Matt Nolan

Household structure, economic units, and income splitting

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There is talk in the air that the New Zealand government may one day look at “income splitting” as a form of providing tax relief.

Income splitting changes the fundamental economic unit that is taxed from the individual to the household. The most likely form of income splitting we could see in New Zealand would see the gross income of the main income earner and their partner (either through marriage, civil union, or some other definition) aggregated and then split evenly between the two partners before being taxed at the individual tax level. As tax rates increase with income, this would lower the tax liability of all two-person households.

However, is this policy fair, or even sensible?

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jamesz

More smoking in public

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I’ve talked a lot before about hyperbolic discounting, time inconsistency and smoking. Reading a paper by Gruber and Koszegi on the topic yesterday, I came across an interesting little aside.

They point out that, for an addict, smoking in different periods is complementary. That means that taxes to overcome time inconsistency problems are substitutes: if your tax in one period is too low then you can compensate by raising it in another period. The same holds in a spatial sense: if you can’t prevent smoking in the home then this rationale suggests that over-regulating smoking in public places is optimal. It’s an interesting way to look at banning smoking in public places because it is specifically targeting the welfare of the smokers, not considering externalities to third parties.

Matt Nolan

Outsourcing jobs – whats the issue?

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Yesterday we had the dual announcements of both Fisher and Paykel and ANZ moving work overseas.

The Standard has taken issue with this activity. Particularly, two posts at the Standard lamented the “exploitation” of foreign workers and stated that consumers should stand up to protect domestic jobs.

On a separate note we have seen the closure of a Dunedin knitwear company at the same time, while the D&B payment survey shows that manufacturers are taking a long time to pay their bills, taking 53.6 days on average (can only find old one 😛 ):

What do these stories have in common other than the sad fact of job losses? What do these stories tell us about the New Zealand economy?

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jamesz

Climate change and the decision to delay

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I went to a debate about climate change a few days ago and, uncharacteristically, decided to take notes of my thoughts throughout the talk. In order that they not be wasted I’ve decided to do a series of posts on some of the interesting points that came up in the course of the seminar. Today’s topic is whether it would be less costly to delay doing something about climate change. Read more

jamesz

Unwanted pregnancy and default options

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It is well known that the default option for a choice hugely influences the outcome of peoples’ decisions. Governments exploit this regularly by, for instance, using opt-out rather than opt-in schemes for pension plans. The idea here is to encourage people to choose the ‘right’ thing without actually constraining their decisions making in any way. People tend to be comfortable with an arbitrary choice of default option for a new scheme. For existing schemes, a decision to change the default option from the status quo might meet with considerable opposition. However, using the power of the default option to influence peoples’ choices could potentially have a huge impact on problems that our society currently faces. Read more

Matt Nolan

Biofuel regulation and carbon prices

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From the Hive we see that the government may be having trouble getting its mandatory biofuel regulation through parliament. Anyone that knows me will know that this makes me glad, not because I’m a climate change denialist (I’m willing to trust the experts on this one), not because I’m concerned about biofuel not having a net positive impact on carbon emissions, but because I don’t think the scheme is properly synchronized with the fact that we have a “carbon price” (through the carbon-trading scheme).

Why does setting a price for carbon mean that we don’t need to make biofuel’s mandatory? In order to explain this I’ll look at the three main criticisms I might get for this position (I’m hoping more criticisms can be added in the comments 😉 ):

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