Tax “reform.” It’s not rocket science, it’s theft. [Update 3]

There’s one aspect only of the Tax Reform Group’s recommendations I have any time for: If NZ is going to be wealthier, then NZers need to consume less and produce more.

Fair enough.  The intelligent commentator distinguishes between the two: consumptive expenditure uses up stuff without replacing it; whereas productive expenditure uses up stuff in order to create more stuff.  The more productive spending, the more productive we are.  The more consumption spending we do, the less productive we are (especially if we’re consuming our capital.)

This is just basic economics, but it’s ironic that it’s being said in the same spending season as all the Keynesians are talking up spending as if it’s the cure to syphilis.

So much for the consistency of mainstream economists.

So saying it makes sense, but (even given today’s rampant Keynesianism) it’s hardly a feat like discovering gravity to say it. Because if they have the intelligence they are supposed to, they would recognise that the biggest consumer of stuff round here is the government—and recommend the government stop.

No such luck. instead they’re recommending that we give the government more.

So much for the “logic” and acumen of the Tax Reform Group.

And the government is talking up a change away from taxes on the production side at the same time as their Nick Smith is imposing new taxes on production to protect the Earth Mother Gaia.

So much for the “logic” and acumen of this government.

The Tax Reform Group insist that we give the government more (and have no fear that we will). 

They insist on soaking residential property investors for example, and commentators like this moron over at Bernard Hickey's leap into print cheering on the increased rents on tenants and the tax-man’s hand being thrust into a new pocket.  That moron is just one among many completely blind to the irony of giving tenants an accommodation supplement with one hand (which has helped push rents up to unsustainable levels), while taking the cash back with a tax on their landlord.

So much for the ability of economic commentators to know what the fuck is going on.

The only thing we can be sure of is that when anyone talks up a new tax, a legion of talking heads with nothing in them will leap up to cheer on the tax man.  Soak the rich, soak the poor, soak the landlords, soak them more. That’s just the thing to get the commentariat cheering.

This latest bunch of academic done-nothings insist on a “new” tax on land, for example — and commentators like David Farrar and Bernard Hickey leap about excitedly, announcing that this new tax will (somehow) avert the growth of future housing bubbles.  Commentators like David Farrar and Bernard Hickey say this despite evidence from all around the world that not one market that had such a thing managed to avoid any such thing; and evidence from here at home that we have pretty significant land taxes already, thank you very much.

And not only that, commentators like these two  appear utterly oblivious to the all too obvious fact that the housing bubble was itself the product of a borrow-and-spend mentality flushing out of the system under the Reserve Bank’s impimatur (what George Reisman calls counterfeit capital), coupled with a restriction on land supply created by the toxic swill of ‘Smart Growth.’ 

An inflationary demand combined with restrictions on supply!  Who would have thought you’d see a bubble!? Not these two, anyway.  And not the Tax Reform Group either. (For an extra mark, work out what will happen bubble-wise when an additional tax is placed on the suppliers of developed land.  Answers on a postcard please.)

There’s certainly more than one thing broken here, but the Tax Reform Group (and the various commentators who are mostly too dim to see past their next tax return, or the last economic report) just can’t see them. 

So instead of trying to fix the country’s woes with a new tax, here’s a few home truths the Tax Reform Group failed to wrestle with but should have:

• that the Reserve Bank’s credit spigot needs to be capped, and the country’s town planners need to be told to take a hike. 
• that if they’re serious about taking taxes off productivity, they immediately take an axe to their new cap-and-tax scheme. (Copenhagen’s over boys.  No need to grandstand now.)
• that if they’re serious about lowering the the “price” of rents, and with it the value of rental property, they think seriously about calling a halt to the Accommodation Supplement.
• that if they’re serious about reducing consumption, then they get pretty damn serious about reducing their own (and the way to start that is to begin attacking the culture that demands that need is an entitlement).

If you want some sort of “step change,” those simple things need to come first.

UPDATE 1: Slight change in text and title.  And the addition of a swear word.

UPDATE 2:  Libz leader Richard McGrath says the issue is spending. Government spending. You want wealth, then “Put the State Sector Through Woodchipper.”

    “Libertarianz  leader Richard McGrath said the National Government needs to grasp the nettle and slash state spending so that taxes can be reduced across the board.
    ““The agonising by Bill English over which taxes to cut, and which to increase, demonstrates a clear lack of direction,” he said. “This government clearly has no intention of reining in the profligate spending habits of its predecessor. And if it doesn’t stop spending, it has to keep taxing.”
    “My party can name dozens of departments, ministries and boards which could be axed tomorrow - and no-one would miss them. . .”

 Read on to see some examples.

UPDATE 3: Cactus Kate lets rip:

    “All this talk of "tax neutrality" makes me rather ill. When you are running deficits you need to cut government spending. No talk of that is there?
    “I don't understand Hickey's crusade against landlords, perhaps he doesn't own a rental property. As for the depreciation on buildings - Farrar states most buildings don't depreciate in value? WTF?
    “If anyone has sold a rental property they would know a thing as ‘depreciation recovered’; that is, on any sale in which you make a gain, you have to pay the bloody deductions back in any case.
    “Fund Managers, NZX operators, share scammers - I can understand their self-interest on the Tax Working Group. Pity others can't.
    ”I'm independent of the matter having no NZ stocks or property. All it seems like is new ways to thieve from all walks of life.
    “The suggestions are so poor that we can now only put faith in English and Key that true to form they will decide it is all too bloody hard so they do nothing.”