Monday, January 7, 2008

ZenTiger Greens Eco-Tax: Part II - It's about the environment

[This is part two of a three part post on the Greens Eco-Tax Policy]
So looking through the Green's Eco-Tax Policy document, here are some of the changes they want to push through on the environmental ticket. Because it's about the environment, stupid.

Ecological tax reform tends to produce a new tax mix which, at worst, is little different to the present mix in terms of tax efficiency, and which has substantial, though difficult to value, environmental benefits [pg ii]

Eco-Tax Policy Suggestions:
* Overhaul of the benefits system [pg 52]
* Introduce a Universal Income or Guaranteed Minimum Income (UI/GMI) [pg 52]
* Introduce a comprehensive capital gains tax [pg 54]
* Tax capital movements in and out of New Zealand [pg 55]
* Restructuring the Govt Super fund to invest "in New Zealand" [brochure]
* Across the board tariffs on imports (+5 to 10% on all imports) [pg 56]
* An Arrival Levy to complement the current Departure Levy [pg 57]
* Increase in tax deductibility of donations to communities [pg 2]

Yep, Eco-Tax is all about the environment. OK, I concede that implementing Eco-Tax as a basis for raising revenue for Government expenditure lends itself to considering the tax package as a whole, but the Green's are very deliberate in the (non-Eco) tax reforms they bring to the table under the umbrella of Eco-Tax.

They obviously want to avoid a general debate on reforming the taxation system, but in implementing eco-tax seek to push through a raft of changes that each in itself could have profound impact on our economy. My post on their actual Capital Gains Tax policy demonstrated how their written word deviates from their spoken promises.

I suspect many within the Green Party don't actually realise the impact the above suggestions would have, and possibly many do not care. However, I find the pushing through of these ideas "on the quiet" a little disconcerting. The Green's, being an open and truthful party, need to consider a way of summarizing their key policy points, probably on their brochure. I came up with a list of about 20 significant statements from reading their policy document and overview. I'll provide it in Part III. Not hard Jeanette. Not hard Russel. What else are you hiding?

Now, I don't particularly want to debate the merits of each of these proposals (although this may happen via specific posts in the future if the Green's can convert Al Gorism into votes.) At this stage, I'm not even suggesting that some of these ideas are bad. I'm just saying they are very significant, and shouldn't be hidden. These policy changes are not going to save the environment, but they will impact our economy.

A quick look at these policies for those that don't find the description self evident.

Overhaul of the benefits system
The Greens make the plea "that the highest marginal tax rates in operation are those faced by beneficiaries entering the workforce. The current tiered benefit system results in an overlapping of abatement regimes. The system of payments to people with children is complex and does not reach all those potentially in need of assistance...In the year ended 31 March 2000, almost 60,000 families had to refund money to IRD as a result of overpayment of Family Assistance. and suggest reform in this area is necessary, as their own policy document suggests the lower income workers could suffer the most with Eco-Taxes on energy. Part of this discussion leads them to suggest a Universal Income.

Introduce a Universal Income or Guaranteed Minimum Income (UI/GMI)
A person with zero income receives the minimum income as a payment from the IRD. As that person starts to earn money, they receive an amount equal to the net value of their PAYE and the minimum income. As at present, the end of the financial year provides an opportunity for a tax "wash-up" to deal with any loose ends.

There is no suggestion on what the UI should be - presumably it equates to the unemployment benefit and superannuation payments that it would replace. Their policy is suggestive of streamlining all other benefits. does that mean there is no child benefit, family assistance, rental assistance, sickness benefits etc? Do children also receive a UI (paid to parents for their child's benefit? What do they mean by the end of year wash-up? What is the projected cost of everyone receiving a UI? How does the government claw this back from workers - will it really even out the disparity a low income worker suffers when they move from the dole to paid employment? Or does the claw back get dumped on the middle class? For such a serious proposal the detail is scant. What do they hope to achieve by putting this through on the back of Eco-Tax? Chances are, this would just stall the whole Eco-Tax Bill and they would end up achieving little. Same deal with the other non Eco-Taxes.

Introduce of comprehensive capital gains tax
Again, this policy is out of place on their Eco-Tax submission. At the least, they need to add "We would exempt the family home from CGT" because the opposite is implied in their submission.

Tax capital movements in and out of New Zealand
I am intrigued with this idea. Possibly worth a separate post. But it is probably out of place on this submission, if they want any chance of getting Eco-Tax through.

Restructuring the Government Superannuation fund to invest "in New Zealand"
We also see ending the dedicated super fund as part of ecological tax reform. Instead of putting $2 billion a year at the mercy of international stocks and bonds, the Greens want to invest in New Zealand

This one rings alarm bells. A couple of reasons. Firstly, it's in their brochure but not well discussed in their policy document. So how did this become a key point of the brochure? Secondly, people when they retire want fresh air in the garden, sure, but if the Super Fund doesn't provide a good financial rate of return, there simply will not be any money for the elderly. They'll die early and become fertilizer, and that's not a particularly good campaign platform for the Greens. Again, if they are going to push through changes like this under the guise of Eco-Tax, they need to provide far more detail on these so called "throw away" items, and also be prepared to have the whole package derailed as we start discussing trivial matters like survival income for pensioners.

Across the board tariffs on imports (+5 to 10% on all imports)
No costings, no mention of CER obligations, no real discussion on how this will effect our various trade agreements and our export revenue. Dangerous.

An Arrival Levy to complement the current Departure Levy
I really shake my head when I see pointless taxes like this.

Increase in tax deductibility of donations to communities
Oh very nice. I suppose that will save the environment somehow. What's the rate, what's the projected cost and what counts as a community recipient? (And now probably redundant anyway with NZ Labour removing the donations cap from April 2008 - one of the few policies I like from Labour)

So, if you thought the Green's Eco-Tax was all about the environment at this stage, you'd be wrong. At this point, it looks like they allowed themselves to get distracted with a whole lot of contentious tax reform issues that speak to the redder elements of the Green Party, using the environment bandwagon to push through other changes.

I'd advise them to drop these from the submission and focus on implementing a quantifiable number of changes, in exchange for a suitable tax free threshold and simply push for a separate wide ranging review of taxation, providing it protects their Eco-Tax concepts.

You might be relieved to see my next post (Part III) discovers more taxes focused on moving the taxes from (as they say) "goods" to "bads". Stick around and see what they are, and how effective they might be.

Related Links:
Greens Eco-Tax: Part I - The Sweetener (and links to related Greens documents)
Greens Eco-Tax: Part III - Bad Tax

Update 2008: It seems the old submission documents are no longer available, so the links don't work. I will look for alternate copies. However, I have located a Greens Business Tax Review (Sep 2006) that may update some of this information, and I'll review this soon (Perhaps end of Jan 2008)

1 comment(s):

MK said...

"Overhaul of the benefits system."

More benefits to useless parasites.

"Tax capital movements in and out of New Zealand."

In case you get any bright ideas of sending your money overseas where they can't touch it, you folks will have to hide money in your socks to get it out.

"Restructuring the Government Superannuation fund to invest "in New Zealand""

Don't depend on your super folks, if the investment in the glorious new NZ tanks, you'll take the fall, not the Greens.

"Increase in tax deductibility of donations to communities."

Sounds like a grand plan for you folks to fund even more minorities and 'disadvantaged' groups.

In my opinion, treat the Greens like you would a used car salesman telling you to, just trust him.

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