Matt Nolan

GST and food. Why I’m against exempting the tax

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Via Dim Post, No Right Turn mentions an article from Werewolf.co.nz by Gordon Campbell.  The article supports the idea of exempting GST on food. There were a number of interesting facts, I definitely enjoyed the articles.

However, even if all the premises are correct and even given significant social justice goals, I think we have to be clear regarding why we think an exemption is the way to go – and in the end I still disagree regarding any exemption.

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Matt Nolan

Fat is normal, but it still involves choice.

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I was impressed by the title of a NZ Herald article today “Fat is normal“.  I was like, yes it is perfectly rational for an individual to put on weight, contrary to what we are often told.  I began to think that if policy wonks would treat the idea of putting on weight sensibly we could avoid weird “anti-fat” policies.

However, then inside the article I saw it was written by a nutritionist – the worst of the prescriptive disciplines in my opinion.  Furthermore, they decided to take an entirely holistic approach to weight gain, removing any individual responsibility and blame the environment.  Namely:

Professor James said that in countries such as Britain and New Zealand, the reason for many people’s obesity was a genetic predisposition in an environment which allowed it to happen with an “out-of-control” food industry and the constant use of cars

What is this.

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Matt Nolan

The unit of taxation

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While having a quick look of “Failbook” I found this enlightening status update:

Source.

This is one of the reasons why taxing on the basis of a “family” unit instead of an “individual” unit doesn’t make sense to me.  By setting up an arbitrary idea of what a family is you ensure that people arrange their affairs to take advantage of that, and you ensure that people that are either unwilling or unable to enter these arrangements struggle.

People pool resources and work together by forming a family unit if they want to.  Lets just stick to taxing people as individuals, and let individuals in society make the decision on what type of family unit to set up given this equal treatment – after all it is the individuals that make choices.

Matt Nolan

Taxi cameras, why?

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Ok, so the government is making it compulsory for taxi drivers to put cameras in there cars right?  They are doing this because some taxi drivers have been tragically injured – so its a safety issue.

But if its in the driver’s interest to have the camera, and they are the only ones getting a benefit from it, then surely they would only do it if the benefit of putting in the camera exceeded the cost.  In which case, regulating for them to put cameras in is either pointless, or forces taxi drivers to do something where the cost exceeds the benefit – and so is suboptimal.

What am I missing?  I must be missing something here, so just point it out to me and I’ll be happy 😀

Eric Crampton discusses here.

Matt Nolan

Robin Hood Tax redux?

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Here are two articles against a Robin Hood tax:

One from me (also here) and one from Patrick Nolan.

Feel free to comment about them here.

Matt Nolan

A $150,000 pay increase?

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David Farrar states that this is how Labour has framed the idea of tax cuts – a $150,000 pay increase for Jack Paul Reynolds, and only a few dollars for the rest of us. David states that we must look at the macroeconomic impact, and that we can’t focus on who gets what, specifically he says:

If the debate becomes one of simply who gets how much, they will have problems

However, I think the debate about who gets what is important.  However, I do not think that it actually falls in Labour’s favour.

Jack Paul has specific skills, he is hard to replace, and is seen to add a lot of value.  The “elasticity of demand” for his service is very very high low.  Furthermore, he has a lot of high paying outside options – he has a good reputation as a CEO.  This means that his “elasticity of supply” is very high (note that I am using quite a discrete margin in this case).

What does this mean?  Well, when he labour income is taxed, the FIRM will pick up the tab – as a result his gross wage is representative of this.  Now this also indicates that, when taxes are lower, the tax payment by the firm will be lower.  As a result, over time his gross wage will adjust DOWN to represent this lower tax rate.

As a result, the direct impact on Jack’s Paul’s pay packet is likely to be very low proportional to both income and what other people receive.  It is Telecom that faces most of the “incidence of tax” in this case – not him.

As a result, a tax cut isn’t a $150,000 pay increase for Jack Paul.  Nowhere near in fact.  National should be using basic economics to debunk these sorts of myths, so that Labour can’t try to pitch it as a class war.