Thursday, February 20, 2014

Mike Butler: Mind the facts when debating the gap



It’s election year again and Bryan Bruce was back on TV3 last night with another erratic poverty doco titled “Mind the gap” that appears to want to tax the rich more heavily to give more money to the poor. Some will remember his “Inside child poverty” about effort three years ago. Unfortunately, while Bruce ponders the questions “why is gap between rich and poor in NZ growing faster than anywhere else, and why is that bad for all of us, he is woefully selective or just ignorant when it comes to the data he uses.

Bruce gives example of family in which the dad earns around $350 a week after tax and pays $340 in rent. The mum works part time for an unspecified amount, and they get an accommodation supplement of $250 a week.

He did not mention the fact that the family would also qualify for Working for Families, which for this family with two children under 12 would be a payment of $217 a week. So this family actually brings in $350 from dad, possibly $175 from mum, $250 from accommodation supplement, and $217 from Working for Families, a total of $992 in the hand a week.

Bruce used this as an opportunity to lash out at "rich landlords" by saying “every year the government pays out $1.2-billion to landlords rich at the taxpayers’ expense?” What he does not say is that Work and Income pays the accommodation supplement to the qualifying New Zealand citizen or permanent resident, and the recipient, as a tenant, pays rent to his or her accommodation provider.

Without the accommodation supplement there would be more pressure for state houses, and this family of four would have to get by on $742. Unless tenants were jobless, a landlord would not necessarily know if a tenant’s income was propped up by the state.

Then there’s Rebecca with her five children at the local supermarket. Her husband brings home $500 a week from a fulltime job; they could get $250 from the accommodation supplement, and $350 from Working for Families, a total of $1100 in the hand a week.

What Rebecca wants is for her husband to be paid a living wage, which to equal the income they are currently getting would have to be $27.50 an hour in the hand. Current demands for a living wage put the amount at just $18.80.

Bruce used that as an opportunity to slam the $2-billion a year that he says is the Working For Families total as propping up employers and evidence that the economy is not working properly. He is silent on the impact that the number of unemployed in New Zealand, plus the impact of numbers of immigrants happy to work for less than $13.50 an hour, on wage levels. More workers than jobs simply push wages down.

In his muddled thinking, Bruce wants higher taxes on the rich (over $150,000 a year) and complains about taxes squeezing the middle class (white collar workers earning up $150,000 a year), but seems oblivious on the role of tax in pushing up prices.

For instance, he interviewed Family No. 3 which kept track of the increasing costs of living over the years. While their income has remained the same, food that cost $3465 in 2004 had rocketed to $8580 in 2012. Petrol went from $1850 to $3421. There was no mention of the increase in GST in that time from 12.5 percent to 15 percent. Neither was there any mention of the high tax in petrol, of 64.129 cents per litre with GST of 15 percent on top of the total.

If Bruce is recommending higher progressive taxation to fund more social spending, he is on the wrong side of current opinion. A recent Fairfax poll asked respondents if they support or opposed raising taxes to pay for new spending. Sixty nine percent said they were opposed and 25 percent were in support.(1)

This so-called report which was actually more of a docu drama that included blood-sucking ghouls cavorting around the steps of Parliament to dramatise the “Zombie Economics” opposition to neo-liberal economic theory and interviews plugging the advantages of the proposed Robin Hood tax on bank transactions.

The “report” that took front-man Bruce and a camera man to the United Kingdom as well as Bangladesh made “Mind the gap” look like a junket dressed up as journalism paid for by New Zealand on Air.(2)

Sources
1. Rasing taxes, IPSOS poll. http://www.kiwiblog.co.nz/wp-content/uploads/2014/02/Fairfax-poll-breakdown.pdf
2. New TV line-up, http://www.nzonair.govt.nz/news/newspressreleases/pressrelease_2012_06_15.aspx

4 comments:

Angry Tory said...

Kathryn Ryan: Mr Key, in opposition you called WFF communism by stealth. Why haven't you repealed it?

John Key: Lots of countries have those policies

Kathryn Ryan: communist countries Mr Key!


So there it is. Radio NZ considers NZ a communist country.

Anonymous said...

The point Bryan Bruce was pussing on the programme was how the tax payer was suporting the land lords with a rent subsidy enabling them to get higher rents,
He should of said more about John getting more and more permit free people in to NZ to help keep unemployment up to aid with lower wages?

Anonymous said...

Wasn't Mr Key told as a child "If everyone else was jumping off the harbour bridge, would you do it too?"

Hilary said...

As "rich" landlords, we wish the government would pay the subsidy to us, instead of to our tenants. All too often our tenants have decided to renege on payments, and by the time we manage to get them out of the property we are several thousand dollars down. If we are lucky, the tenancy tribunal will demand that the money is paid back to us at a rate of a few dollars a week, so it will be paid off in about 10 years. This hasn't happened just once or twice. We haven't made any money on our property, which is in an area where there is no capital gain either. We are doing the government's job of providing cheap housing.