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Posts tagged ‘Act Party’

Honestly misleading taxpayers

Act’s “Honesty for Taxpayers” policy sounds nice, but if the objective is clarity, it will be unhelpful or worse.

In America, every government form has a small “OMB Approval Number” in the corner. In line with the Paperwork Reduction Act, all government departments must have all forms approved by the Office of Management and Budget every three years, and show an “estimated burden time” alongside the approval number. There’s probably some benefit to this: perhaps agencies would otherwise have a habit of asking for more than they need. And the direct costs aren’t too bad—less than $10 million (Shapiro 2013). But the irony of creating a bureaucracy to fight bureaucracy seems lost on people. Approval, required to collect any information from more than ten people, takes 60 days including a public comment period, often longer in practice. If the problem is inefficient governments, slowing down the government seems like a counter-intuitive move.

Supporters of Act’s new “Honesty for Taxpayers” policy would do well to keep this in mind. This doesn’t mean that the policy is a net harm, of course, but the equation is not nearly as simple as its leader, Jamie Whyte, makes it out to be.

Why so much spending?
Some of Dr Whyte’s diagnosis is woefully misattributed. He blames the absence of checks and balances for making New Zealand “the fastest spenders in the West.” Perhaps so, but fast isn’t the same as wasteful or opaque, and more dire cases of wasteful spending are found in America, where checks and balances run galore. America’s legislators are notorious for sneaking unrelated clauses into bills that push federal spending towards pet projects in their constituencies. Each line is small in the context of the whole federal budget, but they add up. The second chamber and entrenched constitution don’t seem to help.

Also, Dr Whyte forgets that speed runs both ways. Just as governments can increase spending easily, they can cut programmes—as the current government did with student allowances and the R&D tax credit, much to the chagrin of left-wingers and the tech industry.

Similarly, California’s administrations may have been overspending, but only because they were bound to by direct democracy initiatives. Act might like how, in California, tax increases require a two-thirds supermajority of both houses. But Californian voters also had a habit of approving spending for new programmes in voter initiatives, which means that their legislators get little discretion over the government budget—and hence, the trade-offs they should make when spending starts to run away.

Perhaps Act believes that California would not have voted that way if Act-style income tax warnings had been included in the official guides, rather than just the total costs (though that’s not what they said). Maybe that’s the case. But if they want “honest”, useful information, Act’s proposal is an odd way of going about it.

This won’t mean anything, either
A back-of-the-envelope calculation to derive Act-style income tax figures is relatively trivial, but like the total cost, it’s useless information. In no world without Working for Families would “the 17.5% income tax rate be 12.5%”, because no responsible consequential tax adjustment would change just one tax bracket. Assuming we wanted to keep the tax system equally progressive and non-distortionary, all tax brackets would be adjusted, along with the company and trust rates to follow the top income tax rate. It might be sensible to adjust bracket boundaries as well as rates, and maybe GST too.

In fact, the warnings Act proposes could be dangerously misleading. Someone who understands income tax would realise that if the 10.5% rate drops to 3.5%, that’s (mostly) just another way of saying $980 per earner per year. But one would be forgiven for thinking that WfF comprises close to a majority of the government budget, or that they’d have 7% more of their income. This isn’t stupidity. It’s the natural at-a-glance impression of anyone who, unlike me, hasn’t spent hours musing about taxation. Perhaps the extremity of that example would bring people to their wits, but something like “the 28% company tax would be 25%” would not.

If we applied this analysis to superannuation, which Act strangely forgot about, you could wipe the 10.5% rate completely and drop the 17.5% rate to probably about 4%. [1] There’s a reason Act neglected this: canning superannuation would, unlike canning WfF, be universally unpopular. What’s more realistic is peeling back superannuation: raising the retirement age or means-testing it, for example. Act’s policy doesn’t allow for transparency in the nuances that matter.

Far from being meaningful revelations, Act’s policy would open a new can of worms. How do we determine where the tax burden of a policy lies? Do we assume it’s equally distributed by person, or proportional to the tax they pay now? Some difficulties are by design: an Act-style income tax statement would make no sense for a national highway funded by an earmarked road tax. Some require thought about the counterfactual: would tax cuts for welfare cuts be aimed at the poor, or would welfare be funded by taxes on the rich? (This is a dichotomy: think about it marginally.) And would estimates take into account the impacts on the behaviour of consumers and companies? Or savings elsewhere: say, for a corrections policy, savings resulting from a reduction in reoffending?

Act for honesty, or Act for small government?
There is a more basic tension in Act’s proposal. Act opposes government spending beyond the basics, and said as much in Dr Whyte’s speech. In most cases, the misleading effect of their statements would probably make spending seem more significant than it really is. Supporters of small government are unlikely to complain about this if it means people turn off government programmes that they think are wasteful.

Yet it is difficult to reconcile this with the policy’s stated objective. Dr Whyte says that people “should have a clear idea of the price of [an] agency in their taxes or rates”, that “good decision-making depends on good information.” You would think, then, that the policy is about providing high-quality information. The sort of back-of-the-envelope calculations Act proposes are the precise opposite. And they give themselves away at the end:

Politicians from the big spending parties will oppose this policy. That shows what a good idea it is. The bureaucracy will also resist it, because voters will be surprised to realise that much new spending is generated by bureaucrats.

Their language doesn’t really contemplate the possibility that oftentimes, the cost will be worth it. The information they provide focuses only on income tax rates, and not on all the other factors a policymaker would (and should) take into account when making a decision. Act dresses this up as being about informed citizens, but they are really only interested in certain information that will help achieve the objective they seek.

If you’ve read any of my previous posts, you might know where I’m heading with this. Demanding the disclosure of information to help voters is a value-agnostic procedural policy. Act is curiously selective about where they apply this principle. You should bear this in mind when reading their rhetoric about “honesty”, “information” and “accountability”. It’s really about something else.

[1] This is an extremely rough estimate based on the Treasury numbers on the effect of changes to tax rates. Crucially, it assumes that the effect of a two-percentage-point change is twice the effect of a one-percentage-point one and so on, which is patently wrong, but should still give a ballpark figure.


Oddities in MMP submissions

I’ve just been flicking through submissions received to date by the Electoral Commission on the MMP voting system.  Most suggestions are quite sensible—even ones I disagree with—but there are some bizarre claims made by a few:
(I’m only picking on political parties in this post.)

National Party: electorate seat threshold
The National Party is one of few to support retaining the one electorate seat threshold.  They say that abolishing it would be “unworkable in practice”, since it would necessitate “greatly increasing the risk of overhangs or reducing the list allocations of other parties”.

Neither is necessary: we can just say that a party missing the 5% threshold should get its electorate seats, as currently, but what would have been its list seats now just go to the parties next in line to get a seat.  The details are non-trivial but possible.  (I explain how it would work in my submission.)  Compared to the status quo, overhang is the same and the list allocations of other parties increase.  Workable, easily.

The Conservative Party also made this mistake, saying that if the one electorate seat threshold is abolished, we would have an overhang of 6 seats.  We could design the system like that, but it’s not hard to just keep Parliament the same size while reallocating “coat-tailers” to other parties.  (In 2011, there were actually no coat-tailers, so it would have made no difference.)

NZ First: the overhang anomaly
NZ First advocates introducing a 4% threshold for parties who win one electorate to gain additional list MPs.  (The status quo is no threshold.)  That’s all well and good, except when they say “this threshold… would go a long way to eliminating the likelihood of the overhang anomaly”.

This was probably just a proofreading oversight.  But their proposal wouldn’t have any impact on overhang.  Overhang parties never have list MPs (since electorate winners took all their seats), so the question of receiving additional list MPs doesn’t really bother them.

ALCP: representing cannabis users
The Aotearoa Legalise Cannabis Party criticises the 5% threshold as leading to the people “not being properly represented”, which is well and fine.  But their evidence is that “not one single MP is standing up for the cannabis consumers who represent 16% of the adult population”.  Given that 16% is greater than 5%, this seems odd.  Maybe these cannabis users just decided they had more important ways in which to spend their vote?

ACT: the thresholds
The ACT Party supports the 5% threshold to “limit and rationalise voter choice” and “assist with government formation”.  It’s unclear how, but presumably by preventing too many minor parties from messing things up.  But they go on to say that the one electorate seat threshold should be retained because it “allows more votes to count”.  It’s unclear how this reconciles with their support of the 5% threshold, which renders many votes useless.  It’s also unclear why they think waiving the threshold for electorate-winning parties has “contributed towards stable government formation”, while waiving the threshold for other parties would detract from it.

The ACT Party goes on to say that most advocates for abolishing the one-seat threshold do so for partisan reasons.  The ACT Party, which in both 2005 and 2008 had “coat-tailers” on their Epsom victory, has more incentive than any other party to advocate its retention.  They were also scant on reasoning of their own, largely conceding that the thresholds are arguable, “arbitrary” or “subjective” judgements and deferring to the 1986 Royal Commission, which didn’t actually explain why they proposed for the threshold to be waived for parties winning a constituency seat.


Impressively, both the Greens and the Labour Party managed to avoid any internal inconsistencies in their submissions, or at least ones that I could pick up.

Here’s a joke: ACT and climate science

When will the ACT Party wake up to the world’s realities?  When will they open their eyes to the scientific consensus on climate change?  When will they understand that some small, isolated American petition simply doesn’t cut the mark for evidence of a lack of consensus?  The ACT Party’s understanding of climate science makes the Residents’ Action Movement’s economic policies look intelligent.  (And that’s a really, really big call.)

The ACT Party is the lone dissenting political party to generally accepted evidence and causes of climate change.  If the election debate that the NZ Planning Association hosted last week is anything to go by, no-one else is in denial.  (National’s spokesperson was airport-bound and couldn’t make it, but I’m reasonably certain the National Party is quite well-informed in this respect.)  The only serious debate is about how we should go about solving the problem.

It is difficult to understand whom exactly the ACT Party listens to.  The best I can do is to understand from Peter Tashkoff’s blog to that they are prepared to base their opposition to emissions trading schemes (in general, not just Labour’s one) on some petition circulating in the United States.  You have to wonder, though, when Tashkoff says scientists accepting climate change are “outnumbered fifty to one” while the best figure the petition’s website itself can give is fifteen to one.  A subtle discrepancy, but a chilling one for credibility.

And even then, the fifteen-to-one claim is questionable.  The petition can cite no survey other than the petition itself, with no counter-figure for comparison.  Rather, “fifteen-to-one” is based on the number of scientists “seriously involved in the United Nations IPCC (International Panel on Climate Change) process”.  I hardly think it necessary to go further than to question the assumption that all involved scientists are directly involved in the IPCC.  It is quite a ridiculous assumption indeed.

Somewhat telling is the petition card on the front page of the website.  This petitioner’s PhD was in physics: was this the best example they could give of a petitioner?  No meteorologist, no climate scientist, no geologist?  I certainly wouldn’t want to question this person’s intelligence: if a physicist said something about particle physics, and a meteorologist said something contradicting the physicist, I think I’d believe the physicist.  The same goes in reverse when the meteorologist’s field of expertise is the topic at hand.

What, then, is the real scientific consensus on climate change?  When I direct you to the article “Scientific opinion on climate change” on Wikipedia, I’m not directing you to the article content—everyone knows that Wikipedia alone shouldn’t be taken as authoritative.  What I am directing you to is the list of 66 references (at time of writing) at the bottom of the page, for you to browse through.  It’s no coincidence that most of these views are of associations of meteorologists, climate scientists and geologists.  To give the whole picture, I should also mention this article outlining dissenting scientists (in the most broadly defined way), also quite well-referenced.  On the whole, if there is any solid evidence that the UN’s view is “not supported by the scientific community”, I find it hard to find.

I will concede, though, there there are a handful of scientists who don’t agree with the view that climate change is happening and caused by human actions.  If 100 per cent concurrence is a requirement before we should believe anything, then I could sympathise with the ACT Party’s stance against the Emissions Trading Scheme.  It just so happens that I think 100 per cent is a bit of a tall ask.  No-one in their right minds would flatly refuse scientific opinion, not even the ACT Party.  The question is, who do you believe: the vast majority of researchers, or a few thousand petitioners who we don’t even know are connected to the field?

Can’t escape the “hard-right” tag

No-one ever believes their own views are extreme.  It’s always “common sense”.  Sir Roger Douglas thinks his recently released agenda is “common sense”—not “hard right”.  But you know, I’m sure the Greens think they have “common sense” too.

The point here isn’t to question whether or not Sir Roger’s plans have sound theoretical basis.  It is the nature of economics, as it is with all the social sciences, that questions cannot be definitively answered.  Most economists, though, would accept that economic opinions can, for the most part at least, be modelled on a spectrum, from state control on the left to the free market on the right.  The thing is, everyone sits somewhere on the spectrum further left than him.  He must have realised that no-one is advocating more of a free market than he is.

This doesn’t make it “wrong”, but one must realise that at the heart of his agenda is an ideology.  That is what the far ends of the spectrums are: ideologies.  His policies are well-reasoned, just like every other policy (except perhaps John Key’s) is well-reasoned—communist ideologies being no exception.  Whether they stand up to practice is more difficult to answer, but the heart of his policies is a firm belief that a more efficient economy benefits everyone, and no less for the poor than the rich.  It is this firm belief that characterises those far-right on the economic spectrum.

But when were no-condition, no-catch universal benefits like that ever true?  The unfortunate reality is that there always is a trade-off, some winning and some losing.  Better always means worse for some.  It is this understanding that separates those towards the centre from those on the sides.  Sir Roger is effectively advocating that the free market can work for everyone.  In return for low taxes, he wants people to cover themselves for everything.  As much as he seeks to deny it, that by definition is hard right.

The heavy irony rests in the fact that while Act has realised the opportunity arising from a left-moving National, seizing on the moment to separate its policies from theirs, Act can only realistically seek a place in a National-led government.  Meanwhile, National is doing is very best to attract centrist voters.  While it might be true that a vote for Act is a vote for National, this could cause a backlash when centrist voters realise that it works in reverse too: that a vote for National is a vote for Act.

Centrists tend not to like ideological visions, preferring realistic policies instead.  Wary of pure market policies like Sir Roger’s, voters may think twice about gifting their vote to National.  That the policies they get may not be the policies they vote for, because of Act.  It creates opportunities for a fear-driven Labour campaign, not unlike the “Gone by Lunchtime” campaign in 2005, with but a subtle difference in target.

While polls currently position National to govern alone, this never happens come election time, not in an MMP system.  National, having gained lots of swing voters from Labour, is now in the awkward position of having to decide whether it will appease its centrist support base, or be prepared to make concessions to Act after the election.  Key says now that he won’t be “held hostage to a radical right-wing agenda”, but what if his ability to form a government depends on it?