Taxing the ideologue

This is a response to this blog post by property investment lawyer David Whitburn, which in turn was a response to a series of articles in the New Zealand Herald about the worth of a capital gains tax. (They start here, but it’s the second installment where you can read the argument in favour of a capital gains tax.)

I’ll say upfront that arguments such as those of Chye-Ching Huang and Craig Elliffe have put me in favour of the introduction of a capital gains tax. However, this post is not about the benefits of such a tax per se, but a criticism of Whitburn’s response.

Whitburn makes the early claim that Elliffe and Huang "were disappointingly emotive". Yet, Whitburn himself then goes on to make several statements that could be described as ‘emotive’ to say the least. For example:

- “Do we want to borrow several billions of dollars every year until 2016 and create a noose for the taxpayers now, our childrens’ and grandchildrens’ generations...”

- “The idea of a new tax really offends me. It smacks of arrogance and a neanderthal like ‘big Government is good’ mentality...”

And most laughably, he concludes with: “New Zealand needs a capital gains tax as much as we need the plague to strike us.” Yes, the original comment was in bold. But hey, let’s not get emotive.

Next, he moves on to claim that Elliffe and Huang have apparently “forgotten that New Zealand’s mountain of debt is mainly not government (or sovereign) debt. In fact New Zealand is an outstanding performer globally when compared to most other countries" ... “As a country we are in the safe dark grey zone with Government debt at (considerably) less than 30% of GDP.”

Okay, so we don’t need a capital gains tax, because the public debt is not a big problem. Yet strangely, as soon as Whitburn has finished reassuring us that we don’t need capital gains tax or any other increase in public revenue – because public debt is low, we’re safe – he then comes up with a number of suggestions to cut public spending - some of them quite drastic. For example: “Don’t let people leave NZ until they have paid off their student loan.”

What could justify this kind of action, along with the other 15 suggestions he makes to cut government spending? The problem with our public debt, that's what. You know: that low, safe level of public debt.

[Some minor edits have been made to the following points.]

So what other arguments does he make against a Elliffe and Huang? None. That one inconsistent, misdirected point about public debt was it. He addresses none of the benefits they discussed; he addresses nothing else in their case at all.

There are many other suggestions he raised in regard to spending cuts that I diagree with (cuts to education spending, disposing of MMP), but will limit myself to a few more quick points. Whitburn asks: “Do we want to run the risk of more good Kiwis going overseas?” Well apparently, David, you consider a ban on people leaving the country a viable option, so why worry?

He says he does not approve of increasing government income by raising taxes. Yet, one of his suggestions is to raise tax. “Raise the tax on cigarettes so they cost at least $25 per packet (that will stop a great number of smokers and therefore save a lot of money on our pressured healthcare system)”. He claims he doesn’t like a Big Government mentality, and is in favour of individual liberties and personal freedom. Raising the tax on cigarettes is a move often criticised as “Big Government” or “nanny state”.

I do agree with some of what Whitburn suggests. We need, at some point, to raise the age at which the universal pension becomes available, or otherwise address the cost of the system. And I think a 4-year electoral cycle is worth considering.

Also, I’m not against increasing taxes on cigarettes. Then again, I’m not saying that the introduction of a tax is an arrogant compromise of my personal freedom.

I prefer the stance of libertarians over Whitburn’s stale conservatism. I still disagree with them, but at least they’re more consistent. Whitburn will have a lot of people largely agreeing with his position. The problem is that they don't even realise their own ideological myopia.