Man of the Week - Barry Colman

Barry Colman on Close Up



With Mike "But I am not a socialist" Hosking chipping in. Self-made scrapper Colman says:

"This gap between the rich and the poor is one of the most damaging myths we have in New Zealand and people like socialists just keep repeating it over and over again even though its demonstrably not true.

The people who are poor in NZ today are enormously better off than if they were poor 50 years ago or 100 years ago. A hundred years ago they couldn't eat at all. Today we've got a really good welfare system in place, much abused as I think it is, so the poor people fundamentally have rooves over their heads, and they have enough to eat by in large....a tiny number when you are talking about a city of over 1 million people".

In other words, Colman states that the poor already have enough. Unapologetic for the fact he is loaded and they aren't.

Colman is the first Rich Lister (albeit his own list) to come out and explain precisely why the poor have never had it better in New Zealand. And that the Rich listers themselves who existed three years ago aren't on it now due to recession etc.

Good job Barry. Happy to keep chipping in with that $89 every 6 months for common sense comments such as this and to keep Matt "Sludge" Nippert and "Schlock" Jock Anderson on their huge corporate salaries.

Now just stop giving money to socialists to fund political parties such as Labour and you will be allowed your rightful place in the VRWC. Which we almost gave back to you when you fronted with the Veuve Clicquot.

That Busted Blonde STILL after almost a year has in storage. If it isn't consumed within a year I have the right to send the boys around to take it and throw the party myself.

Women Love John Key

John Key A Hit With Female Voters

I've always had a gut feeling women don't vote for other women. So it doesn't surprise me that women are flocking to John Key. Why?

Key is loaded, has a nice family, exudes the sort of "comfort" that women are after in a man and most important of all ... He is just a wee bit of a dork. New Zealand women like that. It's non-threatening. It makes a man not entirely perfect.

I've never really seen the sex or general appeal of John Key. Not really my type and all as he's under it all a bit of a wishy-washy unprincipled flake. Which is why of course he's winning so handsomely because New Zealanders share the same wishy-washy unprincipled easy ways out of decision making. But I do see why other women looking for inspiration to vote find him attractive.

I saw the man work a room in June and it was breathless. He waltzed around charming the knickers off older Nanas. Women stared at him like he was a messiah, oggled at him like they were going to break out into a dance that would only occur at a Rolling Stones concert in the 60's with Mick at the height of his superpowers. His speech was on the button, funny, even witty. And delivered with the adeptness of a professional stage performer.

In New Zealand we've had David Lange (ick), Jim Bolger (ick), Bill English (ick), Geoff Palmer (ick), Mike Moore (triple ick) and of course Rob Muldoon in my lifetime. John Key doesn't have firm competition.

But in a superficial world where women look often at superficiality in choosing a partner, the ability to provide for the family (euphemism for "he's loaded"), look good, make them feel good with a comment or being noticed and even better, a second, just a millisecond even of engagement - John Key is brilliant.

And best of all.

He's not Phil Goff. Surely the world's most boring male leader aspirant with the world's most unusual and non-commanding surname.



Goff has zero sex appeal, not much general appeal at all. No man aspires to be like Phil Goff and the only woman who finds Phil Goff attractive surely must be Mrs Goff.

Sadly for Goff, standing next to Jacinda Ardern constantly doesn't make him more attractive to female voters. Unfortunately it just makes him look a little bit creepy and desperate.

He's not even vanilla in a line up of a budget icecream brand like Tip-top. He has zero stage presence. It is so bad in fact that David Parker, David Cunliffe, hell even Goffice staffer Fran Mold look more the Leader of Labour than Phil Goff.

Phil Goff's brand is one of confusion. A centre-right politician wrapped up in a Budget brand can in the bargain bin. The man who may have been ACT leader at one point. Don't laugh. Some were trying to recruit him in the beginning back in 1995. Thankfully that failed. Even ACT rejected him.

So if it's Goff v Key, Labour will lose.

Attacking Key is a waste of time and I am impressing this heavily in the ACT campaign. A personality contest when you take a Goff to a gun fight, is a waste of time. Key cannot be beaten.

If Labour are to beat National their team has to beat National, without focusing on John Key.

And no election in my lifetime has ever really been won on anything other than who has the most appealing, dominant Leader.

Which surely aint Goff.

Benefit of the Doubt - No Thanks

Speechless. Where do you start?

Close Up meets beneficiary Monica Tigifagu, a solo mum with six kids to four fathers. …

Fathers are paying child support - think that's enough. This woman is nothing but a breeding machine for the underclass. Popping out yet another mouth to feed and a child destined for a life of despair, statistically likely to repeat the cycle of welfare dependency.

Say hello to EVERYTHING that is wrong with the welfare system.

Smoking - "I don't give a crap...it's my stress relief".
On men - "Finding bad relationships I would say". You reckon?
No remorse - "I'm glad I had my kids...they are more special than the money itself".

Of course they are more special than money. She doesn't have any money. "Other people" are paying for her kids.

Monica needs to meet a special friend and have injections linked to her benefit.



And the four deadbeat dads who acted as sperm donors for these kiddies need to also meet a special friend.



Forget Paula Bennett, she's too friendly and is too close to bennies out there in West Auckland. Put Crusher in charge of collections and policy development on child support payments. Make these sperm donors pay more and develop policy to stop the Monica's of this world from recklessly endangering the taxpayer with more mindless breeding where the only Daddy around is the State.

I challenge even the most hardened pinko to defend Monica's right to keep breeding like nothing more than a low self-esteemed smoked feral alleycat and have the taxpayer fork out the damage. By all means have 6 kids from 4 different fathers if you wish. But make sure you can pay for it yourself. With those stats and absolutely no hope of ever supporting the family, her breeding was solely a lifestyle choice.

In the meantime imagine what a people's jury would decide under David Seymour's system in this case?

Guest Post - ACT's David Seymour on Moral Hazard, Welfare and Citizen Duties

To squash the perception for good that ACT is a Party of old men I have invited some of the younger ACT 2011 election candidates to post unedited and uncut here on Asian Invasion. Many are members also of ACT on Campus that has its own blog and website and these pieces will be cross-posted there.

Some contributors will also be members of the to be launched Youth for ACT that will be launched with a special debate on 2nd August at Back Benches.

First up is David Seymour.



David is a bright, keen young chap who left New Zealand to work in Canada for the conservative/libertarian think-tank Frontier Centre for Public Policy. He's now back in town and ready to campaign in Auckland for ACT.

Moral Hazard, Welfare, and Citizen Duties

N.B. Although I am an ACT Party candidate this is not ACT policy. It’s a far out idea, but it’s worth a float (thanks Cactus). If I was a Nat I’d probably be expelled for writing something outside the party lines, so if this post does say anything about ACT it’s that our party tolerates free thinking and open discussion.

Welfare in New Zealand suffers a fundamental problem. Economists call it moral hazard, and they define it something like this: Two or more parties enter into an agreement but one cannot monitor whether the other is really trying to keep their end of it. The classic example is car insurance: Once insured most people are less careful than they would be without insurance, to the insurer’s (and ultimately other customers’) cost. For better or worse, welfare in New Zealand is an agreement among all citizens that people faced with misfortune including unemployment (Unemployment Benefit), incapacity (Sickness and Invalids benefits), injury (ACC) and childbirth with insufficient income (DPB) will be compensated with a replacement income. For the agreement to work all people must ensure that they do everything in their power to avoid relying on welfare, and rely on it only when they have no other option. Unfortunately, moral hazard tells us that nobody’s internal motives can really be known.

The key problem is that a person’s circumstances are never entirely in or out of their control. The most conscientious worker can end up out of work despite making every possible effort to find it, but talented and highly employable people can choose to be indolent. Because the human body is so complex health conscious people can be struck by terrible sickness and incapacity, but people blessed with good health can fritter it away through bad choices. The most careful workers can be injured by bad luck, but I’ve also seen people do some stupid things on building sites. There is no 100 per cent effective contraception and anyone can have an unplanned pregnancy despite their best efforts, but I have first-hand accounts of people asking doctors to remove their IUD in order to get pregnant and claim the DPB.

The problem with welfare and the debate surrounding it is that civil servants cannot make decisions based on their judgement of a person’s motives. They are bound to administer the law without discretion. They may identify beneficiaries who are clearly making bad choices and who would make better ones if the benefit were not available (let’s call them type A beneficiaries), but they cannot discriminate by allocating less or cutting the benefit completely. They may identify people whose genuine need is greater than what a benefit can meet (let’s call them type B), but they cannot discriminate by allocating more. The result is pleasing to nobody, and it makes for a surrounding debate where both sides talk past each other.

Welfare critics tend to believe that too many beneficiaries are type A, and that welfare needs to be made meaner. Welfare defenders tend to assume that too many beneficiaries are type B, and welfare needs to be made more generous. Critics cannot win because the public will not accept putting type B beneficiaries into even greater hardship. Defenders cannot win either, though, because the public will not accept giving more money and therefore more hazardous incentives to type A beneficiaries. Take the proposal to time limit DPB receipt to six years over a lifetime. It might discourage many from using children as meal tickets, but it would also put at least some in even greater hardship. Again, the problem stems from the fact that different people have different internal motives that cannot be measured objectively.

The only way to make welfare work better than it currently does (and the Welfare Working Group has provided the figures to show why it seriously needs to), is to solve the moral hazard problem. That means giving the welfare administrators the ability to make decisions based on subjective assessments of motives. That’s the only way they can make welfare more compassionate for type B beneficiaries and remove the hazardous incentives that trap type A’s into debilitating dependency at taxpayers’ cost.

Except the way welfare is currently set up they fundamentally can’t. Giving WINZ staff discretion to decide who is “deserving” and who is not would be a disaster. The whole concept of the rule of law would be thrown into chaos as little Hitlers in WINZ offices across the country went on personal tirades to rebalance type A and type B beneficiary numbers according to their own prejudices. It would be an opening to corruption of the likes this country has never seen and never should.

However there is one very successful institution that does make decisions with heavy consequences about nuanced matters within the law. Juries do it every day and compared to realistic alternatives they do an extraordinary job. Juries make decisions that no civil servant should be allowed to make because nobody is a juror all the time so there’s little scope for corruption. What’s more private citizens are allowed to have private prejudices that civil servants aren’t, and when there’s twelve of them they usually balance out to something sensible.

You can probably see where this is going now: Welfare in New Zealand should include jury-like boards that would involve ordinary private citizens in deciding recipients’ eligibility (or not) for welfare. Mechanically, it might work something like this:

The country would be divided into communities of 10,000 adults. To the extent possible in each geographical region, the communities would be balanced by the deprivation index, so they would all have roughly the average socio-economic status of the country as a whole. Some remote regions would have communities that would be outliers. The tip of Northland, for example, has a lot more beneficiaries than most parts of the country and no high employment regions nearby. All communities would have a share of total welfare spending weighted to their share of deprivation.

Taking the Welfare Working Group’s figure of 1:13 working aged adults receiving a benefit, the average community would have around 800 beneficiaries. If there was to be a 6-monthly assessment of each beneficiaries’ needs and benefits, then the average citizen would be required to form part of a citizen assessment panel of twelve for one day per year during which time they would assess 20 cases over 20 minute sessions. Ten minutes to interview, ten to deliberate.

In each case the board would review the recipient’s situation and make a recommendation based on a series of options including more money, less, stopping the benefit completely, or recommending some form of training or work program. All of these decisions would be made in view of a total budget for the community. As a bonus feature, it might be that each community would evenly share any monies not spent from the annual budget.

The main result would be that the scope for discrimination, in the original sense of the word, would be greatly increased. Truly tragic cases would be able to benefit from discretion. Cases where the beneficiary was abusing the system and had other options would come under more intense pressure to end dependency. The overall level of justice and humanity in the system would increase.

A secondary result would be political. As I have written elsewhere, voting in elections is a terrible way to understand and influence policy decisions. The rational and informed voter gets the same government and the same policies as the irrational and ignorant voter, but the first has a lot less free time. Smart people don’t think too hard about politics, and everybody suffers bad policy as a result. A day’s mandatory service each year would focus voters on what is really happening with the welfare system. It might be that on balance the political demand for a more generous welfare state would increase. I doubt it, and I’m happy to take the chance.

The system has precedent. The original Old Age Pension Scheme in the 1890’s applied character judgements to recipients. Drunks and wife beaters could be denied their old age pension. As Jonathan Bartholomew has recorded in The Welfare State We’re In and David Beito has recorded in From Mutual Aid to the Welfare State, friendly societies once carried out all of the functions of the modern welfare state, and arguably more effectively. They succeeded because they used peer pressure and personal relationships to solve the moral hazard problem.

Of course, my libertarian friends have probably defriended me on Facebook and burned me in effigy by now for suggesting mandatory participation in these community boards. However, I believe that we need to make smart trade-offs if we are to actually achieve a freer society instead of just talking about one. Current expenditure on welfare (excluding Super) is around $3,000 per taxpayer per year. One day to see it spent better is an inferior solution to not paying it to the state in the first place but it’s far better than what we have now.

This idea is way out there, I accept that much. However our welfare system fundamentally doesn’t and can’t work the way that we currently try to make it work. More generous welfare means more abuse, “meaner” welfare just means failing to help the people supposed to be helped and defeating the purpose of having the entire scheme in the first place. The nub of the problem is moral hazard and the inability of civil servants to deal with it.

If a problem defined is half solved, then please consider this solution.

The Real Competition For New Zealand's Underclass

This weekend I returned to one of my favourite holiday places, Thailand, and the Island of Koh Samui.

I had plenty of time on a bean bag in the sun by the hotel pool to observe the latest state of the place as evidenced by the beach vendors peddling their wares to punters.

It is asked by the likes of comfie living, poorly travelled Grey Lynn hipster Martyn Bradbury why I am so hard on New Zealand's heaving pathetic underclass. I do not and never will back away from that description.

In terms of achieving something with your life, New Zealand is one of the easiest places in the world to make something of your life, no matter how badly it has started or who your parents are. The Prime Minister is the best example of such.

New Zealand as a country has a better standard of living, more opportunity and a better education system than most countries in Asia. A "free" education system at that. Laugh as you want, but New Zealand's public education system is better than most in the world. Despite their bad press, New Zealand's teachers are better than most. Any student without the reason of a major learning disability who is failing is doing so because they either aren't trying hard enough or their family isn't supporting them to succeed. Neither is it the fault of any government or teachers union. It's the fault of the rubbish that's going into it and parents with expectations that education ends when dropping and picking their child up at the school gate. One cannot expect teachers to turn dirty swamp water into Dom Perignon. I don't accept that New Zealand's school system is failing. No system will succeed unless parents and students alike change their attitudes towards education and actually value it. New Zealand has not reached that level of respect for education. It expects a system that tailors for each an every child. Which is impossible. What is needed is conformity by each and every child to the system in order to learn then leave and earn.

Currently the world is undergoing massive inflationary pressure, not insignificantly caused by the emergence of Asian countries in their desire for better standards of living and western lifestyles. Something has to give. Even the poorest Westerners after all, want big screen TV's and better cars. Fact is they're buying on credit, not their own but from welfare handouts from other taxpayers and public debt.

Even in Samui since Christmas, prices for massages that were 200 baht are now 250 baht (25% increase), corn that was 40 baht is now 50 baht, same with the ice creams. Chaweng Beach inflation is running around the 25% mark.

The largest competition in the world is at the lowest margins. It is also as I observe in dealing with people from what are deemed third world countries, the most fierce and brutal. At the upper end we see movies like Wall Street depicting corporate battles, these wars are but nothing compared with the basic human desire to survive at the lowest end.

Put simply Asia's poor and desperate are better than the poor and hopeless in New Zealand. They work harder, they have aspiration and desire to do better than they are. They are superior in every regard.

In New Zealand, regardless of the race of the poor or the underclass, you do not see that desire. Their response when things get hard seems to be to have another mouth to feed. Even on a benefit, the poor and underclass in New Zealand are better off than a working class Thai for example.



This woman sells mangoes, fresh fruit and drinks and cooks corn for 50 baht a cob on the beach all day and into the night in energy sapping 40 degree heat down on the burning sand and will never have the standard of living than that of a second generation beneficiary in New Zealand does.

If the corn seller had the hand-out attitude of a New Zealand underclasser she would starve and die in Thailand. The Herald has a beat-up on how 40,000 children in New Zealand are fed by charity. Why would you bother to feed your own child however when the school does?

Right now the biggest threat to the lives of the underclass and lower paid in New Zealand isn't John Key, Don Brash, Reserve Bank or a National led government. It's this seemingly harmless woman and billions just like her in China, Brazil and India. Her children will want a better life. They will push their governments to provide it. Eventually Thailand will get its act together, stop stealing money through corrupt practices and provide it. And at that time their country with 63 million people all working with a go-forward attitude will surge ahead of New Zealand. A country where now according to these statistics on Kiwiblog, 44% of households are net beneficiaries (a greater number of these people if you include their dependents). That is, not earning their keep and relying on the charity of others who are forced to pay taxes to survive.

Asian countries do not have welfare states. They will resist as long as possible. Because they've seen America. They've seen what paying people to do nothing brings. They've seen what happens when everyone is told they can have their own home despite inability to finance it.

It's not the act of payment of welfare that destroys the fabric of society. It is the attitude it breeds. That someone is owed a living by other people and can and will vote themselves an income.

The corn vendor with her entrepreneurial street smarts would kick the backside of any New Zealand low paid, beneficiary or underclass. She would do it with far less compassion than even I show towards New Zealand's poor and underclass. She bargains market pricing daily in a way that a Wall Street trader would be impressed with. Cutting deals for bulk buys and sales, she has her mark-up and knows what is required to break even. She hustles, uses a considerable amount of charm and instinct to wrestle every valuable baht from tourists. All of whom have more education and opportunity than she had.

I watched her bargain with some of the worse of tourists - Indians and Israelis. Nasty bargainers themselves squeezing every cent they can get just for a cob of cooked corn. She was happy at the end of negotiations every time.

Then there are the children whom I haven't taken pictures of for obvious reasons. The gang leader in Samui is a girl around 10 years old. If you sit on Chaweng beach in Samui long enough you'll meet her with a connect four board and an entourage of much younger children. She speaks English better than any of the hustlers, even the adults. For 100 baht she will bet you in a game of Connect Four. Win and you keep it, lose and she takes your coin. She trades on the gift of the gab, knowing what tourists are drunk enough to take on or taken in by her charm. She entertains, is cheeky and above all knows her time is valuable so when she can't see a sale, sticks her chest in the air and moves on to the next punter. Her skill set is transferable to a woman who in New Zealand would have a career in sales and marketing, or if she was a wet - human resources.

Put her next to a New Zealand child living in a State House with a P or even pot smoking Mum and absentee sperm donor that some people charitably call a father and she would clean them up ruthlessly. Again in a manner more abruptly than I ever could.

Her basic math and finance skills would run rings around a New Zealand educated child the same age. She can communicate with adults better than anyone who has a drug or alcohol addled parent. And better still, she would soak up everything you taught her, as someone older has taught her the art of the street hustle.

Sadly in Thailand she will more than likely be working in the bars behind the beach when she reaches puberty and her life now is as good as it will get. She's the Little Princess of Chaweng Beach. Things probably won't change in her lifetime.

New Zealanders response to such stories is arrogantly to say "we don't want to be like Thailand". Thing is, eventually with modern globalisation the way it is heading New Zealanders won't have a choice and emerging countries such as Brazil, China and India will be sneering down their noses at New Zealand and its over generous tax and spend welfare state as New Zealanders now do at these apparent pauper states. All suffering inflationary pressures from the demand from developing nations for resources they have in the past had all to themselves. There simply are not enough resources in the world to go around. It will create winners and losers. If New Zealand wants to be a winner it will have to stop hugging trees, and start competing.

Martyn Bradbury can sit there in front of his taxpayer subsidised camera jeering as much as he likes about big business, rich pricks and corporate greed.

But the largest threat to Maori, the underclass and with it his comfie middle class lifestyle in good old Grey Lynn is the little old lady selling corn on Chaweng Beach and what she represents. And the ten year old hustler playing Connect Four.

While he's busy representing the past. They are representing for the future and what his world looks like. For Martyn and his bunch of hopeless, lazy underachievers in left-wing fringe politics - it doesn't look good.

Little wonder they trade on envy politics and the theft of even more taxpayers money to build a fortress around New Zealand from globalisation and the fear it creates for them.

The fear that none of them have a chance competing in the real world.

Youth For ACT Official Launch

I won't be back for this but definitely for all you political junkies, a not to miss event.

2nd August 5.30pm
Backbenches
Wellington

Youth For ACT are launching. This group will be the more official (or dare we say it "boring and regulated") alternative/supplement to joining ACT on Campus.

One could be controversial and say even Happy Feet Farrar in his 40's would qualify as a "youth" given ACT's current demographic in the leadership.

Or one could be more controversial and say that Deborah Coddington is the best person possible to be in a room judging this with Don Brash as host after the garbage she's written about ACT in the past...ergh...since she rather ironically left Backbenches that infamous night.

Lets hope that Dr Brash remembers to put the elbow in.

So please go along even if just to mindlessly heckle so we can chuck you out ACT style on your arse into the cold street.

Also if Happy Feet dares mention my name in reference to the debate topic I want to know precisely what he's said so I can meter out appropriate punishment about his misdeeds of youth.

Which are of course far greater than mine.

Richard Prebble - 100% Pure on Taxes

I've had some absolute face palm moments of right-wing woe as of late listening to namby pamby weak centre-right proponents infect our minds with ideas that more and new taxes may be good.

As mentioned in my political philosophy post at the time of Labour's buggers muddle of a tax policy:

All tax is evil. All tax is theft. And I will never be a part of introducing new taxes because the taxes you have right now are evil and thieving enough.

I took a swipe at ACT's Founding Great-Grandfather and soon to be again a Former MP Sir Roger Douglas. It is about time someone on the centre-right did in terms of his mushy Yeltsin-branded thought processes with respect to taxation policy to bring him back to a bit of modern day reality of the monster he helped create:

The only solution to their tax addiction is to just say "no" at the outset. No new taxes. Politicians cannot be trusted not to raise taxes. And yes that includes Sir Roger Douglas who has a manic ideological weakness at the knees as a career politician in terms of taxation. There isn't a known tax that he hasn't at one time or other advocated and there are quite a few unknown taxes I am sure in his head right now waiting to be divulged even at the ripe old age of 73 for one last spin around the Beehive.

Sir Roger slammed National for increasing GST to 15% yet forgetting he was the very enabler who brought the damn tax in.

But there is light at the end of the tunnel in support of my assertions that new taxes are to politicians what heroin is to junkies and it comes from this cameo on Backbenches by Richard Prebble, Former Leader of ACT.

Prebble comes out firmly opposed to Capital Gains Tax. Prebble even reminds his old colleague Sir Roger of the nightmare that the introduction of GST and even income taxes has become. Prebble is a man who has grasped lessons from history. His quotes:

"If you could tax your way to prosperity the Soviet Union would have won the Cold War" and;

"Taxes are like acorns... they grow..when the Labour party brought GST in it was 10% and it was never going to be increased and it's now 15%" and;

"When income tax was introduced all the politicians said it was only going to be on the wealthy and of course now it's on all of us".

Rounded off with the grand finale:

"You have Capital Gains tax and it will be on your family home, I'm telling you".



Watch this short clip 1m 19secs I commissioned of Prebble's performance from Master Remixer Whaleoil. Including 30 second "I've Been Thinking" summation from the show at the end.

National will not repeal CGT if Labour and the Greens get in to office and introduce it. There are no second chances to stop CGT and other silly taxes but to kill them off before they take their first breath.

After that it is too late.

Send the politicians back to the drawing board and just say no to new taxes.

Nats Epsom Selection Shocker

The most enthralling of National Party selections was finalised tonight - Epsom. It produced perhaps the largest shock. Paul Goldsmith def. Aaron Bhatnagar.

Whaleoil rather delightfully bio'ed both candidates

I do not know Aaron that well personally from ACT days but I know him well enough to know that he would have thought he had the numbers on this one. He is the former Electorate Chair as well and surely the favourite to win the selection given his time and work in the electorate. He wanted to win the seat.

The selection went to the third ballot. Which basically means that even at that point, the Epsom delegates lied to Aaron. Aaron would have met them all personally as well, he campaigned full-time to win the selection. Once named as a candidate he was not allowed to comment about his candidacy but on his Facebook status updates you could conveniently see the sort of legwork he was doing in the electorate.

I guess that his loss tonight is politics in all its ugly never-trust-anyone essence; back-stabbing and deceit.

That is hard enough in itself to get over and Aaron isn't the sort of character to mildly accept such treatment. He walked from ACT when pushed in a similar manner of principle. He didn't walk quietly either, choosing to go to the Nats and attempting his own jihad on ACT for his shoddy treatment. The Nats have now in effect said "f*** you very much" for that.

Unless they give him a much coveted list position (that Aaron will hate as he knows the value of having an electorate seat), they've shafted him.

As hard as it is to accept, it is very much part and parcel of the nature of the beast regardless of what political party you are in. I have seen some extraordinary examples in National and Labour. As well as in ACT of course.

The reason however I point this out is that Aaron is a good example to young people in politics and in fact anyone with a lot to lose who thinks about getting involved in politics. It is something I was schooled on from the first candidate and list selection I witnessed in 1996 in ACT.

It doesn't matter how much money you have access to, how many positions you have held in the past, what club you are a member of, the history of your family in politics, how good everyone else tells you that you are and how you are the favourite to win and that you are loved and cared for by the masses.

Never, and I mean NEVER, first give up your day job.

The Politics of Division - interest.co.nz Gets Debate Going

I gave Bernard Hickey permission to steal my series of posts from yesterday and stick them on his website interest.co.nz.

I believe Bernard's right side was removed in his weight loss transformation and the remains are really only the left but despite this tendency to lean left he still encourages good dialogue from both sides of an argument.

Whaleoil tonight received a copy of an email circulating within the Labour camp. The email was quite disturbing, not for most of the content but for these paragraphs which basically scream "shut down all debate" with respect to the more academic parts of the policy.



Labour don't want a debate about the detail!! Oh dear. "The public don't care and we get boring".

I gave some of the detail a ride yesterday for your viewing pleasure to point out the kinks in the proposal and how little detail has been worked out - Labour preferring an "expert committee". They didn't listen to the tax working group proposals in their policy design, makes you wonder whether they will listen to any other experts in the area of tax who don't lean the way they want.

ACT MP and Minister Rodney Hide has now joined in and has written a special piece for interest.co.nz. Because Rodney is my mate and this is my blog I will steal it off interest.co.nz and repost his here because it is the sort of detail Labour do not want debated.

Why a capital gains tax is a very, very bad idea

By Rodney Hide*

All taxes are economically damaging but the capital gains tax is easily the worst of the lot.

Taxes on capital gains doubly tax savings and investment, they are brutally unfair, they are complicated and costly to administer, they are easy to avoid, they raise very little money, they choke the economy and harshly penalise entrepreneurship and innovation.

Capital gains taxes double-tax income

The value of say a business is simply the net present value of its expected income stream. The income stream is taxed and so the capital value of the business is after tax. This is a key point.

Cut the tax rate and the business will be worth more. That shows that the capital value of productive assets is always after-tax. Let’s show a simple case.

A business generates $100 a year. The going discount rate is 10 percent. The value of the business is $1,000. That’s if there’s no tax.

Introduce a tax of, say, 30 percent, and the business now yields only $70 a year. The business is worth only $700. The tax liability is capitalised into the value of the business.

Now let’s say I buy the business and fix it up. I double its income to $200. In the absence of any tax the business is now worth $2,000 and I can sell the business and pocket a $1,000 capital gain. However, if there’s an income tax of 30 percent the increase in the business’s value is from $700 to $1,400. My capital gain is now only $700.

My gain is not tax free even though I appear to pay no tax on my gain.

That’s because the capital value reflects the extra tax the extra income the business generates.

A capital gains tax of 30 percent reduces my gain from $700 to $490. I am doubly taxed.

Capital gains aren’t tax free and a capital gains tax doubly tax savings and investment.

Capital gains tax is brutally unfair

There are plenty of ways a capital gains tax is unfair. Imagine a young widow with children whose husband poured his heart and soul into his business. Following his death the young widow has no choice but to sell the business. She has no income and no other assets.

The business was a start up. It generates $200 a year. After tax, that’s $140. The business sells for $1,400 upon which capital gains tax has to be paid at say 30 percent.

She nets $980. In the absence of any tax she would net $2,000.

The widow is taxed at 51 percent. That’s brutal.

Capital gains tax complicated and costly

Capital gains taxes for practical and political reasons are invariably riddled with exemptions and exceptions making them devilishly complicated to administer and to comply with.

We see that with Phil Goff’s proposal with exemption and exceptions already and having to be sent off to an 'expert panel' to be worked out.

The big complication is determining the true capital gain net of inflation after netting out the purchase price and the cost of maintenance and investment in the asset over the years. It’s hard to do financially let alone in terms of writing and then administering tax law.

It will be a great tax for tax lawyers, tax accountants, tax consultants and tax bureaucrats. But bad for everyone else.

Interestingly, but not surprisingly, Phil Goff’s proposal is not to net out inflation. That makes the tax somewhat simpler, but means New Zealanders will be taxed on their nominal gains.

The government-induced inflation rate over which you have no control will determine your tax liability. It’s not a trivial amount.

BERL who provide Phil Goff with his analysis estimate the return on New Zealand shares at 2.6% with inflation at 2%. The bulk of the tax to be raised is on nominal gains, not real gains.

Capital gains tax easy to avoid

The decision to pay a capital gains tax is entirely up to the taxpayer.

It’s the easiest tax to avoid because you just don’t sell your asset.

Besides high-priced consultants will always outwit the complex and complicated law that will always have to be amended and reviewed in the vain attempt to keep up with perfectly legal tax minimisation.

Capital gains tax raises little money

Capital gains taxes don’t raise much money. BERL assume no change in behaviour as a result of a 15 percent tax on the nominal gains in many trades.That’s a heroic assumption.

But even accepting that, they estimate that by 2028 Phil Goff’s capital gains tax will raise $3.7 billion. That’s a lot of money.

In its first year, it only raises $17.5 million – leaving Phil Goff a big hole in his budget.

But Treasury’s Long-Term Fiscal Model estimates the total tax in 2028 as $120 billion.

Phil Goff’s capital gains tax fully matured raises a measly extra 3 percent in tax assuming no change in the number of trades and with the tax taxing nominal gains not real gains.

Capital gains tax chokes the economy

The heart of a vibrant, prospering society is wealth-creating trades that shift productive resources to ever higher valued uses.

A capital gains tax chokes those trades and bungs up the economy. That’s the big problem with a capital gains tax.

Imagine you can an increase the value of a productive asset by ten percent. That’s a big gain that the economy can ill-afford to miss out on.

In the absence of a capital gains tax you would easily make an offer to the present owner in which both of you are better off through the trade and the economy gets a ten percent gain.

That gain won’t happen with a capital gains tax.

The tax at 15 per cent proposed by Labour more than wipes out the gains from trade and the wealth-creating trade does not proceed.

Multiply that result a million times over and the incredible wealth-sapping effect of a capital-gains tax is obvious.

Phil Goff’s capital gains tax will lock up New Zealand resources in low-valued uses. It’s an incredibly damaging tax.

Capital gains tax harshly penalise entrepreneurship and innovation. Entrepreneurship and innovation are key to a dynamic and prosperous economy.

The incentive to entrepreneurship and innovation are capital gains. The capital gains tax is a double tax on entrepreneurship and innovation.

Politicians like Phil Goff talk up the need for entrepreneurship and innovation but their policies invariably hobble and hinder them, and there’s no greater disincentive than a capital gains tax.

But what about economists backing a capital gains tax?

Back in the day economic text books used to back a capital gains tax because it was argued capital gains are income and that the absence of a capital gains tax is itself distortionary. The latter point is the important point. It derives from a note Nobel Prize winning economist Paul Samuelson wrote in the 1960s.

It showed that a true capital gains tax was neutral alongside a comprehensive income tax. The trick is in the assumptions.

The model assumes perfect information, no entrepreneurship or innovation, a closed economy so that critically the income tax drops the cost of capital rather than grosses it up, and that the capital gains tax is an accruals tax payable every year on gains with all losses netted out.

I wrote to Prof Paul Samuelson about his conclusion and he readily accepted it didn’t apply to an open economy like New Zealand in which the income tax rate here grosses up the cost of capital.

I suspect the New Zealand Treasury now accept that point.

There is a section of the New Zealand population that are always up for taxing the rich and the successful. That’s who Phil Goff is targeting.

It’s certainly not about improving the economy.

The promise of a capital gains tax also allows Phil Goff to bluff and bluster through how he is going to pay for his spending promises which is where he hopes to win his votes.

The great thing about political promises is that the numbers don’t have to add up.

That’s because as H. L. Mencken observed an election is an advance auction in stolen goods.

================
Rodney Hide is Minister of Local Government, Associate Minister of Commerce and Minister of Regulatory Reform. He is a member of the ACT Party, and until April 2011 was its leader.

The Politics of Division - Organisation of Economic Co-operative Disaster

Labour compare New Zealand to other OECD countries an awful lot through this policy launch.

Problem is that currently many OECD countries are not the envy of the world

- USA
- UK
- Portugal
- Iceland
- Greece
- Ireland
- Spain





Most developed countries have a CGT according to Labour, and there are just two that do not.

And here are two more that do not:

Hong Kong
Singapore

I suggest Labour do not wish to talk about either jurisdiction. Neither is aspirational for Labour.

Low-tax systems of social order in the centre of the Universe for New Zealand's future exports into China and wider Asia.

You would think they would pay both more attention.

The Politics of Division - One CGT For All

By far the most generous of all possible exemptions in the structure of CGT is potentially that for Maori.

Multiply-owned Maori land is "unlikely to be appropriate for CGT coverage". What about multiply owned non-Maori land?

In terms of a CGT event, the definitions are not set as of yet and Labour have copped out not giving us anymore details as to how Maori land is to be covered with respect to CGT. They are throwing that over to the committee to deal with.

Interestingly Tariana Turia appears to have already come out against CGT. In doing so she has redefined the Maori Party definition of "struggle" and "wealthy".

Labour "thinks it's only wealthy people who have accumulated more than one home", she said.

"In actual fact, I know quite a lot of younger people who have become involved in understanding investment and own two or three homes as well.

"Most of these people have struggled to get their first home and then used their first home as collateral."

Turia said she was "ambivalent" about capital gains taxes, which should apply only to people who had "substantial assets".

Anyone with enough collateral to own three homes surely has to be wealthy by a Maori Party definition prior to this confusion.

"They are people who are trying to build an economic future for their families."

Nice aspirational politics from Turia. Shamefully she very rarely practises what she preaches when it comes time to vote unless it is for her own benefit.

The Politics of Division - Nanny Rahui Exemption GST

Remember when Nanny Rahui from the Maori Party had a batshit crazy proposal to take the GST off "healthy food" and we all belittled it?

Even Trevor Mallard sensibly bagged it as a stupid idea

The bill was immediately mocked by Labour’s Trevor Mallard who correctly noted that an army of inspectors would be needed to define what is healthy and what is not.

And now Labour have stolen and modified the same policy.

We can all sleep easier at night because seasonally market priced fruit and vegetables will now be cheaper so poor people can afford to eat them and they will all lose weight and be healthier.

Yeah right.

The Politics of Division - The Hotchin Exemption

I have completed plenty of prior analysis of the register of interest for MP's and many have family trusts for their primary home.

I am more interested here in the wording of the policy design.

This carve out recognises that trusts can be used "to protect the asset from liability from things such as law suits" but cannot be used for the purposes of "minimise their tax liability". Oh dear. So as long as taxes are not being tampered with the Labour Party has just recognised trusts are legitimate tools for asset protection. Hallelujah, thank you for coming finally.

I wonder how they would feel however about a certain family home being built on Paritai Drive? They may wish to have a looksie at this one again in terms of their anti-avoidance provisions....

The Politics of Division - Gambling Ok Just Not on NZX

Here is an interesting one (well two here - I will post on life insurance when I have time). There is an exemption for winnings or losses from gambling. Why?

Surely gambling should be discouraged as a policy decision? Why is it so god damn awful to profit from the sale of your business or property which is then taxed but when take your money and stick it on the roulette wheel the winnings are tax free?

This is from the political party that wants to take GST off fruit and vegetables because it plays nanny state but here it is encouraging gambling as a form of investment in their policy design of CGT.

Why?

Have a look at Sky City every night. Labour could hold branch meetings in there. The gambling demographic are their electorate. It is another political decision.

But I ask what is the difference between placing $1,000 on a roulette wheel, and buying $1,000 in shares when you are Joe Punter and know nothing about the New Zealand stockmarket? Answer - nothing.

A crazy anomaly in the policy design.

The Politics of Division - The Family Home Exemption

John Key has already mentioned how silly this exemption is.

"Budget 2010 and Budget 2011 actually made it much more difficult for people to speculate in the property market, removing everything from depreciation right through to beefing up the capability of IRD to clamp down on those who do speculate in the market."

Mr Key said if Labour wanted a capital gains tax they should do it properly and excluding the family home cut out 80 percent of the residential market: "it's not going to work".

For most New Zealanders the equity in their home is their biggest asset, they live in the home and will be tax exempted from capital gains tax when they sell it and move. The last estimates suggest around 66% of New Zealanders actually own their own home. This would mean we are only talking a possible CGT event for a third of houses.

I know people who have moved house 3 or 4 times in the past decade, pocketing tidy tax free gains of a few hundred thousand dollars a time from doing so. They can keep doing this as long as they are not buying for the intention of resale (a "trader" as Labour calls them here) and it is their primary property therefore worthy of an exemption.

The family home is somehow sacred, yet for example shares in a family business are not?

What may I ask is the difference?

Exempting the family home is purely a political decision designed to appeal to the Labour voting electorate. It encourages people to still pour money into property and profit from moving home if they wish, rather than for example investing in a small business which is then taxable if it doesn't meet the $250,000 exemption.

And in a blatant envy grab, the family bach is not excluded. Because you know, only rich Aucklanders own them.

The Politics of Division - The Jenny Gibbs Exemption

One of the funniest exemptions is that under "collectables".

ACT supporter Jenny Gibbs lays claim to one of the most expensive collections of art in the country.

Apparently it "would be intrusive, result in high compliance costs and would not raise significant revenue" in applying CGT to any sales or CGT events (undefined precisely as of yet) occurring on her artwork.

I see a boom in valuable works of art from the CGT policy and Mrs Gibbs to celebrate her close shave with Labour's tax policy by investing in a Picasso.

The Politics of Division - Intergenerational Theft

The first problem I have with Labour's Tax Policy is the implementation clause which is very fundamental to the process.

Labour have happily called this V-Day. Which has connotations of course dating back to World War II. Ironically it is the baby boomers already cashed out who will suffer least among the Labour CGT regime especially with the property and asset price rises in the past decade.

There is even a baby boomer exemption for tiddly sized businesses:



Newsflash for Labour, if your small business (tradespeople?) is worth less than $250,000 then chances are you won't be selling it to retire at 55 will you? Again this is a waffly carve out that confuses the purpose. They do not wish those who have "saved through investing" in a small business to be "negatively disadvantaged". Saving or investing? The financial illiteracy in this paragraph is extraordinary, right up there with a Hanover "investor".

In other words, the burden of CGT is going to fall on those of us young enough to accumulate assets from this V'Day. It will not fall substantially on our parents as their unrealised capital gains have been earned prior to V-Day. CGT pits those who wish to be millionaires against those whom have already taken their capital gains out from the pie and are now planning to invest elsewhere.

Apparently Labour do not wish to be "penalising" people for investment decisions made when there was no CGT. Problem with this language is that it is penalising people for investment decisions by inference when there is a CGT.

I also say what investment decisions? There are so few exemptions and moreso very unusual exemptions, that investment decisions must surely stay the same as before. Property driven.

In the past many groups have looked at CGT and decided it might be a good idea, then nothing specific has been done in New Zealand. Take for example in 1987 when ironically again Don Brash and his team reported to Sir Roger Douglas about the Brash Report "Comprehensive Tax Reform and Possible Interim Solutions June 1987".



Here capital gains has been discussed but only with a trade-off of lower taxes. Again remembering giving politicians the option of new taxes is like leaving alcoholics overnight in a brewery.

Members of that committee included Brash, Paul Bevin, Dr Robin Congreve, Dr Geoff Harley, Dr Keith Sutton and Arthur Valabh.

Let me focus on one of those committee members, Dr Congreve who has an estimated wealth now of around $110m. Good on him. As a lawyer he didn't earn such a princely net wealth billing time. No, his investment interests were private equity and real estate. Would Dr Congreve for example have been happy paying 25-30% of his wealth in capital gains for every deal? I doubt it. How many of that committee live in million dollar homes and have a spare home that would have been subject to CGT if it was around when property prices in Auckland skyrocketed?

Then we have the show-boating Gareth Morgan (and to lesser extent his successful entrepreneurial son Sam) harping on about capital gains and how they didn't pay a cent when Trade Me was sold. Morgan Sr. has written ad nauseum about CGT. Problem is I don't see a large cheque from Morgan to the NZ consolidated fund for any voluntary taxes. No, he would rather donate directly to charities of his choice. And why is that? Because Morgan doesn't trust the government to even spend his charity dollars better than he can. Yet he wants other people to happily part with CGT on the sale of their own Trade Me's.

Even in my twenties when I wasn't earning enough money to have any assets, I voted aspirationally, therefore I look at where I want to be and consider how I want to be taxed when I get there.

Labour's CGT punishes young people trying to get ahead and it encourages voters not to vote aspirationally but to vote on the basis of envy of their neighbours and peers. It pits those who wish to be millionaires versus those who already have substantial cashed out assets.

Capital Gains Tax is Labour's way of dividing the country into those who have aspirational goals versus those who wish to take away the wealth of others because they have either achieved their own goals or worse still have none in the first place.

Getting The Prickles Out For New Taxes

Let me preface tomorrow's posts by introducing you to some ideology of mine.

All tax is evil. All tax is theft. And I will never be a part of introducing new taxes because the taxes you have right now are evil and thieving enough. I believe in under promising and over delivering in terms of policy but given my background I will never be a part of any political movement or coalition that taxes you more.

I am not one of those namby pamby faux right wing females who say they believe in lower taxes but then change their mind with "but we need to perhaps raise taxes just a wee bit to give more money to (insert their latest cause such as education, health or welfare)".

In terms of political ideology I am not that interested in arguing about "maorification" or Maori radicals because it is an argument that has no ending but constant trades of "racist" every time dialogue commences. I don't care if we have to wait a few more minutes at meetings while Maori say a prayer or hum a song. Or if Maori want a representative at a meeting at the Supercity to nod off every time Len Brown speaks so they feel important in the process of governance. Or if there is an "h" in Wanganui, because I will keep spelling it as I damn well please.

I am far more interested in arguing taxation and revenue policies. In other words, limiting the amount of money available to fund election time bribes to Maori fringe parties, welfare beneficiaries and special interest guilt-trip sectors of society that Labour are now directly targeting with their latest envy politics.

In other words I don't want to try and stop the water that comes through the tap. I want to turn the tap to a very low flow so it all becomes irrelevant.

I left New Zealand in 2003 with two goals. First naturally as any twenty-something does on an OE, to line my own pockets working in the lowest tax jurisdictions possible and second, to bring lower taxes and reform back to New Zealand.

I was blessed having spent four years in New Zealand learning all about how taxes are applied under the tutelage of some of the best taxation Partners and with it most fabulously aggressive clients in the country at PricewaterhouseCoopers. I hated the often dull as dishwater work environment but it was excellent for me. It was good because I met clients who all believed the best rate of tax on their return was zero. I left the country disillusioned at having to tell clients the bad news that their effective tax rate was for example 12% and wished to see how the other half lived. For eight years now I have had an equally fabulous education in how taxes and policy is applied in pure tax havens and low-tax offshore jurisdictions.

I live in a jurisdiction now, Hong Kong that has no capital gains tax, no sales tax or GST, a top 15% flat rate of personal tax, a 16.5% companies rate of tax, a small transactional stamp duty on stock and property transactions and no resident withholding tax on either interest or dividends. Since arriving here I have also received a tax cut almost every year.

Labour will not use Hong Kong or Singapore as examples of taxation systems. If they did, they would be embarrassed.

This is as close to a perfect tax system I can find in the first world. We don't grow anything here. We don't milk cows. GDP is dominated by service industries. Property prices are astronomical and people get rich buying and selling property to each other in cycles yet there is no capital gains tax. I read Labour's capital gains and tax policies that have been leaked and I wish to puke into a large bucket. I read National's opposition to capital gains tax and it gives me some hope even though their arguments are all over the pitch. ACT seems to be dithering around the edges, but any capital gains tax would have to be implemented with large cuts in personal and company rates to offset it. ACT's 2008 tax policy for example is for lower flatter taxes.

Politicians are like alcoholics left overnight in a brewery when they see new taxes. Introduce a new one and it is very hard to get rid of it. They dither around seeing advantage in revenue raising for themselves to buy votes. GST for example started at 10% when introduced in 1986 and now it is 15%. Adjustments to PAYE and other taxes aside are irrelevant because they tinker at the margins and are very easy to adjust up. National failed at capturing hearts and minds in their recent GST hike because their tax cuts were not large enough. Everyone saw it as an opportune time to hike prices, some more than the GST effect.

The only solution to their tax addiction is to just say "no" at the outset. No new taxes. Politicians cannot be trusted not to raise taxes. And yes that includes Sir Roger Douglas who has a manic ideological weakness at the knees as a career politician in terms of taxation. There isn't a known tax that he hasn't at one time or other advocated and there are quite a few unknown taxes I am sure in his head right now waiting to be divulged even at the ripe old age of 73 for one last spin around the Beehive.

Sir Roger slammed National for increasing GST to 15% yet forgetting he was the very enabler who brought the damn tax in.

ACT New Zealand Finance Spokesman Sir Roger Douglas today slammed the Government’s decision to increase GST to 15 percent, labelling it as totally unnecessary and calling it a reckless revenue grab.“Rather than cut wasteful spending – of which I identified over $3.1 billion – the Government has instead taken the easy option by increasing GST and adding to the significant cost burden already borne by Kiwi families,” Sir Roger said.

I don't have the same issues with respect to taxation and tomorrow I will lead you hand in hand through Labour's proposed reforms as they become evident with details. Most of it has already been released, so it will not take long for me once the formal release to whip through the main issues in separate posts highlighting just how namby pamby exempting and ideologically unsound Labour's tax policy is.

It is election year and their entire policy is driven to divide by class envy. A bit of "rich bashing" for a Thursday then it will be.

Moata on "Maorification"

Lets talk about the elephant in the room for a second.

As I guess one of these Ansell "white cowards" within ACT I wish to link to the real "Maorification" plan as outlined by Moata:

Here we were quietly "Māorifying" the nation, spreading a love of BBQ reggae and jandals as formalwear throughout the country in our sneaky, insidious manner when BOOM, John Ansell, marketing manager for the ACT party, laid it all out - blabbed to the media and everything.

Very funny and worth a read.

As also in terms of a listen is Paul Henry's interview with John Ansell explaining just what the hell he was going on about. Make sure you play right to the end for the singing and picture John Boscawen if you know him, being locked in a room with Ansell.

We Wished He Could Stand For ACT - Roger Kerr

Everyone knows the background here who is into politics or Wellington. Perigo comes back for a special interview.

Best part of the interview is around 22 minutes when Roger (who must be about as close to having a genius IQ as you can find) glibly and very modestly brushes over his academic achievements and that of his children. But highlight is at 24 minutes where an otherwise stoic, rational, softly spoken and very shy individual wears a huge grin and talks about his wife. Very sweet.

New ACT Candidate - Don Nicolson

In the past on this blog I have spoken of Don Nicolson as President of Federated F******s in glowing terms.

Despite philosophical differences with respect to the promotion of farmers over other SME's, I do acknowledge that Don Nicolson was Head of the finest lobby group that New Zealand has ever seen. Federated F******s.

If he promotes the interests of ACT's membership including our city members as well as he did the members of Federated F******s then ACT's future Leader may very well be here. He will soon become a very popular member of the Party and will most likely receive a top list ranking. All of which is good for ACT.

Look for ACT now running a very strong anti-ETS and Resource Management Act campaign with Don Nicolson on board.

Update: Paul Henry outs himself as a good ACT voter (bless) while in the interview he pushes Nicolson to stick his fence post in the grass and say he would be happy with a list position of 3 and 4 but not happy with 5. Good on him for being honest and in his position I can understand his ambition. Lets hope in 2011 he isn't stuck on the farm and actually makes it to the polling booth!