to pay right now (how much debt), and also how much govt. you really want to buy in the first place. End o' story. You have at least three places to disagree intelligibly with Key and "wealth transfer" doesn't enter into any of them (until you get into completely bonkers regressive proposals a la the US states in many cases). One normally has to argue this point to crazy righties who think the govt. is stealing all *their* money. So I give lectures with titles like: "Why it's not your money!" to wake them the hell up. It's depressing to see the left buying into the same stupidity.

Posted by Anonymous : 6/24/2006 03:26:00 AM

The first two odd question-marks in my post above should be (were typed by me as!) not-equal-to's, i.e., =/
Hope that helps!

Posted by Anonymous : 6/24/2006 03:59:00 AM

By Mr Key's equasions, we're all billionaires, if you compare us to the right country. Only we're still not billionares in NZ.

He's cheating with the exchange rate (hello, living costs, house prices), he's cheating by not counting all the stuff Aussies pay that isn't strictly a "tax", he's cheating by pretending moving to Oz to make a quick buck is free (or even desirable), and he's worst of all cheating by knowing better and saying it anyway.

That the main TV news progs read it like gospel makes me wonder if Cullen didn't have a point.

Posted by tussock : 6/25/2006 03:58:00 PM

MTNW said " If National want to precipate a brain drain..."

You mean one hasn't started? What you paint as class-warfare I/S, I see as an effort for all NZ'ers to attempt to improve their standard of living and have more say on what fees and costs individuals are responsible for, and how far the State needs to go.

Taxes are a fact of life, but who pays them and to what degree is fair game for debate. A tax cut for middle income earners is not inherently a bad thing, it may come at a cost, and equally, may provide unexpected benefits.

Adding a tax free threshold on the first $30,000 in exchange for a capital gains tax on all homes (except for a persons place of residence), for example, could be an acceptable exchange for many (I haven't crunched the numbers, this is just an example).

Don't look for the negative, when you could mgain fair more by accepting the point - a brain drain doesn't do NZ a lot of good in the long run, if our ex-pats remain ex.

Posted by ZenTiger : 6/25/2006 08:56:00 PM

Yeah more pay but crumpets are $2.60 a packet. I mean jesus!

Posted by Anonymous : 6/27/2006 08:37:00 PM

There are 2 issues, do you want to encourage those who work and generate wealth, and what standard of living the net buys. The average person may not have the knowledge to interpret statistics or the inclination, instead he makes a judgement and frequently acts on it.If that judgement is that another country is preferred then so be it. What Cullen & Key say may influence that decision and there is undoubtably a perception amongst the taxpayers without dependent children that they are perhaps underappreciated and Cullens remarks that workers should not expect across the board pay rises to compensate for inflation may irritate given the 8% rise polys have voted for themslves.

Posted by Anonymous : 6/28/2006 01:31:00 PM