By Brian Fallow*
There is a political leader Gareth Morgan wants to knock off his perch. It is Winston Peters.
Speaking to Victoria University students recently he asked them who they would rather see hold the balance of power: the most regressive politician in New Zealand or himself with his fresh, radical (but evidence-based) ideas?
“We have to be able to work with whoever is forming the government,” he told me later. “That is the fatal flaw of the Greens. They are environmentalists but when they rule out working with National that means we only get environmental policy getting any sort of a say 50% of the time. I don’t understand it.”
So where would he see the Opportunities Party’s votes coming from?
“It will come from New Zealanders who care, beyond themselves and their immediate family. Who care about the future of the country and also about those who are disenfranchised now.”
How’s that for a politician’s answer?
But he goes on, citing market research he has commissioned: Those people are to be found across the political spectrum. It is conceited of the political left to think is an exclusively left-leaning mindset. “And it is also across age groups, which has been a real eye-opener. I have done a few gigs at retirement villages and I would expect them to basically fall off their walkers when I talk about the rationalisation of New Zealand Super but actually they don’t. Their number one concern is their grandkids.”
That said, “there is no doubt our support is strongest among the young.”
'I can cut income tax by a third'
Metrics like GDP and even GDP per capita might be fine at the moment. “But look at the statistics on inequality, the stubborn-ness of poverty and you will see not all boats are rising. And look at the disenchantment with democracy as measured in election turnouts, especially when you break it down by age. You have got a lot of disenfranchisement there,” Morgan says.
The party’s flagship policy is to overhaul the tax system so that it taxes all forms of capital income as it accrues, and to apply the fiscal fruits of that broadening of the tax base to lowering rates. “When I do those sums I get $11 billion out of that and that is a third of the [individual] income tax take, so I can cut income tax by a third.”
He would tax either the market return to capital or a deemed return whichever was greater, including the imputed rents owner-occupiers derive. For cash-strapped elderly homeowners the liability could be rolled up in a mortgage held by the Inland Revenue to be cleared when they die or sell.
Morgan sees the policy as making the tax system not only fairer but more efficient, inasmuch as it reduces the tax advantages in investing in property rather than productive enterprise.
That capital efficiency argument is his response to one objection to the policy of means testing half of New Zealand Superannuation. Doing so inevitably creates a zone of high effective marginal tax rates applying to the income superannuitants derive from private savings. When super is already taxable and the tax treatment of saving through managed funds is already discouraging enough, surely those high EMTRs would be negative for saving, investment and capital deepening?
“The [current] tax regime is driving where those savings are invested in a way which is really bad for the economy,’’ he says. And under his plan income tax rates would be lower.
'We have got to get rid of some of these liabilities, of which NZ super is the biggie'
The Opportunities Party’s policy is to split New Zealand Superannuation into a universal entitlement of $10,000 and means test the rest of it. It would also drop indexation to the average wage. The fiscal savings would enable a universal payment of $200 a week to families while they have one or more children under three years old.
Morgan is a fan of universal basic income (UBI) but with an economist’s respect for the laws of arithmetic has to recognise that the closer you move to universality the more basic the income is liable to be. “We will never get rid of targeting but there is just so much of it now and we can roll it back,’’ he says.
“But we have got to get rid of some of these liabilities, of which New Zealand super is the biggie.”
The party’s families package would also broaden Working for Families (WfF) with a payment to lower-income families with children under 17 based on an income and wealth test, but not a work test. “We don’t like the punitive conditions that eligibility to the in-work tax credit requires. It is an awful intrusion with perverse behavioural incentives.”
Fundamentally, though, Morgan regards WfF as evidence of market failure in the labour market, which allows some employers to get away with paying less than people need to raise a family on.
“It is basically an acknowledgement that the labour market is not paying a certain sector of our society enough to live. We hide that with Working for Families rather than let wages rise. That is the start of the rot, to me, because the economy is not performing and you are masking it through the welfare system.”
'Volume approach increases gap between the haves and the have-nots'
Similarly he argues that the policy of allowing lower-skilled migrants to “pour in” has prevented wages from rising in response to bottlenecks – “it might be dairy workers in Southland or waiters in Queenstown or whatever”.
Propping up businesses whose sustainability depends on not paying proper wages Morgan sees as part of a flawed strategy that is focused just on increasing the size of the economy.
“Whether it is the volume of migrants, the volume of cows, the volume of crap in the streams or the carbon footprint, that whole volume approach has this consequence of an increasing gap between the haves and the have-nots, and we are going to mask the have-nots by giving them welfare even though they are in work.”
Morgan portrays himself more as a policy wonk than a politician.
“We have done a whole lot of stuff at the Morgan Foundation, since I stopped making money, on different policy issues and I am essentially a voice in a way for the frustration of the policy advisory community which tries to put forward best practice policy using all the evidence base to politicians, only to see them introduce policies in some cases barely recognisable from those recommended to them,’’ he says.
“There has always been a gap you could put down to political pragmatism. You have got to have a bit of respect for that. But I think that has morphed now into political expediency where politicians are serving interest groups rather than all the people of New Zealand. So we are seeing increased alienation.”
Similar alienation is evident elsewhere. First the Americans and then the French have elected presidents who have never held elected office before. Paleo-socialists like Bernie Sanders and Jeremy Corbyn have also defied pollsters’ and pundits’ confident predictions. What all four have in common is that they are seen as outsiders, a departure from politics as usual.
Whether Gareth Morgan benefits from something similar here only time, as they say, will tell.
*Brian Fallow is a former long serving economics editor at The NZ Herald. This is the latest article in an election year issues-based analytical series on economic policies he's writing for interest.co.nz.
His first article is here.
His second article is here.
His third article is here.
His fourth article is here.
His fifth article is here.
His sixth article is here.
His seventh article is here.
His eighth article is here.