If I was to have a platform

I am constantly criticised for not putting out conclusions for policy.  So I thought with an election coming up, I’d put down my personal election platform … this should make obvious why no-one would vote for me, not even my mother 😉

Tax policy

  • Complete removal of current tax system – except externality taxes
  • A flat rate of GST, with the rate determined by an independent body subject to the constraint that “the books must be balanced over a 10 year period”.
  • Direct transfers to help compensate losers from the change in the tax system (GST will transfer from current savers to borrowers – a one off tax on the debt stock which is then given to savers will help compensate for this)
  • A land tax, set at a rate that will provide for essential infrastructure that is made by government on public good grounds (or a similar argument).
  • Public research into the appropriate level of externality taxes, so they can be set at their “right” level.

Benefit policy

  • Complete removal of current benefits and superannuation
  • Introduction of a guarenteed minimum income (GMI) – so that each person over the age of 18 receives a minimum amount of money
  • The size of the GMI to be set by referendum within the first year.
  • GMI is inflation adjusted – and each election the level is again voted on.
  • For people under 18 there is a smaller payment – the age tranch nature of this payment will be determined as a proportion of the total GMI, and set according to any belief in “positive spillovers from family formation”.
  • From 16 it is possible to get the full GMI under special circumstances.
  • GMI to not be work tested – however, there will be a referendum on work/education testing in the first year.
  • Funding for people with special needs beyond the GMI to be instituted, based on suggested targeting by departments

Legal policy

  • Look at the consistency of the legal system, rely on expertise of lawyers and judges.
  • Change drug policy to focus on it as a health issue rather than a criminal issue.
  • Legalise all drugs, but place externality taxes on them – use this to fund treatment.

Health policy

  • Focus on prevention and education.
  • Outside of this, society has shown it WANTS to pay for an expensive health care system and values this – so just make sure that it is funded, and the costs are transparent.

Superannuation

  • We have a GMI now
  • Remove all “gold card” benefits and the such

Kiwisaver/saving policy

  • Remove all subsidises on Kiwisaver.
  • Changes to tax policy will  incentivise savings appropriately.

Education

  • Reintroduce a market rate of interest on student loans (including on current loans) – with the ultimate goal of moving them to the private sector
  • Work to integrate skills training more closely with skill shortages

Research and development

  • Base any funding on estimated spillovers/externalities – generally limit public funding where possible.

Competition policy

  • Significantly increase funding for commerce commission
  • Ask for a set of industries where competition policy is an issue and give them free reign to investigate
  • Change their brief to take into account the impact on both the welfare of businesses and consumers – not just changes in consumers welfare

Reserve Bank Act

  • Change the target of “1-3% over the medium term” to “2% over the medium term”.
  • Define medium term as 5 years – have the Bank openly state why they have deviated from target when they have (will always be due to a price level shift, which they need to look through – think the open discussion of it would help transparency and communication with the public)
  • Look into operational separation between monetary policy and  financial stability goals of bank – along with a separate contract for any specifed financial stability aim.
  • Increase co-ordination in forecasting and openess regarding policy debate in private:  Treasury, independent tax body, and the RBNZ (in both its financial stability and monetary policy roles).
  • MarkS

    Hi Matt, I have a practical question about how a GMI would operate in the case of fluctuating income. For example, consider somebody that has an income of 100k pa, and a lifestyle to boot that means they have no net savings. Half way through the year they become redundant. However, they have earned 50k so far, which is above the GMI. So do they get nothing for the next 6 months (and so starve)? Or do you see GMIs operating at a weekly level?

    Similarly, imagine somebody that is unemployed for the first half of the year, receives the GMI from the govt, then gets a good job.  Do they have to repay the GMI they received in the first half of the year?

    A way to deal with these problems would be to make income a weekly calculation, which would cause other issues (lumpy self-employed income, casual labourers).

    Another option would be to make the GMI a universal benefit, which will involve massive churn through the government (think of the opportunities for fraud, the necessary departments to manage it, the tax rates required to support it). 

    How would it work in your view?

    Mark 

    • Hi,

       

      The GMI is indeed a universal benefit – everyone gets it.  There are two ways to consider this:

      1)  Churn is actually not a big deal – especially in a system where the tax rate is flat, and payments are made electronically.

      2)  This is all equivalent to a negative income tax (http://en.wikipedia.org/wiki/Negative_income_tax).

       

      There is no opportunity for fraud when there are zero conditions for receiving the benefit … so it should work pretty efficiently 😉

  • You forgot a point under Competition Policy:)

    • Make Agnitio the head of the Commerce Commission
    • “Jobs for the boys” is implied – you don’t say it explicitly, but once you are given this sort of position of power taking advantage of it is to be expected.

      • I see what you did there with the competition law lingo:P

        I would like think you would just give me the job on merit Matt:D

        • That is also true – you are a boss!

  • Raf

    Matt,

    There is hope for you yet 🙂

    You may wish to review this GMI proposal which is different (and I believe better) to the Big Kahuna. 

    • There is no hope for me, I’m an empty shell.

      The only thing I care about is transparency – so that’s all I’m ever going to talk about 😉

  • Also, you should probably write a book now, that is the fad these days!

  • Kris

    Hi Matt – I liked your blog.  And I would vote for you.  Happy?

  • 2.5 years into your programme, the SST runs an expose on “bludgers” in low decile areas whose birth rates have shot up; the mums there talk about how great the extra income is and the kids don’t really cost that much compared to the GMI boost from having more kids. Pictures of kids running around in tatty shirts eating potato chips. You have half a year going into the next election. Your move?

    • I believe I’ve already mentioned that the GMI is only some “proportion” for people under 18. 

      However, if this still happens I’d say “this is the side-effect of the level of support society wanted for people having kids – if society decides they want to change that, we could have a referendum.  Otherwise this is fine by me and I might actually go buy myself some chips because its close to lunch time and I’m hungry”.

      • Problem is that you can’t set a proportion sufficient for raising a kid properly that won’t induce others to have kids, raise them badly, and pocket the difference. No clue what the relevant elasticity is though.

        You give the right answer; just not sure how well it meshes with the re-election constraint. 

        • Indeed I agree.  However, I see that as just part of life – if someone is going to run their family poorly that is unfortunate, but I can’t see how society can necessarily just walk in and improve outcomes … however, I do know that many people would disagree with this, and would state that society should have more of a direct role – the scope of this role is something I haven’t thought enough about to dictate.

          “You give the right answer; just not sure how well it meshes with the re-election constraint. “

          The old re-election constraint – ultimately, what is the point of being re-elected if you aren’t standing up for what you believe is right in the first place.  Politics really makes no sense to me.

          Luckily, I get to sit around talking about economics – that is a lot more fun.

  • raf

    Starter for 10:

    1) Maximum of 3 children eligible for GMI.

    2) Free sterilisation for men and women available after 3 children. 

    3) Investment into the 0-5 age group, from ante-natal onwards improving educational and social outcomes. 

    4) Development of a new social contract to create what I call a UPI (universal participatory income). I’m working on this proposal.

     

    • Not sure if I’d go as far as setting that sort of direct regulation.

      Agree with the idea of viewing all these sorts of things as a social contract though – that is part of the reason why I’m so keen on having social votes that determine parameters in said contract.

      • raf

        The dreaded visible hand at work? 

        Ok well you could easily drop point 1) but keep point 2) as an unofficial indicator that 3 might be a good place to stop!!

        And hopefully education and better social outcomes will provide right incentives to have less children. 

        • All about prices and the incentives that stem from them – all about that for sure.

  • Kimble

    First of all, GMI… heh, nice.

    How would the GMI affect peoples attitudes to immigration? There are some now who dislike taking poor immigrants because “they come here and just go straight on the dole”. With the GMI, every immigrant who comes here would go straight on the “dole”, from a certain point of view.

    People would SEE families arriving as a big drain on taxpayers. But they wouldnt see the benefits of that immigration. The same is true now, of course, but the problem would be much greater under a GMI.

    Would there be a stigma attached to (being 100% reliant) on the GMI, like there is the dole? I dont think there would be, as everyone is getting it. So wont the removal of that stigma provide upward pressure on the number of people voluntarily leaving the workforce? Meaning fewer productive people are left to fund the ‘bludgers’ lifestyles.

    Also, arent you worried that when Labour gains powers again, and have to be supported by The Greens, Mana, Maori, and Peter Dunne, that they will use the mechanism of the GMI to piss a fire hose stream of money down the drain?

    How can you trust the party that instituted an idiotic policy like interest free student loans, and would do/promise anything to stay in power, with something as powerful as the GMI?

    • “How would the GMI affect peoples attitudes to immigration? There are some now who dislike taking poor immigrants because “they come here and just go straight on the dole”. With the GMI, every immigrant who comes here would go straight on the “dole”, from a certain point of view.”

      Ahh you’ve caught one of the issues I blatantly avoided on purpose 😉

      I’d keep immigration policy the same as it is now, and then once policies are set up so that we know what the “GMI” constitutes I’d review migration policies.  Having a GMI definitely makes the free movement of labour more problematic – until countries overseas are doing the same.

      “People would SEE families arriving as a big drain on taxpayers. But they wouldnt see the benefits of that immigration.”

      For that issue, I would fund research to make the full costs and benefits of policy more transparent.

      “Would there be a stigma attached to (being 100% reliant) on the GMI, like there is the dole? I dont think there would be, as everyone is getting it. So wont the removal of that stigma provide upward pressure on the number of people voluntarily leaving the workforce? Meaning fewer productive people are left to fund the ‘bludgers’ lifestyles.”

      Yup, all good.  That is why society needs to vote regarding whether it is a universal income, or is subject to a “willingness to work” clause.  In either case, whatever society votes on it gets.

      “Also, arent you worried that when Labour gains powers again, and have to be supported by The Greens, Mana, Maori, and Peter Dunne, that they will use the mechanism of the GMI to piss a fire hose stream of money down the drain?”

      Hopefully, the party can make the costs and benefits of policy transparent – if that is the case (such as with an independent tax setting body) then there is some defacto limit on other parties ability to screw around.

      If people elect in a party that does explicitly screw them around, then that is their own fault – I’m not going to deviate from optimal policies just to prevent it 😉

       

      • Raf

        That’s why I like the idea of a citizen’s contract..not so much a willingness to work but a willingness to participate (i.e.not doss on the sofa all day, though to be fair this can be fun occasionally!). 

        In terms of immigration this may change things slightly but i think the same criteria we have now would still be in play (demand may be higher though).

        I’d also argue that a properly constituted GMI would limit political parties ability to screw around as there would be fewer policy levers and therefore less opportunity to raid the treasury.  

        This proposal has come from the right as well by the way. I dug out this post from almost 4 years ago…..guess the Infometrics crew are a bunch of closet UBI supporters 🙂

         

        • A minimum income with a flat tax is both a staple of the left and right – which is why it will never happen.

          I wouldn’t put this post down to Infometrics – we all have different judgments on what would constitute good policy.  I know that the majority of my colleagues would not support my view of a land tax 😉

  • Tell me that you’re also abolishing at least youth minimum wages, right? What’s the point if you’ve got a GMI?

    • I thought that was implied in the first bullets where I completely removed the tax/benefit systems – so yes I am removing all minimum wages.

      What is the point of a minimum wage when people already have a living wage?  People can’t be “taken advantage of” anymore, and so the decision to sell labour can be seen as truly “voluntary”.

  • I can’t help but notice that Guaranteed Minimum Income has the same acronym Gareth Morgan Investments….no wonder GM likes the idea so much…promoting it is subliminal advertising:)

  • jh

    I’d vote for that (rightly or wrongly).
    It seems to me that some issues are like a wrongly set broken leg. It needs to be broken the be re set.
    Ideas seem to have more to get them going than their merit for example Esperanto (a sort of metric system of language).