For richer, not poorer

Tomorrow the Government will show us the colour of its money. And not an awful lot of it will be a great surprise.

Among two of the most widely touted moves, top tax rates are predicted to come down from 38c in the dollar to 33c, and GST will almost certainly rise from 12.5% to 15%.

An advance guard of neo-liberal persuasion has been beavering away making sure that we understand precisely why this is both desirable and necessary.

Every which way you turn, a commentator here, an economist there, has been carefully paving the way, sweeping the path in obeisance before the footfalls of the Budget - so that it is now common knowledge there is, as the saying goes, simply no alternative.

The argument is that money needs to be prised from the clutches of government and instead returned to hard-working citizens, who will then begin to make inroads into two of New Zealand's great economic failings: poor savings and equally poor investment records.

The country's public expenditure to GDP ratio must come down if we are to increase our general and comparative standard of living.

This is fine as far as it goes, but the money thus extracted from government vaults and rerouted to the pockets of the people will favour those on high incomes.

They, apparently, are more likely selflessly to create wealth than the poor - who presumably will rush straight down to pub and drown in it.

Furthermore, that additional income returned to the comparatively well-off will then trickle down to the rest of society - who, incidentally, should be jolly well grateful.

Only, a great many Kiwi investors could be forgiven if, by virtue of brutal and bitter experience, the theory does not much resemble their reality - neither the class of 1987, nor that of two decades on.

The great New Zealand finance company fiasco of the last two or three years saw tens of thousands of ordinary Kiwis investing their savings - that is to say they simultaneously saved and invested in such outfits - only to see their lifelines disappear through the plughole of economic downturn, shoddy regulation and sharp practice.

You have to feel for people like the chap quoted in one of the Sunday papers who had invested $700,000 in Hanover, "money earned through a lifetime's hard work".

"I was a simple worker who saved his whole life and then poured it into Hanover.

And all because of this son of a b..., I'm in hardship," Tony Ricciotti told the Sunday Star-Times.

And like a lot of other devastated Hanover investors, Mr Ricciotti was having his nose rubbed in his own misfortune by the contrasting situation of one of the men to whom he entrusted his life savings.

Mark Hotchin - who may be familiar to readers as the person who until recently was building a $30 million mansion on Auckland's plush Paritai Dr as well as planning a $13.8 million holiday home on Waiheke Island - is currently enjoying an extended luxury holiday with family and assorted hangers-on in eye-wateringly expensive resorts in Hawaii: eye-watering to the tune of advertised per-night rates of almost $4000.

Their stay in Hawaii is expected to last until at least early July, the paper reported.

With businessman Eric Watson, Mr Hotchin co-owned Hanover before an Allied Farmers "rescue deal" in December last year.

According to the Star-Times, his wife, Amanda, their children and nanny have been there since April 8.

When confronted by the newspaper as to the propriety of such extravagance while erstwhile investors were facing ruin, Amanda Hotchin is reported as having said: "We don't have to justify where we get our money or what it's spent on, to anyone.

I don't care what anyone says."

Therein lies the rub.

The trickle-down hypothesis, like neo-liberal economics, is fine in theory, except that it takes little account of the messiness of human behaviour - of fallibility, of greed, of rapaciousness.

Furthermore we have, in this country, bred a culture of worshipping acquisitiveness.

Those who have neither the means nor the nous to play the system, play the pokies or Lotto instead.

It is those people who will be hardest hit by an increase in GST.

At one level it might be considered a fair system because it is a tax on consumption, so the more you choose to consume, the more you are taxed; further, it can't be avoided by the rich and super-rich, who might structure their affairs in such a way as to pay little or no personal tax rather paying it through their companies or trusts at lower rates.

But every time they so much as buy a banana, the tax man stamps their ticket.

Only in their case it's small beer.

A mere trifle.

The stamp on the ticket of the low-wage family, which uses every last cent of its income to feed itself, is rather more telling.

Simon Cunliffe is assistant editor at the Otago Daily Times.

 

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