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Insights 36: 4 October 2024
The Post: Dr Eric Crampton on the economics behind Auckland’s planned parking revolution
 
Australian: Dr Oliver Hartwich on NZ’s bold move on gig economy workers
 
NZ Herald: Roger Partridge on why the RBNZ's "gold-plating' may be costing you

RMA replacement phase 3 - the welcome focus on property rights
Nick Clark | Senior Fellow | nick.clark@nzinitiative.org.nz
Last Friday the government made a heartening announcement that its phase 3 reforms to the Resource Management Act will make property rights a ‘guiding’ principle.

The RMA has failed in good part because of two fundamental flaws from a property right perspective: first, it allowed all and sundry to object with impunity to a changed land use; second, it denied compensation for the lost value from a successful objection.

Both flaws are bad for New Zealanders’ wellbeing. Unaffordable housing, over-crowded homes and people sleeping in cars is one result. Consenting costs for infrastructure projects exceed $1.3 billion per year and can add many months to getting them built.

The impacts are much wider than housing and infrastructure. An anecdotal article in last week’s Insights illustrated how ludicrously wasteful the RMA has become.

Despite such evidence, many will scoff that the government’s affirmation is ideological.

To the contrary, it is evidence-based. Security in one’s possessions is essential for dignity and prosperity. Tom Bethell documented this in his 1998 book, The Noblest Triumph Property and Prosperity throughout the Ages.

Eighteenth century philosopher and social reformer Jeremy Bentham wrote that the law that gives security to property is “the noblest triumph of humanity over itself”. A lack of property rights was a key reason the Soviet Union was a poor country despite rich natural resources.

Property rights determine the degree to which legal owners can determine the best use of their property, retain any income from that use, and dispose of their property. Those rights affect owners’ incentives. Property rights are not absolute, but government over-rides should be restrained and principled.

The RMA’s neglect of property rights is not an aberration, there is a long history of it including confiscations of Māori land. Their protection is absent from New Zealand’s Bill of Rights Act. A 2009 paper for the Victoria University’s New Zealand Institute for the Study of Competition and Regulation argued that:
 
New Zealand is distinguished by having among the weakest protection of private rights in the OECD, a history of confiscation of private property rights, and a long-standing failure to recognise the protection of the basic human right of property rights.

New Zealand is not alone in having neglected protection for property rights. But we need to be doing better, and not just with housing and infrastructure.

The also announced expert advisory group has a big job to produce a blueprint for RMA replacement by Christmas. Let us wish it well.

Should New Zealanders aspire to be among the world's most taxed people?
Dr Bryce Wilkinson | Senior Fellow | bryce.wilkinson@nzinitiative.org.nz
Max Rashbrooke's recent research note, High earner tax rates: New Zealand in context, makes a case that rich people in New Zealand pay much less tax than they would on the same income in some of the highest-taxed countries in the world.

This brief article questions his case, but first it asks “so what, if so”? Why would it be in New Zealanders’ best interests to do the same?

Rashbrooke is far from alone in his advocacy.  Proposals for broader capital gains taxes, wealth taxes and/or heavier land taxes are abroad in the public media.

Too many of these proposals are one-sided. They fail to balance well-canvassed pros and cons, as assessed by several expert tax taskforces in recent decades.

All tax proposals need to consider the costs of collection and undesired and unintended consequences. These costs rise with something like the square of the tax rate
Taxing capital heavily is problematic because it is mobile. Less will be invested in New Zealand the more penal the tax system . Higher pre-tax interest rates for borrowers in New Zealand are an unintended consequence.

Students quickly learn the more general point in first-year university economics. The burden of a tax does not fall fully on the person paying the tax.

This is why taxes aimed at “soaking the rich” will rebound on others to some extent.

It is why tax policy experts tend to favour taxing capital income less heavily than labour income on relative mobility grounds.

That last point does not rebut the case for a more comprehensive capital gains tax. But in practice there are a host of distorting difficulties, including political reluctance to tax the unrealised gain on a family home or farm. Advocates should address the experts’ reservations about difficulties and distortions.

Returning to Rashbrooke’s empirical case, it is dubious because it rests on a stylised OECD study that abstracts from issues of loopholes, realised versus unrealised gains, inflation-adjustments and IRD refunds for capital losses.

A related point is that New Zealand is not the location of choice for many rich people world-wide. Our regime is relatively hostile even to foreign direct investment.

Moreover, his supporting argument that the rich in New Zealand pay a much lower average tax rate than others is contrived. It is based on cherry-picking data periods and a bananas and oranges approach to assessing income.

Pavlova's identity crisis
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
There should be a German word for it: that moment when one realises a dessert one has always associated with one country actually belongs to several countries – or perhaps, to none at all.

As a German who has lived in both Australia and New Zealand, I have often found myself caught in the crossfire of the great Pavlova debate. Both nations claim this meringue-based dessert as their own.

It is a curious thing, this antipodean fervour over a dish named after a Russian ballerina.

But it gets even more interesting. In Germany, we have been enjoying Schaumtorte (literally: foam pie) for over two centuries. Essentially, it is Pavlova’s doppelgänger. So, who is appropriating whom?

I recently learned of a new Pavlova Café opening in Berlin.

The twist? It is run by an Estonian company.

Their menu proudly states: “We are the only café worldwide that specialises exclusively in the Pavlova dessert. We offer about 10 different variations of this dessert, all prepared according to the classic recipe: A soft meringue base with a crispy crust, topped with whipped cream and juicy berries.”

Okay then. A café, in Germany, run by an Estonian company, serving an Australian or Kiwi speciality, named after a Russian.

This got me thinking about other instances of culinary confusion. Take Häagen-Dazs, for example. With its umlaut-laden name, one might assume it is a Scandinavian delicacy. In reality, it is as American as apple pie (which, incidentally, is not uniquely American either).

Then there is Hawaiian pizza, a Canadian invention, and French fries, which likely originated in Belgium (or Holland, if you ask the Dutch). Even the California Roll first saw the light of day in Vancouver, not California – and certainly not in Japan even though it is quintessentially sushi.

Meanwhile, Russian dressing is about as Russian as the Moscow Mule cocktail – which is to say, not at all. And Swiss cheese is a generic term for a style utterly foreign to Swiss cheesemakers.

In today’s climate of heightened sensitivity around cultural appropriation, one might expect outrage over these misattributions. Yet, curiously, there are no protests outside Häagen-Dazs shops or petitions to rename Hawaiian pizza.

Whether there will be a similar lack of outrage in New Zealand against Estonian pavlova in Berlin, I am not so sure.

Then again, before anyone considers launching a petition, maybe they should re-think the idea: over a Steinlager.

 
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