Fisking that “step change” [update 4]

It used to be called a “sea change.” Before that it was a “paradigm shift.” But all a “step change” really means is an admission that the way things are done isn’t working, so we have to try something new.

But is that really what Mr “I’m-Ambitious-For-New-Zealand” will be offering New Zealand this afternoon in his programme for the coming year?

To put it simply, the country’s businesses have been mired in shackles, knee-capped by nannying, and hamstrung by hefty taxes.  And John Boy’s solution to that is going to be  . . . well, don’t hold your breath. At a time when the world’s economy is still mired in the Great Recession and none of the old nostrums are working, it’s going to be more rules and new taxes and more of the same old, same old, isn’t it.

So not very hopeful at all, is it.

There are manifesto promises that haven’t been delivered, giving (as Lindsay Mitchell says about National’s welfare promises) “an opportunity to keep rolling them out as 'new' announcements.”  This is known as spin.

And there are manifesto promises that were never going to be delivered, like those manifesto promises to cut back the nanny state, which it’s now clear you’ll never see from these boys, and to give you big tax cuts—which as you might recall as they’re rolled out this afternoon never ever came with the public advisory that any cuts you might see in your taxes will be balanced out by new ones.  So this must be known as lying.

So amidst a sea of broken promises and a morass of spin and froth, will anything proffered this afternoon bring a “step change”? Or a “paradigm shift”? Or will it just be a shift with the ‘f’ missing?  Let’s take a look this afternoon. Bernard Hickey, among others, will be live blogging the announcements as they come, and (as time permits) I’ll be fisking what I see.

Stay tuned.

UPDATE 1: Just clearing the decks here, setting the tone for this afternoon with these two quotes:

1. "Taxes are the price we pay for civilization”
   – Oliver Wendell Holmes
2. “Taxation is the price we pay for failing to build a civilized society, since taxation represents force.”
   – Mark Skousen

Two competing worldviews, only one of which is correct.

Which one do you think will be taken out for a ride this afternoon?

Do you think anyone in that National caucus room, or anyone at all in the commentariat who is talking up all the new taxes, understands either the moral point above or the practical point made by Winston Churchill?

We contend that for a nation to try to tax itself into prosperity is
like a man standing in a bucket and trying to lift himself up by the handle.”

UPDATE 2: Said John Key this morning: “I want to make sure that in my time in office I make a difference to making New Zealand a wealthier country, where our kids want to stay here.” So based on that standard . . .

UPDATE 3: As H.L. Mencken once observed,

    When a new source of taxation is found it never means, in practice, that
the old source is abandoned. It merely means that the politicians
have two ways of milking the taxpayer where they had one before."

It appears the National Party are following that course. We have another promise of income tax cuts; and with it we have the promise of a hike in GST.  We have some promise of tax relief, and the promise with it of extra spending.  We have a promise of welfare “reform,” but a clear signal that the middle-class welfare reform of Welfare For Working Families (which John Boy once called “communism by stealth”) will be untouched.

If we take those two views of civilisation above, it’s clear from some the “highlights” of John Boy’s speech which is the one of which they approve.

• No plan to pay off the ever-increasing debt, perhaps by reducing govt spending, but more plans to spend more--and a hike in the only tax that everybody pays.
• No Capital Gains or Land Tax, but some sort of Property Tax to sweep more people into the grey ones’ net. (Remember how they promised before the election to “force” property owners to build on undeveloped land?  Expect something along those lines.)
• GST hiked to 15%, with some sort of change made to Income Tax to “compensate.”
• No change to Welfare for For Working Families—and more taxpayers’ dollars thrown at welfare beneficiaries to “compensate” for the hike in GST.
• No change to Welfare for For Working Families—but (somehow) will work out how to “compensate” WFF taxpayers on effective marginal tax rates of around 95% for the additional burden of the GST hike .
• Will now pick winners in Research and Development and throw millions of taxpayers’ dollars around.
• Will (somehow) free up mining and resource exploration.
• Will throw billions more taxpayers’ dollars at Conservation to shut the Greens up about mining in Conservation land.
• Will throw the Public Works Act at property owners getting in the way of infrastructure developments, especially those involving water storage and irrigation.
• Will improve business’s access to capital, by doing whatever Mark Weldon says.
• Will throw billions more taxpayers’ dollars at nationalised broadband and other infrastructure—over the next five years, that will be $25 billion plus cock-ups.
• Will “reform” the welfare system to “get people back into work” (just as Lindsay Mitchell said they would), but will not be touching either the Minimum wage or Youth Rates, which are keeping so many people out of work.
• Will thrown billions more dollars at education.
• Says nothing at all about banning planners “ring-fencing” cities (thereby hiking up land prices) but will ban the “excessive proliferation” of liquor stores.

So much for “step change.” This looks like more of the same, only more so.

The fundamental point that must be said again and again was made by Henry Hazlitt:

    The mounting burden of taxation not only undermines individual incentives to increased work and earnings, but in a score of ways discourages capital accumulation and distorts, unbalances, and shrinks production. Total real wealth and income is made smaller than it would otherwise be. On net balance there is more poverty rather than less."

Shuffling around that mounting burden does nothing for prosperity.  What is necessary is removing it.

A responsible government would have done that.

That they didn’t tells you precisely how “ambitious” they really are.

UPDATE 4: Comment around the traps on what was signalled as John Boy’s “most important speech since he entered Parliament in 2002”:

• David Farrar gives it a B.  But he would have given it a B+ if they’d promised even more theft.
• Phil Goff says “it’s Alan Bollard 1, John Key 0.”  Which is not far from the truth, really.
• Bernard Hickey summarises the anti-climactic speech: “John Key has just sent Generations X and Y a clear message. Leave the country now.” But Bernard was hoping for swinging taxes on property owners. . .