05 February 2023

Bribing voters with their kids' money (and undermining your own policy objectives)

As a libertarian when a government cuts taxes I am pleased, even ones that are purportedly a user fee, because in fact so much of what is collected from those user fees is not directed to services consumed by the users - in this case fuel tax and road user charges.  It would, after all, be much better if the amount collected was what is needed to pay to maintain and upgrade the roads, rather than be directed to pet projects designed to "change behaviour" (subsidise transport modes you aren't willing to pay to use),.

However, it reeks of hypocrisy, as the Ardern/Hipkins Government proceeds to undermine a land transport funding system that once was seen as a shining example in a world where political pork barrelling is so often the order of the day (see Australia and the United States).  It's much more than that though.

Remember the "most transparent government ever"? Remember the commitment to (reducing) child poverty? Remember the belief that New Zealand taking action on climate change is meant to be a demonstrable commitment to values of environmental protection?

It's all bullshit of course.

Remember when Jacinda Ardern said tax cuts would STOP not cut, but stop investment (!) in health and education? This was when National proposed just to raise income tax thresholds, so inflation and wage rises wouldn't result in fiscal creep (when your increases in pay, to offset inflation) putting you into higher tax brackets.  

Remember when National proposed a cut in fuel excise, but Jacinda Ardern said it would mean the roads would fall apart?

"It maintains our roads and it builds our transport projects so if you were to remove excise, which every government has used, you basically remove your ability to maintain roads and build new roading projects," she told AM. 

It's all bullshit of course, because Labour did just that, it cut fuel excise and road user charges, and is paying for it by using "funds set aside for Covid" which are actually borrowings that are unspent.

Prime Minister Chris Hipkins is maintaining these cuts in tax through till the end of June 2023, not because fuel prices are high (they have been dropping for months), but because, he says, it relieves pressure on households.

Well it does, particularly higher income households. Infometrics research indicates that the highest income households save three times as much as lower income households.  That makes sense, as they pay the most fuel tax, because they drive the most and are likely to have the largest vehicles with the highest fuel consumption, but remember this is the Government that decried tax cuts "for the rich". 

Apparently it's ok to cut taxes for those that earn the most.... if Labour does it.

Transport Minister Michael Wood even said on Newstalk ZB that the tax cut was an "investment". Here's a clue, almost every single time a politician says something, that involves your money, is an "investment", it's a lie, because you'll never get anything back from it. In this case, Wood, known as a leftie in the Labour caucus, has helped us all out...

I agree with him, tax cuts are an investment - an investment in believing people know best how to spend their own money.  It was theirs in the first place. 

What's particularly hilarious is the contortion of the tax cut.  Ignore James Shaw bloviating that it is subsidising fossil fuels

It's bullshit.

For a start, it is cutting a tax, not subsidising the market price of fuel, secondly it is just one "fuel". Diesel doesn't carry excise tax, as diesel vehicles pay per kilometre to use the roads.  New Zealanders are still pay the market price for fuel, plus (for petrol) some fuel tax and GST.  However, you can rely on the Greens to exaggerate for hysterical effect.

After all fuel tax and road user charges do not raise money for general spending, but for the National Land Transport Fund, so that Waka Kotahi can spend money on roads, subsidising public transport and now Kiwirail and coastal shipping.  They are effectively user charges so there is some user pays, although it's worth noting what this government spends the money on, and how far it has undermined the system that was once deemed best practice by the World Bank.

(From the 2021-2024 National Land Transport Programme)

69% of spending is on roads, the remainder is mostly spent on subsidising public transport and Kiwirail (26%), 4% on upgrading footpaths and cycleways and the remainder on administration and subsidies for coastal shipping.

Setting aside the 20% which actually isn't spent by the government, but comes from local government rates (on average half of spending on local roads and a bit less of public transport is from local government), 56% comes from road use fees in the form of tax on petrol, and road user charges on diesel powered vehicles, plus motor vehicle registration/licensing fees. 24% already comes from general taxes (either current or future).

By cutting fuel tax and RUC, Labour is substantially raising the proportion of money derived from borrowing from future general taxpayers, to around the same as fuel tax and RUC.  

Labour is now subsidising roads more than any government for decades.  Of course it is subsidising public transport like no government ever before, to the point that public transport users are now paying, on average, only around a quarter of the cost of paying for the bus driver and the diesel and maintaining the bus (or train). 

This is the same government that has an explicit target of cutting on average, 30% fewer km every year (50% if you live in a city) because it isn't just about climate change, it wants to mould you into a green citizen, that walks and bikes for most short journeys, rides public transport whenever it is available and just drive less. It's a centrally planned and controlled vision that doesn't respect people making the "wrong" choices, it is also supported by cutting speed limits, because it isn't just about safety, it happens to make driving less attractive compared to slower modes of transport.

However, Labour is now subsidising road use, and that includes road freight (note rail and shipping operators don't get any cut in fuel tax or road user charges, because they don't pay any, but they get subsidised anyway by other means).

So you have a Labour Government that says tax cuts (proposed by National and ACT) will threaten health and education.... but then implements tax cuts, completely blanking out the fact that this either means less money for other spending or it means more borrowing - for tax cuts.  How "sustainable" is that?

It says tax cuts will benefit the rich the most, and then implements tax cuts that do just that.

It says cutting fuel tax will jeopardise spending on transport, and then implements tax cuts on fuel.

Finally, it claims climate change is the great crisis that especially needs New Zealand, the country that emits 0.09% of global CO2 emissions  must radically change how it lives, by constraining private motoring, but then subsidises road use like no government in recent history.

Votes are much more precious that policy objectives though, as is leaving a fiscal bomb for the other side if the election is lost, although if it were up to me, the next government could think long and hard about whether it subsidises public transport and rail from general taxes anyway (assuming it wants to do that), and leaving fuel tax and RUC for roads only.

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