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Insights 6: 1 March 2019
Joel Hernandez argues in The Dominion Post that deciles are a blunt instrument for school choice
Oliver Hartwich discusses our new #localismNZ report on Newstalk ZB
New report: #localismNZ: Bringing power to the people

As Kiwi as pavlova
Dr Oliver Hartwich | Executive Director |
“Few ways are guaranteed to make yourself unpopular in New Zealand: try claiming that pavlova was an Australian invention; hating the All Blacks; or maybe expressing sympathy for local government.”

This is the opening paragraph in our new publication #localismNZ: Bringing power to the people. We launched it yesterday at a joint symposium with Local Government New Zealand.

However, we may have been too quick to assume that New Zealanders are passionately opposed to local government. A new UMR opinion poll, also presented at yesterday’s event, shows just how open New Zealanders are to shifting power from central government in Wellington to local communities.

Only 30% of those surveyed do not support a move towards local services being managed and provided by local decision-makers. Meanwhile, majorities of New Zealanders believe that:
  • Locally controlled services will be more responsive to local needs (54%);
  • Local government would be more accountable to the locals they live amongst (53%); and
  • Local people would make better decisions based on greater understanding of local needs (52%)
Interestingly, at the top of the list of supported services that should be controlled by local decision-makers was vocational training (52%). This suggests that the planned merger of all existing polytechs into a New Zealand Institute of Skills and Technology might not be the most popular move.

The UMR poll surprised us. Then again, after years of making the case for devolution and localism, perhaps we are finally seeing a shift in public opinion.

An alternative explanation could be that New Zealanders realise that bigger does not always mean better. The past years have not lacked big national schemes which then encountered substantial difficulties. The list ranges from Novopay to Kiwibuild.

Of course, local government does not always get things right, either. But where programmes are smaller and designed closer to the people, there are better chances to listen to community needs. Perhaps it is also easier to change course sooner before billions of dollars are wasted on an unworkable grand national plan.

In our #localismNZ report we call for a radical shift of power from the centre to the people. And since we started with it, here is the concluding paragraph:

“We hope this essay will make you think anew about New ­Zealand’s structure of government. And we hope you too will conclude that localism could be as Kiwi as pavlova.”

#localismNZ: Bringing power to the people was launched on 28 February. You can download it from our website.

A missed opportunity on productivity
Dr Patrick Carvalho | Research Fellow |
The jury is out for the released Tax Working Group’s “Future of Tax” Report, with the government promising to deliver its verdict in April.

Unfortunately, a careful reading of the 200-page document already shows a missed opportunity to address New Zealand’s biggest elephant in the room: slow productivity growth.

Worse, the document’s main recommendation of taxing capital gains will do little – if not work against – to fix our low capital stock levels that drive the productivity problem.

To be fair, the TWG report has a few praiseworthy parts. The report, for instance, argues against the introduction of progressive company taxes and changes to our dividend imputation system. Similarly, the document makes the right case for a functioning emission trading scheme and the efficient use of road pricing.

The most notable laudable aspect of the report, however, is the conspicuous minority dissent on its core recommendation regarding the introduction of a comprehensive capital gains tax.

For the three dissenting (and brave) members, “the revenue benefits, perceptions of fairness and possible integrity benefits [of a broad approach to the taxation of capital gains] would be outweighed by adverse efficiency impacts, increased compliance and administration costs and fiscal risk.”

Indeed it would: much pain and little gain, as we have argued here before.

Part of the report’s shortcomings is due to its original design. From the beginning, it was clear that the commissioned work was a calculated move to bring the capital gains tax to the forefront of the tax debate. And so it did.

CGT is the sole protagonist in the two-volume report, with the second volume entirely devoted to detailing its implementation.

All the other topics – from environmental taxes to counter-tax-avoidance measures to the taxation of business – are forgetful sideliners. Well-nigh afterthoughts, scarce on details and too often dismissed with “further work is necessary” comments.

So here comes the ugly side of the report: a blind spot on tax arrangements to enhance our slow-paced productivity growth. Particularly with respect to our timid efforts to fix the housing constraints.

The New Zealand Initiative, for example, has long favoured a revenue sharing mechanism between central and local governments to create the right incentives for increasing the housing supply.

The report, however, banks on the belief the (self-inflicted) housing shortage will not go away, and unashamedly proposes CGT on ever-increasing property prices to fill the Crown coffers instead.

That is, governments not only perpetuate the constrained housing supply crisis, but now might just profit on it as well.

Alas, a missed opportunity indeed.

News that isnít news
Joel Hernandez | Policy Analyst |
Scroll down your news feed, what do you see? Trump’s latest dumb tweet, an update on the crisis in Venezuela, maybe something on Brexit?

Unless you’re on the Economist, probably not. If you jump on any mainstream news website, you’re more likely to see something about the latest drama on Married at First Sight (MAFS), unruly tourists, or the latest limited-edition Cadbury or Whittaker’s chocolate bar.

Don’t get me wrong not everything is click bait and trashy news, there has been excellent coverage by both Stuff and the New Zealand Herald on the Nelson fires and the new proposed capital gains tax.

But sprinkled in between these stories are articles about Meghan Markle’s luxury baby shower and the latest affair on MAFS.

Why do people care that the Duchess of Sussex had a candyfloss machine and a harp at her baby shower? Maybe Meghan Markle has excellent taste in candyfloss machines and harps and people are looking for recommendations.

The same goes for Sam’s and Ines’s secret date on the latest episode of MAFS. Are people looking at ways to secretly cheat on their partner? I don’t think doing it on public TV is the best way to go about that.

I’ll admit that I was enthralled by the unruly tourist saga in early January. Almost everyone in New Zealand followed their exploits around the country.

The first video of Kiwi’s telling the unruly tourist to keep our beaches clean was inspiring. For a country touted as ‘clean and green’, seeing local New Zealanders defending our beaches was a story worth telling.

But why is there a story about the new Cadbury Crème Egg chocolate bar? This ‘story’ should be relegated to the banner ads on my web browser.

At the end of the day it’s all supply and demand. If people didn’t read this stuff, the news outlets wouldn’t supply it.

And with the sharp rise of internet usage over the last two decades, people demand content every waking hour of the day.

Who can blame people for wanting to read stories about celebrities? One can only read so much about capital gains tax in one day.

Now if you excuse me, I’m off to buy the new Cadbury Crème Egg chocolate bar.
On The Record
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