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  • rmacculloch

Chlöe Swarbrick says capital taxes are "basic economic sense", which goes to show she doesn't have any.

Chlöe Swarbrick is reported by the National Business Review as being adamant that tax reform is needed in NZ. She says that adopting a capital gains tax is just "basic economic sense". I wonder which books in economics she is reading? Das Kapital by Karl Marx? So what is "basic economic sense" according to the author of the world's best selling textbook in economics, Greg Mankiw? This is what he states in his article, "Optimal Taxation in Theory & Practice" (see page 167) in the Journal of Economic Perspectives: "Perhaps the most prominent result from dynamic models of optimal taxation is that the taxation of capital income ought to be avoided". The logic "is powerful: the supply of capital is highly elastic, capital taxes yield large distortions to intertemporal consumption plans & discourage saving, and capital accumulation is central to the aggregate output of the economy".

Why do many folks believe productivity is particularly weak in NZ? Because we are a "capital shallow" economy, according to the Treasury and now defunct Productivity Commission. Poor countries have lots of labor and little capital, which leads to low wages, whereas in rich countries its the other way around. At present, NZ is driving up labor with record-breaking immigration whilst GDP per capita, and productivity, are plummeting. So what is Swarbrick's mind-bogglingly contradictory intervention into the tax debate? That in order to improve our prosperity, its "basic economic sense" to tax capital more. Since when did you get more of something by taxing the pants off it?

The Green Party under Swarbrick has a new way to achieve its Net Zero carbon goal - its by aiming for Zero Capital and Zero Sized Economy. Add to that the Green's desire for humans not to breed - which is what they have been advising our school children - then in one more generation there will be no people left to pollute, and the Greens will be at last happy, not that there will be any of us left to be happy. What's a more sensible path? To encourage business formation, entrepreneurialism and the capital accumulation that goes hand-in-hand with it, particularly aimed at creating new technologies that make producing energy with fewer carbon emissions cheaper.


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