Blog description.

Accentuating the Liberal in Classical Liberal: Advocating Ascendency of the Individual & a Politick & Literature to Fight the Rise & Rise of the Tax Surveillance State. 'Illigitum non carborundum'.

Liberty and freedom are two proud words that have been executed from the political lexicon: they were frog marched and stood before a wall of blank minds, then forcibly blindfolded, and shot, with the whimpering staccato of ‘equality’ and ‘fairness’ resounding over and over. And not only did this atrocity go unreported by journalists in the mainstream media, they were in the firing squad.

The premise of this blog is simple: the Soviets thought they had equality, and welfare from cradle to grave, until the illusory free lunch of redistribution took its inevitable course, and cost them everything they had. First to go was their privacy, after that their freedom, then on being ground down to an equality of poverty only, for many of them their lives as they tried to escape a life behind the Iron Curtain. In the state-enforced common good, was found only slavery to the prison of each other's mind; instead of the caring state, they had imposed the surveillance state to keep them in line. So why are we accumulating a national debt to build the slave state again in the West? Where is the contrarian, uncomfortable literature to put the state experiment finally to rest?

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Monday, November 4, 2013

Tax - Income Inequality: Of the Prison Built by David Haywood (EY) from Horizontal and Vertical Equity.

Here’s the problem we face in the West, again. The frightening thing about David Haywood’s stuffed Stuff article of this weekend, The Rising Price of the Sin Tax, is that David is a partner at EY (for those of you not hip, that’s the old accountancy firm Ernst & Young.) At least I imagine his article would be frightening for clients of EY.

David starts out fine with that recent factoid showing how unequal is the contribution made by ‘the rich’ to New Zealand's welfare state:

Treasury estimates the top 12 per cent of households earning more than $150,000 a year will pay just under half of total income tax. This increases to 76 per cent when government support such as working for families, benefit payments, the accommodation supplement and paid parental leave are taken into account.

Conversely, households earning less than $60,000 a year (half of households) are expected to pay 11 per cent of total income tax.

According to English, this group collectively will pay no net income tax because of income support they receive.

But then we see the agenda, (or is it merely blind assumption now?), in his echoing the bankrupt ethos sounding out of the Labour Party conference this weekend; an ethos that demands ever more from this twelve percent, as they are forced to bankroll the imprudent life choices incentivised by welfare. David sees this tax fact as desirable as it contributes toward improved income equality. I’ve written before on what I think of that. Worse, for the first time I can remember seeing in print, this ethos no longer stops at income tax. Continues David:

While this should contribute to improved income equality with direct income tax, the level of indirect tax on low income earners represents a significant burden.

[Sadly, by this point in the piece, I knew what was coming – my highlights.]

Vertical equity in tax policy design dictates those more able to pay tax should contribute more.

Tobacco excise, in particular, offends this principle as smoking is most prevalent among those of modest means.

Horizontal equity in tax policy design dictates people with similar income should pay similar tax, irrespective of how they spend their money. Again this principle is offended by excise and gaming duty.

Maintaining high (and increasing) excises places a significant tax burden on people of limited means

The first question has to be why is smoking more prevalent amongst those of modest means? The second how should that affect the tax I pay?

Regardless, the inference is clear: the tax system must be organised in such a way that those taxpayers with immodest means - rich pricks, as that former Finance Minister called them - be forced to pay the excise of those with modest means. Not overlooking the ironic nonsense that Mrs H and I gave up smoking eighteen and seventeen years ago, respectively, because we could not afford to smoke while saving for our future goals, yet are now to be forced, if David has his way, to pay the excise for those too irresponsible to plan their own lives and who apparently have an entitlement to, of all things, tobacco; this premise is wrong on every level, most certainly philosophy. It’s mum of eight, ninth coming, and her Sky remote all over again; a piece, you might remember, which started with Mrs H and I yet still this year prudently restraining our current spending.

Here’s my contribution to David’s contribution to the fair society – noting no politician has taken up my challenge to define fair properly.

Once a taxpayer hits a certain income level what say they are forcibly micro-chipped. New technology could then be developed to work in two ways:

A bio-scanner installed at supermarket counters could pick up the chip and that taxpayer would then have an excise tax that would recover the current excise on alcohol and tobacco - even if the taxpayer was buying neither of same – by adding the tax to their – and just their - general grocery purchase. Similar scanners at bottle stores, garages, et al.

Secondly, as we already have the technology by which you can shake your phone at another to throw a payment across, or merely tap your credit card on an appropriate terminal, we can’t be far away from technology that would allow people of modest means to simply touch the sleeve of a chipped person with immodest means and directly transfer to them their ciggy money. Of course for this to work, people of immodest means would have to be publicly identified. Perhaps they be forced to wear a yellow symbol of a dollar sign on their suit or blazer chest pockets? There’s a great logic in this to proponents of the envy politick: why should such people only be exposed to the censure of IRD officers? Shouldn't they be exposed to the great unwashed also?

To some few of us this latter scenario is the worst sort of dystopia, however, according to the ethic that has destroyed the West, it would still be fairer than expecting people of modest means to control their recreational expenditure. What rot this is. Cigarette smoking is not compulsory, nor, incidentally, given I’ve brought up mum of nine, is having babies. I see on Q&A this Sunday morning another mum of nine trundled out to show the need of fixing poverty and the concomitant problem of over-crowded housing in New Zealand.

I simply suggest in passing, that in the fact house over-crowding is one of the chief characteristics of poverty, is also, therefore, the answer. Family size. You have the number of children you can afford to bring up; no more than that. I have a good income, but I couldn’t afford a family of eight and nine. Decisions like this are simple, until responsibility for one’s decisions is taken away by the fog of welfare that muddies the thinking.

The patronising assumption that people of modest means are less able to control their addiction than, say, I am, or can’t rationalise a prudent family size, is initially as ignorant as it is arrogant. The evil of this is that when you set up a welfare state to fund such arrogant assumptions, then you create an underclass sadly prescribed by, and subscribing to it.

That’s my Monday morning spiel, though to David Haywood, stick to tax, mate, leave the philosophising to yours truly.  You made a complete hash of that one, building from your vertical and horizontal equity only the bars of the prison you would have my freedom locked away to. Albeit prison is where many of the products of our welfare system go to break their addiction to tobacco: it’s banned there now. Regarding excise taxes proper: the rationale flowing from this blog has been made over and over - there should be no excise taxes, period. A tax on choice is a tax on freedom.

[Footnote: Is Haywood's article some type of distorted mirror image of the wowserism of the state health lobby?]


  1. Several good reasons to avoid EY's business. What an irresponsible clown David Hayward appears to be.

    1. It looks to me like some professionals are inculcating this notion of income inequality as needing to be 'fixed'.

      And that probably goes for the majority in general. It's the supremacy of socialism over a freedom based classical liberalism all over again.

      There's no hope, Brendan.

    2. Let's keep competing in the market place of ideas, and maybe we can avoid economic servitude, or worse.

  2. I too watched the Q&A segment on the woman with the 8/9 children and felt not an ounce of sympathy (although I did wonder where the father/s were) life is full of choices and consequences after all.
    With regards to the top 12% of households paying 50% of the income tax before various kinds of middle-class welfare is built in (and ~76% afterwards) are there any figures (or educated guesses) about how this balances out with things like GST? I've heard the point that made that as the lower earners have to spend the majority of their income to survive (less left over at the end of the month) they are paying a higher proportion of their income in GST than those who can afford to squirrel their income away in the form of savings, and since there's more of them than there is of us... Just curious and you seem like you might have an idea
    PS: First and last time commenting on here, its a bloody nightmare to do on the iPad

    1. Yeah, I know the iPad thing :)

      Flat out with work today, I'll answer this tonight, or in the morning.

    2. There are figures, but I'm afraid this time of the year I have time only to get the odd blog post up and work. Figures aren't important though, because you are correct: those on lower incomes of course spend more of their proportionate income on necessities.

      My solution for that is as always, slash the size of the state and go to the principles of a free laissez faire: private property, freedom of contract and trade, sound money, and fiscal responsibility.

      If we do that we can get rid of the indirect taxes too, most certainly GST.

      As an interim, perhaps look to take GST off all necessities: food, et al. But for everyone, not selectively.