NZ Rich – Poor Gap

“The gap between rich and poor has widened further in New Zealand – and in Sweden – than in any other developed countries in the past 25 years …. (The OECD report ) calls for “three pillars” of action to close the gap – investing more in education and training, helping all groups into jobs, and closing tax loopholes to make the rich pay a fairer share of taxes.”

Simon Collins,  NZ Herald December 7 2011

Warning: the following contains unverified “facts” (there’s an oxymoron!),  and a mixture of my own opinions and those of others.

Much of the discussion I have heard today (National Radio Morning Report and The Panel) has focused on taxing the rich to pay more for government services, which raises two points – who are the rich, and how do you tax them.  Bernard Hickey said that the rich are those earning one and a half times the average wage ie in NZ, $70,000;  one of Jim Mora’s guests suggested that California’s bid to increase taxes of those earning US$250,000 is about right; another guest referred to Obama’s suggestion to tax millionaires to pay forgovernment projects, but also pointed out that in NZ only about 30,000 people earn more than $100,000. Bernard Hickey also suggested that NZ could close one tax loophole here by introducing a land tax, given that some rich people had quadrupled even quintupled their wealth over the last ten years by buying properties.

Someone I spoke to today (he was on the Savings and Capital Working group and has worked in the finance and energy sectors) said that taxation is the least of NZ’s problems. He knocked off the other two pillars in one blow by explaining that the export/manufacturing sector we need can’t develop because of one key factor – no energy policy. Overseas investors won’t come here, because our energy supply is inconsistent, inefficient and costly! Exporting commodities such as logs yields a fifty per cent return, exporting a partially transformed product eg cardboard boxes yield about seventeen per cent, and a fully transformed product eg furniture yields about three pc return. Why? Not just because of investment in plant, but because of problems with energy supply. Apparently, ten years ago the Dairy industry planned to have half its milk production in “elaborately transformed” product … It hasn’t happened because of the investment costs … And no energy policy.

So with an energy policy we wouldn’t have such a large unskilled workforce, people would have to be up skilled to manufacture “transformed product”. Productivity would increase and we could stop worrying about who these rich people are who will pay for clean rivers, public education, public health, and universal super, as well as working for families, and interest free loans.

Who would have thought it … An energy policy  …  Bring back Electricity Corporation?


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