Suddenly you find yourself in your late fifties wondering if you have done enough to avoid penury when the working years grind to a halt.
The time to act is now. No matter the task at hand; begin immediately. Waiting for the perfect moment is procrastination that leads to paralysis and regret.
One gentleman who understood this was Roger Douglas. He was Minister of Finance in the 1980s and determined to reshape the economy. The dysfunctional tax regime high on his agenda. He recruited a prominent economist, young Dr Don Brash, to assist him. The result was the goods and services tax which helped pay for deep cuts in marginal tax rates.
Douglas was explaining his ambitions to a group of MPs when a nervous backbencher piped up that
Rome wasn’t built in a day. Brash, in his autobiography Incredible Luck, recounts that Douglas rounded on the backbencher. Governments only get one chance in a generation to fundamentally redesign the tax system, and that “we’re going to adopt it, and you bastards are going to go out there and sell it”.
It has become fashionable to dismiss those reforms, pretending that we could have continued to live as we had, an insulated backwater sheltered behind tariff walls and propped up by subsidies. An illusion then. An illusion now.
Just as Muldoon’s reckless fiscal and monetary policies reduced the country to a weakened state with nothing but decline and decay, so Ardern and her colleagues have expanded and compounded on the neglect of the Clark and Key years to leave this country on a trajectory of waning glory.
Few data points clarify this more effectively than the growth in core public servants; from 47 to 62,000 in six years. This has been matched by a huge uplift in the size of the state relative to the economy. In the 2017 pre-election update, Crown spending was estimated to be 27.4% of GDP by 2024. In the 2023 pre-election update that figure had changed to 33.5%.
This is a 22% increase in the size of the state and is a massive drag on the economy that most of us vastly underestimate.
If your income is tax-free, you get to keep every dollar. You are compensated for your time with cash. In most situations each hour worked is less enjoyable than the one worked before. This applies to the self-employed as well as those chasing overtime.
If the state takes a third of your income, you take home less cash for every hour worked. At some point you decide the money is not enough, and you go home to spend time with your children. Or watch Netflix. Or make a podcast. Whatever you prefer to do with your time than working.
If you are a business, each investment comes with a risk of failure. If there is no tax, the reward for any investment is the post-tax profit, and the risk is the risk of losing your investment. If the state takes a third of the profit, you will make less investments because the reward for taking the risk is reduced.
Every dollar collected in tax costs the economy more than one dollar thanks to reduced output. This ‘deadweight loss’ is a well-known, if difficult to measure, economic phenomenon.
Compounding the problem is the issue of ‘crowding out’. Private companies must pay more for resources as workers prefer the easy life of wearing a lanyard and performing performative karakias working for the Ministry of Anthology rather than working for a firm that must provide goods and services to willing customers in order to pay the wages.
Despite this, Wellington has been reluctant to accept that it must reduce spending and covered the shortfall with debt.
Key and English began this descent into penury but under Grant Robertson the rise in spending and deficits has accelerated.
Crown expenditure rose from 75 billion in 2017 to 123 billion today; and then there is the debt. Under Robertson’s watch Net core Crown debt, which excludes the Super Fund, leapt from $62 billion to a forecasted $181 billion next year. Core debt is still growing at over twenty billion per year, according to the pre-election numbers, two years after the pandemic ended.
To achieve reductions in taxation Willis will need to tear the heart out of the Leviathan that is strangling our economy. Tax cuts can only be paid for with reductions in spending; and cuts in spending will result in political opposition.
Luxon, Willis, Seymour and Peters have a once in a generation opportunity..........The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
Douglas was explaining his ambitions to a group of MPs when a nervous backbencher piped up that
Rome wasn’t built in a day. Brash, in his autobiography Incredible Luck, recounts that Douglas rounded on the backbencher. Governments only get one chance in a generation to fundamentally redesign the tax system, and that “we’re going to adopt it, and you bastards are going to go out there and sell it”.
It has become fashionable to dismiss those reforms, pretending that we could have continued to live as we had, an insulated backwater sheltered behind tariff walls and propped up by subsidies. An illusion then. An illusion now.
Just as Muldoon’s reckless fiscal and monetary policies reduced the country to a weakened state with nothing but decline and decay, so Ardern and her colleagues have expanded and compounded on the neglect of the Clark and Key years to leave this country on a trajectory of waning glory.
Few data points clarify this more effectively than the growth in core public servants; from 47 to 62,000 in six years. This has been matched by a huge uplift in the size of the state relative to the economy. In the 2017 pre-election update, Crown spending was estimated to be 27.4% of GDP by 2024. In the 2023 pre-election update that figure had changed to 33.5%.
This is a 22% increase in the size of the state and is a massive drag on the economy that most of us vastly underestimate.
If your income is tax-free, you get to keep every dollar. You are compensated for your time with cash. In most situations each hour worked is less enjoyable than the one worked before. This applies to the self-employed as well as those chasing overtime.
If the state takes a third of your income, you take home less cash for every hour worked. At some point you decide the money is not enough, and you go home to spend time with your children. Or watch Netflix. Or make a podcast. Whatever you prefer to do with your time than working.
If you are a business, each investment comes with a risk of failure. If there is no tax, the reward for any investment is the post-tax profit, and the risk is the risk of losing your investment. If the state takes a third of the profit, you will make less investments because the reward for taking the risk is reduced.
Every dollar collected in tax costs the economy more than one dollar thanks to reduced output. This ‘deadweight loss’ is a well-known, if difficult to measure, economic phenomenon.
Compounding the problem is the issue of ‘crowding out’. Private companies must pay more for resources as workers prefer the easy life of wearing a lanyard and performing performative karakias working for the Ministry of Anthology rather than working for a firm that must provide goods and services to willing customers in order to pay the wages.
Despite this, Wellington has been reluctant to accept that it must reduce spending and covered the shortfall with debt.
Key and English began this descent into penury but under Grant Robertson the rise in spending and deficits has accelerated.
Crown expenditure rose from 75 billion in 2017 to 123 billion today; and then there is the debt. Under Robertson’s watch Net core Crown debt, which excludes the Super Fund, leapt from $62 billion to a forecasted $181 billion next year. Core debt is still growing at over twenty billion per year, according to the pre-election numbers, two years after the pandemic ended.
To achieve reductions in taxation Willis will need to tear the heart out of the Leviathan that is strangling our economy. Tax cuts can only be paid for with reductions in spending; and cuts in spending will result in political opposition.
Luxon, Willis, Seymour and Peters have a once in a generation opportunity..........The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
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