Friday, March 31, 2006

Working for benefits

Now as a libertarian I don’t believe in compulsory state welfare. At best it doesn’t represent caring at all, because instead of consciously considering how to assist those in need, most people simply accept that taxes are taken from them and some bureaucrats hand money over to the needy. It means the chattering classes can clink their chardonnay glasses in Wadestown or Parnell, and feel they are doing their bit for those in Cannons Creek, Otara or Murupara – without having to actually be conscious of it. They can vote Labour feeling like, somehow, this system makes them better citizens – whilst many avoid the needy like the plague. It also means that bureaucrats, many with good intentions, always have a supply of money to dish out to the needy – and have power with this, and beneficiaries think that their money is an “entitlement”. “Entitlement” is a powerful word, hard to argue against being entitled to something, like holding a certificate proving you have a right to land or some money.
.
At worst state welfare breeds an attitude of dependence of not seeking the best in yourself – an attitude best represented in beneficiaries who would rather watch TV all day than get a job, or wont get a job that “robs them” of their benefit – robbed already from the productive. State welfare is money literally for nothing, taken from force by people who had to earn it in the first place.
.
However, there are plenty who believe that even if the state welfare system is wasteful and has gone too far, that there should still be a bottom line “safety net” for those destitute and unable to work through sickness or disability or to bridge a gap between jobs. This is the line that ACT takes, that welfare should be short lived and be incentivised to encourage or require people to take employment where possible. In other words, welfare for those with no means to provide for themselves or their families. This was, I believe, the vision of New Zealand’s most popular socialist – Michael Joseph Savage.
.
Today, Helen Clark and Michael Cullen have taken that vision and vastly increased the number of those receiving welfare, with the so-called “Working for Families” package. This means that most people with children will now receive social welfare benefits simply because they bred. So let’s just think very clearly about what this system means:
.
1. People work hard, earn money and have tax taken off them, around half paying 33% or more of their income in tax.
2. The state takes a proportion of that to pay bureaucrats to run a system whereby…
3. People with children, with certain income thresholds, can get welfare benefits if they apply for them – simply because they are families.
.
Now the Greens moan about how unemployed and sickness beneficiaries aren’t getting this – because the Greens think state welfare is truly wonderful and if you need money, then fleecing those who make it is fair.
.
However, how do YOU feel about paying a lot of tax and either having it churned through bureaucrats to make you a beneficiary, or it going to middle class families with children?
Take this statement from the Government's own press release:
Most families with children, earning under $70,000 a year are likely to be eligible for family tax relief, but many families earning up to $100,000 may also be able to claim some family assistance.
.
$100,000!! Forget being a responsible young couple in your 20s saving for a mortgage, have babies and get some money from the state. Apparently Dr Cullen's tax increase for the "rich" earning over $60,000 isn't about rich people anymore - so why does middle-upper income New Zealand have to pay 39% income tax?
.
One view is that everyone should share the financial burden of raising children. Why? Unless the children are collectively “owned” by everyone, why should anyone else bear responsibility for the breeding habits of others? People who have 5 children get more money than those with 1 or none. Having children is essentially a lifestyle choice, some people want none – some people can’t have them and must adopt – others want enormous families. However, having children is, by and large, a choice. Nobody makes you have unprotected coital sex, unless it is rape and that is a different matter. Making the choice to have children means taking enormous responsibility and trading off the time, energy and financial commitment of a child, vs. what else you might do with that time and money. If you are unwilling to take on that commitment, then you short change the child – and you’ve made a bad decision. It is YOUR fault – not MY fault that I haven’t given you money for your child.
.
The main criticism of cutting welfare for children is that the children suffer – yet of the two main things children need, material provision is one. The other is time and attention – which is also where the greatest rewards come from. If I am expected to give up money to help children be raised for the greater good, I want to share in their upbringing – after all, children need attention and time from adults to learn and grow fulfilled and to experience life. I’m sure parents receiving welfare from non-child bearing taxpayers would baulk at anyone expecting time with their “shared responsibility”.
.
Quite simply, there is nothing special about having children. Children cost time and money, both for parents and, with the state education system, for every net taxpayer (not everyone is a net taxpayer remember – all those on benefits and working for the non-productive state sector are not) – and the single biggest thing anyone does that increases consumption in the environment is to breed. However, the Greens want people to be subsidised to breed.
.
So why has Labour set up this bureaucratic system to hand out welfare to middle income families? In essence, it comes down to two motives. The first is income redistribution (known as theft if you engage it in) - Labour believes that those that earn and produce, particularly those without children, should have part of those earning taken from them and given to those with children. In short, people with the income of Heather Roy with five children deserve money from people with half her income and no kids, because Labour wants to subsidise them.
.
United Future and NZ First endorse this. It is pure envy – a straight out transfer from some people to others – because Labour likes them.
.
The second motive is far more insidious. Tax cuts reduce dependence on the state and reduce the size of the state. They are preferred by individualists because they mean you get back money the state isn’t using so you can spend it yourself or save it, or do as you wish – after all it was your money to begin with. If you hadn’t worked, or invested or spent, the state wouldn’t have had it. It keeps a cap on the size of the state, which is why Margaret Thatcher, Ronald Reagan, Bill Birch all supported tax cuts – it keeps the state from wasting money on whatever activity was popular with politicians, but which you would never choose to fund yourself. Like rap study tours or middle class children.
.
Extending welfare to include middle class families ties them to the state – some see it as effectively a tax cut, because they get some of their money back, so it’s “ok”. Anyone promising to remove it better give them something as good or better. However, that is the thing – many of those on middle class welfare wouldn’t be better off with a tax cut, unless it was a large tax cut – the sort National would not introduce. Labour now has these people as more likely voters, because to reverse Working for Families and introduce tax cuts instead, there would be losers (low to middle income families) and winners (middle to high income single people). Labour knows very well that the losers outnumber the winners, and the winners are hated by the great Kiwi socialist clobbering machine working in TVNZ, TV3, Radio NZ, the NZ Herald etc etc. Labour has bought voters with this package – and knows that most will remain loyal. They are now dependent on bureaucrats and a Labour government for getting some of their income – something that a tax cut would never mean. That is why it is so insidiously evil.
.
No well functioning economy needs the state to take money off of people to redistribute to middle income working families. How inefficient is that? How ridiculous is it for welfare to have shifted from being the ambulance at the bottom of the cliff for those in dire need, to being a day to day source of income.
.
The appropriate response IS to replace it with tax cuts – scrap the whole Working for Families package, eliminate vast tracts of pointless bureaucracies and cut taxes, dramatically. National should stick to this, take its old tax cut plan and take it further. As much as it is hard for National to dismantle socialism Labour introduces, it is as hard for Labour to reverse tax cuts that apply to the vast majority.
.
While I thought the extent of the cuts were too low, Don Brash is right in his press statement about the Working for Families package:
.
As we have seen from Labour's TV ads, much of the extended Working for Families handout will go to higher income families who can afford to live in plush homes and own the latest electronic gadgets.
It's clear the extension was aimed at middle and higher income earners - proving it was a huge and desperate bribe to get Labour re-elected."But thousands of Kiwis miss out. People without children will subsidise those with children to the tune of hundreds of millions of dollars."National's policy at the 2005 election was to offer tax cuts to working New Zealanders. These would have provided far better incentives for working people to get ahead in life from their own efforts.

1 comment:

Seamonkey Madness said...

LS,

I assume you've been reading the thread over at Kiwiblog regarding this. Very interesting reading, as was this.

Another issue I'm interested in is Resident Witholding Tax. The government of the day wants people to increase the %age of income they squirrel away. All well and good, but if the interest on that is getting taxed at a mighty rate of 20% or so, what is my extra incentive? Again, it was my choice to save that money to a specific account to gain interest on, and then the Government comes along and 'redistributes' their take.

Another scheme I'd like to be introduced (I don't even know if they exist in NZ or not, to be honest) is one similar to the tax-free ISA's over here in the UK. That way at least, you're guaranteed the Government won't take any tax off the interest you gain. Wouldn't that be nice? =)