The wealthy use the nation’s highways to transport their goods around the country. Interstates mainly benefit trucking companies and their clients. It is the trucks that are hard on the roads and require them to be rebuilt every summer. The highways are paid for by taxes. When Congress lowers taxes on the wealthy, it is saying they don’t have to pay for this public good that they benefit enormously from. It is saying that the people who make $50,000-$200,000 a year have to pay for the highways instead. And if the government uses tolls to pay for the highways, it is saying that even the minimum wage worker who uses a toll road to get to a fast food restaurant for employment has to pay for these highways and for the constant damage to them done by the big trucks serving the corporations, who are now held harmless from paying their fair share. Reducing taxes on the super-wealthy is a way of increasing taxes on everyone else….."
Gordon Campbell talks about America and the hole it's dug for itself. His comments on tax and roads sound perfectly applicable to New Zealand.
Wednesday, August 10, 2011
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29 comments:
Robert,
I would agree that the American tax system is a mess, and their system for raising taxes for road infrastructure is particularly messy - with overlapping Federal, State and local agendas and taxes.
By comparison, New Zealand has a relatively simple, efficient and clean road infrastructure taxation system that is relatively fair to all users, and everyone pays.
State Highways are 100% funded from the Land Transport Fund, which is 100% funded by road user charges and fuel taxes. So firms, truckies, farmers etc all pay through the RUC and fuel tax.
Local roads a approximately funded 50% Land Transport Fund, 50% land rates - so again, those who get benefit from a transportation network farms, businesses etc pay via their rates and fuel taxes.
It is at the moment a relatively fair system in NZ - there can always be discussion and policy adjustment around the mix of RUC vs fuel tax, and rates vs land transport fund - but you can't say that everyone isn't contributing.
This is quite different from the USA where taxation for transportation infrastructure has a range of problems.
I trust this assists with your understanding of the issues
Ross
...proving that I'm as thick as two planks!
Thanks Ross. I was well aware that our system here is different from that in the USA and my choice of 'perfectly'to describe the applicability, very poor. However, you are not from Southland and haven't been party to the ongoing stoushes between Central Government and the local bodies over the roads here and the funding needed for their care. You'll not be aware perhaps, of the impact that the Fonterra tankers are having on the highways here and the existence of the over-weight 'super-trucks' that are hauling coal about the region. These issues are causing ongoing upset down here, similar in nature to that described by Gordon Campbell, though, as you so rightly point out, not for the same reasons. The essence of his article though, that the powerful seek to shed responsibility for shared services to the general taxpayer whenever they can, is what I was thinking of when recommending the article. Farmers enjoying exemptions from ETS and environmental obligations that must be taken up by the wider community, industry doing the same over their green house gas emissions, please fom the super-rich to remain free from paying tax - the usual downtrodden view of the prosperous :-)
'pleas from'
Robert,
I am very well aware of the issues associated with both the dairy industry tanker traffic and also the super-truck change.
These issues are impacting in every region that has had growth in dairying in the last decade - and are also currently being debated in Canterbury and the Waikato.
The base issue is that road usage patterns have changed (dairy tankers) as land usage patterns have changed (from dry stock to dairy) which is not all that surprising when you stop to think about it.
The argument is who pays for the additional road use and consequential damage - local rates or land transport fund (fuel tax). The answer of course is going to be both - dairy farms are more economically productive than dry stock farms in this context, and once the conversion and irrigation resources are in place the land is worth more - both higher income and bigger capital gain for the farmer, so in theory more money available to pay for the roads that are used to take his product to market.
In the long run if the roads totally fall to bits then you either end up with 4WD dairy tankers, or farmers pay more for the roads, or they don't get their product to market. They are rational people, so they will pay ultimately.
With regard to the Land Transport Fund it is a bit more interesting. It is currently getting squeezed by the major projects required in Auckland, Wellington, and Christchurch. That is leaving less money for the provinces, and hence the outcry from the likes of Southland District Council.
The dairy companies (not just Fonterra) say - well we are paying our fair share of tax through RUC. Which is true as far as it goes - if there is not enough money in the Land Transport Fund to pay for all the countries agreed road and transport needs, then RUC and fuel taxes will need to rise.
And that is the dispute at the moment - no one likes to pay higher fuel taxes, or rates for that matter - but at the same time roads are fairly fundamental to our lifestyles and our ability to get product to market - and earn a living.
I think it will sort itself all out in the medium term, simply because common sense will prevail - everyone has a vested interest in a reasonable quality roaring network.
Our issues are nothing compared to the USA where at a State level many of them have to go to ballot to raise fuel taxes - hence some of the issues with their roaring infrastructure - no money to fix them.
*roading network
Robert -
re two planks comment:
Not at all - I am trying to help your understanding of this issue.
You have an elected role in this debate, and I thought it would be useful to assist in broadening your knowledge so that you can make a considered and valuable contribution to the debate in Southland, as required by the role you have been elected to.
Cheers
Ross
You are right Ross, and far more learned than I on this issue. My 'American' connection is wrongly made. The roading issues down here have never really grabbed my attention, though I know they consume the SDC and Federated Farmers in equal measure. As a road user, I notice the roads are more ragged now than they have been and I attribute that to the heavy milk and coal trucks. They may be paying for their repair and will continue to do so, but timeliness is also important and those drivers of ordinary vehicles who have had to pay for wheel alignments as a result of pot-holed roads or who have had their driving pleasure reduced through the roughness of the road surface may still resent the industries that increasingly use the roads but cause them to be less than they were.
I've been involved with making decisions about dust suppression on country roads however, and have some knowledge and opinions about that vexed issue. I should perhaps have posted on that instead :-)
If roads were privately owned we would see some innovative ways of calculating the value.
How would the owners of private roads be responsible about environmental issues such as discharges to waterways, dust and oil issues, even road safety obligations Shane? A system where sueing is the tool?
Ross has educated you on the NZ issues, but the original article is fallacious to start with.
Lets start with tax issues. I suggest you have a look at the facts at http://pc.blogspot.com/search/label/Down%20to%20the%20Doctor%27s
14 examples where high tax rates = less tax received and reduced tax rates = more tax received.
If you want to understand how this can be have you seen this before:
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100...
If they paid their bill the way we pay our taxes, it would go something like this...
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7..
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do..
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men ? How could they divide the $20 windfall so that everyone would get his fair share?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.
"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,"but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics.
Paranormal
Educated me paranormal?
You make it sound like some Guantanamo Bay process or something objectors to a Communist regime might be subject to. It's not often used in a punitive sense but there you go...As to your cut'n'paste paranormal, I don't buy it. I've seen it before (darling of the right, that piece of rhetoric) and watched it being unravelled, flayed and laid out in the sunlight for some disinfection-action.
How about you explain your thoughts with your own words.
It is interesting though, how your view contradicts that of Ross so blatantly. I wonder if he'll return to 'educate' you?
This is a good and interesting debate. Nice tone to it. And some presentation of facts and counter arguments. There are a few blog sites out there that'd do well to glean a lesson, unless they wish to be the laughing stock of political comment.
Robert,
I am done for today - with me available time is always an issue. I have a few things to get done today that need urgent attention.
I am tempted to spend a hour explaining the disadvantages and advantages of possible road privatization - but again no time.
I have enjoyed visiting today.
Thanks
Ross
Thanks Ross - roading isn't my burning passion but I've learned a lot from what you've said. I'll mull it over. If and when you do call again, I'd be very interested to discuss 'the commons' with you as it seems you might have an opinion about that. I know Shane is well versed on that topic and perhaps paranormal might be also. Anonymous@2:44 is I know, an astute observer of human behaviour and knows how to string phrases together, take inventory of the facts and blow frog-toxin-tipped darts all at the same time.
Robert, odd, when I put things in my own words you want the facts when I link and cut & paste facts you want my own words. well here goes:
Campbell is following the populist eat the rich mantra you on the left love as it secures your constiuency through the politics of envy. The fact "the rich" are already paying through the nose for the roads through personal and company taxes always evades the 'truth' you on the left expound. The truth is the more you tax the rich, the more they will find ways of avoiding to pay tax or quite simply get up and leave.
Studies have shown that the greater propertion of GDP is taken in tax the less productive a country will become.
Lets bring the tax explained through beer into NZ stats. From the treasury tables recently released, here are the New Zealand stats showing how much households pay or receive in tax/transfers by household income. It accurately reflects the figures in the tax expliand by beer parable.
Taxable Income % of housholds % of net tax paid
$0 - $50,000 43.5 -54.5%
$50,000 - $100,000 30.3 33.6%
$100,000 - $150,000 16.5 50.2%
$150,000 + 9.7 70.7%
100.0 100.0%
Paranormal
Sorry the table hasn't copied across. To explain - the lowest 43% of households ($0 to $50k income) receive more than they pay - net $6bn (ie benefits/transfers received after tax paid). that equates to the four beer drinkers who drank for free.
9.7% of households have an income over $150k and pay 70.7% of net tax. thats the 1 bloke that without his input no-one drinks beer.
Paranormal
Paranormal - where you say,
"The fact "the rich" are already paying through the nose for the roads through personal and company taxes"' are you implying that those two forms of tax are somehow unfair? Excessive perhaps? Unjustified even? I ask because you describe them being paid through the nose which sounds painful. Ought we to feel sory for those who pay those taxes? Are their endeavours being crushed as a result of paying? I suppose that if that were the case, they wouldn't be rich any longer - I guess you could use that as a test.
You go on to present me with another interesting fact that you call 'the truth'
"The truth is the more you tax the rich, the more they will find ways of avoiding to pay tax or quite simply get up and leave.
This determination to 'avoiding to pay tax' seems to be a defining characteristic of the rich, as you've described here. Why is that I wonder? What does that say about their characters?
They're also likely to leave, you add. This doesn't say good things to me about the level of loyalty or patriotism to be found amongst the rich, if what you say is true.
Are the rich turncoats and opportunists, as you've described them here? Will John Key, for example, take his ball and go home (to Hawaii) if he has to pay more tax than he does now? I imagine your comments were intended to cast the rich in a good light paranormal but I'm not sure that's how they came across.
Read the parable Robert.
The rich don't mind paying what is fair. What you and the rest of the left are advocating to secure the great unwashed support through your politics of envy is more bash the rich. How about a more positive approach? How about advocating that everyone becomes rich? I beleive we are all able to acheive that.
But lets look at the reality of tax. You on the left want to tax all sorts of things to make people avoid them. Tax smokes to deter people from smoking, tax on booze to stop people drinking, an ETS scam to stop people using carbon. As you have rightly surmised taxing something means people will avoid doing it. Why can't you realise this works for income tax as well? Income tax is a tax on hard work, the harder people work the more you want to tax them.
Income tax is anti productivity. Just ask any accountant who will tell you about any number of clients that refuse to work harder to avoid going into a higher tax bracket. And don't get me started on the poverty trap that is the disgraceful vote buying Welfare For Families. With marginal tax rates of over 70% there is no incentive for improving a families position. It is just entrenching poverty.
So Robert, don't give me your eat the rich rubbish. The rich are individuals who make choices dependent on what the incentives are, just like every other member of the community.
Paranormal
(paranormal - the 'you on the left' thing is kinda lame. Are you not able to just state your case or would you feel more comfortable if I referred to you as a Tory in every response I make?)
So, you respond "The rich don't mind paying what is fair."
Do I take it then that the personal tax and the company tax you mentioned is viewed by the rich as unfair (paying through the nose you said)?
I'm just trying to fix an answer to my question. I believe that's how useful debate goes - question, answer, next question, answer. You?
You say that we on the left yearn to tax for this and that, then cite the ETS. That's a national Party/John key special that one. I recall Key raising GST as well - that's a tax right there, no?
You also say, "Income tax is anti productivity." The greens seem to be saying something much like that, calling for the first $5000 earned to be tax-free. The right wing seem vehemently opposed to the idea. I hear the Greens say, tax polluters, not workers also. You must agree with this?
Further to your comment - "So Robert, don't give me your eat the rich rubbish. The rich are individuals who make choices dependent on what the incentives are, just like every other member of the community."
So it was just the headline that wound you up paranormal?
I'm more interested really, in Bill English's revelation that the super-rich shouldn't be asked to pay any tax. I understand something of the rationale (and expect that you agree with English) but don't support the concept for a number of reasons. Not envy paranormal, as doubtless you believe it to be, but a desire for transparency and fairness at a simple, human level, not a heady ideological theory one.
(Robert - apologies I've written too long a response so will use two comments for completness - hope you don't mind cluttering your comments in the interests of a full debate.)
Part 1
I'm sorry Robert but I sincerely believe you lot on the left have been indoctrinated into the politics of envy. That’s why I use the moniker. I don't know what a Tory is. I thought they were UK conservatives but if you wish to call me that that is your choice. Whilst I may not have answered questions, I thought my comments had addressed them. But for the sake of order let’s take your points one at a time.
What is fair? Is it fair to tax someone nearly half of their income, at a far greater level than the rest of the community, and then not provide them the same level of services in return as they are 'already rich'? And what is 'rich'. Cullen said it was rich pricks that earned over $60,000. That is not fairness, that is demonisation of a sector of our community.
In the US company tax takes a number of guises. In New Zealand company tax is purely a withholding tax as all income is ultimately taxed at the individual’s marginal tax rate. (I know there are Cullen created anomalies here but I am talking in theory).
ETS is globally a lefty thing. It was brought in by Labour and only slightly tinkered with by National.
I'm sorry Robert you are just not getting the picture. GST was a brilliant tax in that it is a tax on consumption. When it was brought in income taxes, a tax on hard work, were significantly reduced. This set the scene for twenty years of growth in NZ, only stopped by Labours Muldoonesque tax and spend. And don't give me this 'GST unfairly targets the poor' rubbish. The most significant costs in the average families budget, rent and mortgage, are already GST free. GST was designed that way to alleviate the cost to low earners. But consider if a rich guy buys a new porsche they could pay $40k to 45k in GST alone on the purchase. I know you'd love that.
We are talking about half the picture however. Tax is only there to raise funds for government spending. And that is blatantly out of control. Fix one and you don't need the other.
Part 2
Robert keep spinning the Green propaganda. A tax free lower threshold (as part of a coordinated tax plan) is classic Roger Douglas. See http://www.act.org.nz/taxation-policy under Policy detail there is a proposed $25k tax free threshold as part of the 2008 tax policy.
If Pollution was a problem in New Zealand then taxation would be one of a number of answers. However if what you are suggesting is taxing a life gas (i.e. CO2) then you already know we are on a different page on that one. I would also suggest you read one of the founders of Greenpeace’s book, The Sceptical Environmentalist. The world is a far cleaner place than it was 100 years ago and the green movement scaremongering is diverting public attention and funding from where it should be.
No Robert it wasn't the headline, it was the sentiment it expressed that is so wrong headed it is bordering on evil. It is this whole notion that socialism is good / capitalism bad that is limiting individual human potential and gets my goat. That’s why I used your headline to summarise the anti-people sentiment embodied in the article and your support of it.
No I don't agree with English, on this or most things actually. For that matter I think English would be at home in either Labour or National. I believe everyone needs to pay their fair share. In that respect I think it would be fair to cap an individual’s income tax to say $1m per annum. There is no way an individual would gain $1m benefit from government services in a year, particulalry when their income would preclude them receiving a lot of governemnt services. Surely that is fairness on a purely human level? This policy alone would see a huge creation of jobs, industry and wealth in New Zealand, eradicate avoidance and the wasting of money on taxation lawyers and accountants, but I wouldn't expect you to like that. Cactus Kate would be seriously out of work. All that spare time would be hard on the left.
Now having answered your questions let’s look at the real issues. Tax and spend is the tool of the left leaning as it cements power bases. Taxing many to buy the favours of the few is the way it used to be. It’s now punitively taxing the few to buy the favours of the many. That’s why English loves it just as Cullen loved it. Unfortunately it is out of control in NZ and destroying the social fabric of the nation.
It might surprise you Robert to know I used to be a Green voter until I read their manifesto and realised what they really are. Norman, Locke and Bradford aren't (or weren't) Greens because they like trees.
Paranormal
http://mises.org/books/roads_web.pdf
para - special dispensation for the rich because they don't/can't use the services equivalent to their 'contribution'?
People who grow their own food should pay less also (fewer trucks drive on the roads for their benefit_, especially those eating organic food (no need for the health system or ACC because they are more alert that processed food eaters), cyclists and pedestrians use the road less if at all, so that's another reduction for them - us greenies should have to pay no tax by the sound of your proposal. I'm liking it!
Thanks Shane.
Shane: Thanks for that - looks like an interesting book.
473 pages - have you read it from cover to cover?
Comment above from Ross :-)
If you were truly self-sufficient and walked or rode a bicycle everywhere, you would be paying no tax now.
Truly self-sufficient?
That's a huge ask!
How about accidents - broken legs requiring medical help. Being 'self-sufficient' has levels of meaning.
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