Hard News: Superannuation: Back to the Future
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All in favour of a UBI.
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I was going to write a comment in favour of a Universal Basic Income for everyone from birth, as a fairer alternative to the system we have now. It's a good time to look at other options. But I have reposted what I wrote last year for Access instead.
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Will everyone stop calling superannuation a benefit. It's not a benefit it's an annuity.
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Katharine Moody, in reply to
Yes, I'm in favour of a UBI as well - mainly as a result of reading the Morgan/Guthrie book.
So when GM launched TOP, I thought - great, that book (an overhaul of both tax and welfare) will be the policy platform, so I promptly sent off my $25 (or whatever it was) for the membership fee to ensure they got registered. Never expected them to have any other policies - I figured they would just focus on getting the UBI conversation started.
Then they came out with the tax policy (their first policy) - but didn't address the welfare side and hence, no UBI, The reason given was that it might come later if they can collect enough tax money first.
I expressed my dissatisfaction (as I assume many others did) and now (apparently) they are working on putting out a policy on a UBI. Shame though that they've crowded it out with a whole bunch of other policies.
Just running on a single issue - tax and welfare reform as per the Big Kahuna - would likely have been a much better strategy. It would have been like getting a referendum on it without having a referendum.
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Surely the difference in received benefits between Maori and Pakeha is best addressed long term by having more middle class Maori.
On the other hand the issue of people doing hard manual labour simply wearing out faster and not getting the same benefits as middle class people is better addressed not by means testing but by somehow tieing retirement age to individual expected life expectancy
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I think there are a couple of arguments against means-testing;
One, there'll be a cohort of people who are going to spend time and effort figuring out how to hide their assets (or even just spend enough money that they don't have any assets) to come in under the means testing limit. Encouraging people just over the asset limit to spend up big just before they retire seems a bit counter-intuitive.
Two, the administrative costs in figuring out who should get the money and who shouldn't is a significant cost, not just for the government department, but for every single person who has to jump through hoops to prove their income (or lack thereof). This also tends to favour people with enough education to work the system really well, and penalise the people who don't have the confidence or experience to deal well with bureaucracies.
I'm not saying that it's a conclusive argument, but it should be taken into account when deciding whether it's a good idea or not.
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disdained the idea of "borrowing money to invest"
That made me laugh out loud. Are these the same people who run workshops on how to borrow money ... er I mean leverage your assets ... to invest in capital gains-free property?
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The frustrating thing about these discussions is they all seem to devolve into binary options. Super or not. Age X or Age Y. Means testing or not.
Most of us are adults, we live in a world of greys and compromises. Day to day we make judgement calls and think sharing is good.
But get into a political discussion and it's all black and white, all or nothing.
So here's my reckons (valueless and hence free). Superannuation serves two purposes, first it acts as a safety net so that when people get old they don't have to work, our socialist state looks after them. You can take an actuarial approach to who gets it and/or use a UBI, but in a morally sound country we don't force old people to work beyond a certain point and we let people relax a bit before they die.
Second, superannuation serves as a reward for contributing to the country over your working career. It was your taxes that made everything possible and the country chooses to reward people for that.
So means testing makes the first part work better but sacrifices the second, so find a compromise, means-test up to a certain point eg the UBI and after that yeah you are being rewarded for what you contributed even if you are rich.
As for the age, it's pretty clear 65 is too low for some people and too high for others. So find some compromise. Make the UBI portion (or whatever) activate earlier and the reward part activate later, yes I know that's somewhat unfair on those who die earlier but that's what a compromise is about - being somewhat unfair to everyone.
As for paying for it, the morons who stopped paying into the Cullen fund should be taken out back and something embarrassing should happen to them, and frankly the idea that we're taking their ideas seriously now after that fuck up is insane. We need a combined approach that leverages the power of compounding inherent in a large independent fund like the Super fund. And yeah we also need to bite the bullet and realise we (those of us who are rich) need to pay more taxes, it pisses me off when folks wibble about their taxes as if they have no idea what sharing is about.
TLDR: We need some adults in parliament. Children like English and Little and Peters need to be booted out.
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Ian Dalziel, in reply to
It’s not a benefit it’s an annuity.
is it paid weekly?
surely it is then more of a hebdomadal financial boon???Diamond Dog Days...
I have a mere 5 years ( thats all I've got, is five years, it isn't a lot... ) until my ship of state comes in, and I can join the 'Increased Leisure Citizens' Sexagenarian Set, Gold Card in the mail, respect on buses, halcyon days ahead!
(more likely Halcion©* Daze, I'm sure... over-medicated and over-mediated)
*Triazolam -
Moz, in reply to
arguments against means-testing; One, there'll be a cohort of people who are going to spend time and effort figuring out how to hide their assets ... Two, the administrative costs
Those are entirely valid arguments, but I suspect you have forgotten that you are talking about the income tax system. The problems you identify are not new. So the question is not "are there reasons not to have one" but is "where would the government get money if we don't tax income?"
Or are you suggesting that once people are eligible for super they should be exempt from income tax?
I suggest that super should count as income, and retirees should pay income tax. It would also be good if their inheritors paid income tax on any inheritance. Aotearoa also desperately needs to reform its trust system to make it less of a tax dodge, while I'm on the subject of taxes.
Also, amused at linger talking about NZ's paying tax while living in Tokyo... it only counts for NZ super if you're paying it to the NZ government, linger.
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linger, in reply to
I am paying NZ tax, at the residential rate, on my NZ income. Yes, I would be eligible to pay the lower nonresidential rate; but I choose not to as a matter of principle.
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Jeremy Andrew, in reply to
I suggest that super should count as income, and retirees should pay income tax.
Super does count as income, and is taxed. Retirees pay income tax on their income just like anyone else.
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BenWilson, in reply to
Just running on a single issue – tax and welfare reform as per the Big Kahuna – would likely have been a much better strategy. It would have been like getting a referendum on it without having a referendum.
Yes, if it were the party of the Big Kahuna I might have been interested. Now I’m not sure what it’s the party of.
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BenWilson, in reply to
Super does count as income, and is taxed. Retirees pay income tax on their income just like anyone else.
Yes, so that does already function as a kind of means testing. More of their income, if they also have a well paid job, will be taxed at a higher rate.
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Important meeting tonight in Chchch...
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Moz, in reply to
I am paying NZ tax, at the residential rate, on my NZ income.
Good on you.
And Jeremy etc: I agree with you. I was arguing *against* Stephen R's claim that retirees are somehow special and shouldn't be taxed. I tried to make that clear. Sorry.
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I find this issue very complex to the point of being far less sure about it now than I used to be.
On the one hand, I feel like the silver bullet to the debate (and benefits more generally) is a full-on UBI. But a lesser UBI could also be used in tandem. Retirement savings offered with tax discounts are also a good idea, and compulsorizing them has some pretty strong arguments. If universalizing is rejected as too pinko, then means-testing is an obvious corollary - we're buying neoliberalism, we're committing to user pays, so do it on the biggest benefit line item in the national budget by far.
Given that no UBI and/or compulsory retirement saving and/or means testing super is currently being touted by the major parties, though, we fall back on dastardly incrementalism and all its eternally-damned spawn. What little tweaks and fiddles could improve the system a little bit, and to what extent are the improvements likely to just be targeted at unsold voting subsets just now, this year, for the coming election?
This proposal is pretty much the smallest possible increment I can imagine. Let's float a balloon that if elected the government will try to find some way to influence an unknown government 20 years hence to make a phased in small change to policy settings. Nice way to kick off a debate with a position totally lacking in extremity, whilst still actually appearing on face value to be a practical policy.
In fact, I can't help but feel that the purpose of the announcement is more about kicking off intergenerational fighting to polarize oldies to vote this year than anything else. The baby boom only has a couple of shots left in it. Use them for maximum effect. By 2037 there will be no baby boomers at the helm of this country. As an X genner, I'll be 66 years old myself. My folks will be in their 80s and 90s, if they're still alive. I can pretty much recall that people reaching those peaks aren't really that politically active any more, being more concerned with things like getting past the next stairway, and keeping on breathing through the heat of the day.
So how many shits can I really give about Blinglish's water pistol shot at the face of the Kraken? Not many, if any.
For me, this kind of policy option raises the more horrid choice about whether to vote at all. It's already watered down as shit just by the numbers game, let alone that it's a choice between water and homeopathically altered water.
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That said, I'm patently aware that the differences between the major parties, even on super policy, are likely to be a lot more than announcements would suggest. Most policy is not campaigned on, nor even really floated as balloons. It seems likely to me that Labour's would be more palatable than National's, but that's just guessing based on past form.
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WH,
I don’t oppose a phased increase in the retirement age provided it’s linked to renewed contributions to the Cullen Fund and other intelligent efforts to improve the long term well-being of the population. The point Russell, Andrew Little and Paul Krugman have made about those needing income assistance in the years before retirement (such as farmers and manual labourers) is an important one I think.
I hope we’ll use the next twenty years to reduce rates of smoking and obesity, to increase rates of exercise and other forms of community participation and that we’ll explore farsighted and enlightened means of reducing the cost of the health and social care we’ll need to provide to our people.
Plans for reductions in spending of this kind tend to underline existing inter-generational inequalities in education and housing. One can only hope that changes of this sort aren’t motivated by a desire to create headroom for tax cuts.
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Stephen R, in reply to
Those are entirely valid arguments, but I suspect you have forgotten that you are talking about the income tax system. The problems you identify are not new. So the question is not "are there reasons not to have one" but is "where would the government get money if we don't tax income?"
Or are you suggesting that once people are eligible for super they should be exempt from income tax?
I'm sorry, I was addressing someone earlier in the thread (Andre?) who said that Super should be means tested. I have no problems treating it as Income for tax purposes, but saying "you already have investments, you don't get super" is a different kettle of fish, even if practically, taxing it will lead to effectively paying more in tax than someone gets in Super if their income is large enough. The same would be true of most versions of the UBI, but one of the positives of a UBI is that you don't need to spend money checking if people "deserve" a UBI, you just tax their total income and it all works out in the wash.
I know that for early childhood childcare subsidies, trying to means-test it lead to the sorts of problems I raised.
My comment was more generally against "means testing" as always being the right choice without checking the side-effects, rather than specifically arguing that retirees deserve to get treated differently.
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Lucy Telfar Barnard, in reply to
I’m no expert (calling all experts!) but I think the particular problem here is the size of the baby-boomer cohort, which has basically reshaped society around itself by sheer force of numbers. Which is independent of arguments about the privilege that cohort has enjoyed.
I hear lots of people saying that the problem is the size of the baby-boomer cohort. But the date proposed for the eligibility increase won't affect any baby boomers at all - which does make it hard to separate the argument from that cohort's privilege.
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Katharine Moody, in reply to
“where would the government get money if we don’t tax income?”
Land value tax - most efficient and most progressive of all taxes;
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The real villains in this whole mess are ... us. Well, about half of us, anyway.
We had a Prime Minister for 8 years who was resolute in his refusal to do anything substantive about any long-term structural problems. Not just superannuation and the Cullen fund, but everything from property madness to the environment. But the photo-ops were nice, so we embraced emptiness and kicking it down the road, as a path to unprecedented popularity. And much as I'd like to blame the media (there's plenty to blame them for), it's not as though these issues have been ignored. So let's not lie to our grandchildren and say we didn't know.
We're screwed, because we choose to reward the screwers.
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Moz, in reply to
Land value tax
Is simply a partial asset or wealth tax. Why should land be special?
Specifically, why should Bill Gates pay zero tax on $60B of Microsoft shares while I pay extra tax on the unimproved value of the land my house sits on to compensate? Why should a farmer be forced to sell his land at a huge loss during a drought to pay the land tax which is assessed on the much more stable (and therefore higher) unimproved value? Also, I will argue forcefully that "unimproved value" is a bullshit term - why does the council building a road or sewer pipe next to my land change the "unimproved" value? But if it doesn't I'll be taxed on less than a hectare at the same rate per hectare as a farmer on marginal land needing 1000 hectares to raise 5 head of cattle.
There are a great number of arguments of that form to be made.
Wealth taxes are a good idea, but they're not a substitute for income taxes, they need to be part of a whole mix of different taxes if we're to have an effective taxation system.
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Bart Janssen, in reply to
“where would the government get money if we don’t tax income?”
Land value tax - most efficient and most progressive of all taxes;
You don't need to restrict yourself to only one tax. There is a complexity issue but so long as you don't have exemptions then using multiple systems to tax is not inherently a problem.
It also allows you flexibility to modify the system if it isn't achieving the stated goals.
However, that would require you to state goals and measure changes - you know like having a hypothesis and collecting data and then reassessing your hypothesis ...
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