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Posts Tagged ‘government deficit’

Christchurch – Picking the bones clean?

11 February 2012 3 comments

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It is fast becoming apparent that this government is eyeing up Christchurch’s community-owned assets, to “help” pay for the costs of that city’s re-build.

Gerry Brownlee recently  stated,

“Let me tell you, when the Government is spending $5.5billion anywhere, we expect the recipients of that to have some plan for how they will participate in what will be a very, very expensive recovery. And that plan has to be a lot better than ‘we’re just going to put up the rates and we’re going to borrow a lot more money’.” – Source

Which, strangely enough,  is pretty  much what National has done in the last three-and-a-bit years; raise gst; raise ACC premiums; raise EQC levies; and borrowed $380 million a week until we were (last reported) over $18 billion in debt,

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So it’s ok for Central government to raise taxes/charges/levies and borrow like crazy – but not Christchurch!?

Ok, got it.

So what alternatives are  Gerry Brownlee and John Key expecting of Christchurch City Council?

It appears that Key and Brownlee are indeed pressuring the Christchurch Council to privatise  it’s community-owned assets to raise $1 billion for re-building. Chief amongst these, I suspect would be the Orion Power company – one of few in New Zealand still in public ownership. (Orion is 89.3% owned by the Christchurch City Council and 10.7% owned by the Selwyn District Council.) Red Bus Ltd, Lyttelton Port Company, and Christchurch airport could also be privatised if Brownlee gets his way.

Brownlee stated,

“”We have asked Treasury, obviously, to give us advice about what the capacity is for Christchurch’s rating base to take on the extraordinary expense they have to face in the future,” he said.

”It is a $1billion-plus bill that they have to face and we are very interested, given that we are putting up $5.5b, as to how they might meet that cost.” ” – Source

Which is ‘code’ for “how are you guys going to cough up $1 billion for your re-build”?

It would be crazy  to expect the people of Christchurch to rebuild the second largest city in this country. After enduring so much devastation; the death of 184 loved oved ones; thousands of people leaving the stricken city; losing teaching staff and other skilled workers – expecting the local people to weather such an onerous billion-dollar cost is  patently unjust.

And it would be commercial insanity to privatise Council-owned assets at a time when, due to Christchurch’s current state, would constitute ca “fire sale” and not fetch the best possible prices.

As Gordon Campbell wrote on Scoop.co.nz.,

Please. It would be idiotic to force Christchurch to sell its assets to pay for its rebuild, under present conditions. Given the current state of the city, those assets would earn only fire sale returns. Hocking off the city’s assets dirt cheap is yet another version of the destruction of its legacy – and while it may make sense to Brownlee to sell off that legacy to any of his government’s real estate speculator mates who may be waiting in the wings, it would be a betrayal of the people of Christchurch who as [Lianne] Dalziel says, have been through enough: “What they don’t need are backroom deals being done on the future of their city and their city’s assets.”  – Source

As for the government’s financial problems – these are of John Key’s own making. Cutting taxes (April 2009, October 2010) during a recession, when we most needed to stimulate the economy via encouraging strong infra-structure investment was just irresponsible,

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Bill English may have “expected the “tax switch” to be revenue-neutral” – but his ‘expectations’ are not part of reality. Instead, National has left a gaping hole of several billions of dollars in government revenue. No wonder we’re borrowing $380 million a week – and paying hefty interest amounts on those borrowings!

Refusing to raise   taxes (except gst, which impacts mostly on the poorest) to finance the rebuild  of our second largest city simply defies logic. But then, I, and others, have long since given up trying to figure out this governments plans.

Even the business community said as much,last year,

Business NZ also released the results of its election survey of more than 1300 small to large businesses. While almost all believed it was important for the government to have a co-ordinated plan of action that raised economic performance, little more than a third thought John Key’s Government had one.

Deloitte chief executive Murray Jack said the finding was “disturbing” and the plan Mr Key had earlier in the day confidently spoken to the conference about “was obviously news to most people in this room”.” – Source

It’s fairly obvious that this government is relying on short-term “gains” (asset sales) to achieve long-term results. Applying “free market” policies to rebuild a crippled city is simply more right wing craziness.

A far better option would be the Green Party proposal for an Earthquake Levy. Such a levy would spread the cost of Christchurch’s re-build; take unnecessary financial pressure off Christchurch citizens; preserve Council-owned assets in public ownership; and retain the income stream – $100 million per annum – from these assets.

It’s a win-win-win scenario.

Does this government have the wit to investigate this, and/or other options?

Or does John Key really looking to buy into yet another fight with another community over another sensitive issue?

Your call, Mr Key.

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Additional

The Press: Brownlee turns up heat on council over rebuild

Green Party: How an earthquake levy could look

Scoop: On bank profits, and Gerry Brownlee’s asset sales plans for Christchurch

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A warning from a very, very rich man…

17 August 2011 1 comment

Warren Buffet is  regarded as one of the most successful investors in the world.  He is  ranked among the world’s wealthiest people and was ranked as the world’s wealthiest person in 2008. He is the third wealthiest person in the world as of 2011.

He is not a disaffected socialist, nor  “random leftie” – he has serious money in his bank account(s). So when this guy warns us that the wealthy are not paying their way, and have been “coddled by billionaire-friendly governments” – you know he’s saying something important.

And that we should take note…

Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

(Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.)

Buffet’s analysis holds true for New Zealand as much as it does for his own country, the USA.

In April 2009 and October 2010, this government awarded the highest income earners and the wealthiest the most in tax-cuts.

At the same time, the top ten wealthiest people in NZ (and probably others  throughout the world also increased their wealth by 20 percent) – whilst the rest of the global economy was wracked by the worst recession since the 1930s, and millions lost their jobs.

The old excuse that the “wealthy work hard and should be rewarded for their labours” no longer deserves to be taken seriously.  Most of us work hard, and long hours.

It is time that governments stopped coddling the rich. It’s not like they can take their wealth off-planet to Mars or elsewhere. The rich will still invest their vast wealth.

But it’s time they paid their fair share as the price of living in societies that gave them the opportunities to create their wealth.

It’s high time National looked at a fairer taxation system, and paid for the social services and job creation-friendly policies, rather than the top 10% of  the population and middle-class rich-wannabees.

Otherwise, prepare yourselves for a society of growing inequality.

So far, the indicators are not good…

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Well, I think the ‘message’ is reasonably clear for all but the most ideologically-blind.  Question is – what are we going to do about it?

(Hint: more of the same will probably not work.)