Dr Michael Bassett

Dr Michael Bassett

Newspaper Columns


Election bribery

30/08/2005

That shrewd early 20th century American commentator H.L. Mencken described
elections as auctions of stolen goods. The politician offering back the most
stolen goods got the votes. As far back as 1928 New Zealand's Sir Joseph
Ward won office by offering to spend heaps. The loans weren't raised; Ward
died. Depression followed. I clearly recall 1957. A once-in-a-lifetime
opportunity existed for both parties to bribe voters. The start of Pay as
You Earn taxation from April 1958 meant that government would begin
receiving a steady flow of revenue on top of the lump-sum tax payments due
for the previous year. National started the bidding war, promising a small
rebate. Then Labour trumped them. They would rebate the first 100 of the
lump sum due on 1 February 1958. However, in those days many voters paid
less than 100 annually in tax. Labour's billboard in election week confused
the issue with the words "Do You Want 100 or Not?" Walter Nash won
narrowly, but lasted only one term when many of his voters discovered they
didn't get 100, only the smaller sum they had paid in tax.

The next big bribe was in 1975. Desperate for office, Robert Muldoon
promised not only to close Labour's existing superannuation scheme and
refund everyone's contributions, but to introduce a generous
non-means-tested National Superannuation scheme for everyone at age 60. The
payment would be equal to 80% of the average ordinary-time weekly wage.
Coming at a time when the economy was crumbling, the promise was later
described by our greatest historian, Keith Sinclair, as "the biggest
election bribe in the country's history". It worked for Muldoon, but such
was the escalating cost that he soon had to trim the scheme's generous
provisions.

I wish Sinclair were alive to witness the 2005 bidding war. Labour's Michael
Cullen has tried to build a reputation for prudence. He's run big surpluses
but they've come back to haunt him. He denied in May there was any leeway
for tax cuts. Actually, he was nursing his excessive tax take so that he
could play Santa Claus at election time with our money. Interest-free
student loans, and a daily parade of promises to pressure groups with whom
Labour is currying favour have been followed by what Cullen misleadingly
calls "tax relief". It's no such thing. Labour keeps taxing at the same
rate, but filters money back through a gathering army of bureaucrats on the
permanent payroll to selected beneficiaries. Economists I've spoken to
estimate minimum administrative costs for Cullen's advanced form of welfare
at between 5 and 8% of the money taken from us in the first place. Worse,
Cullen is saying to most recipients of his largesse that it is fruitless to
make any extra effort and work harder because he'll reduce the Working For
Families component of the take-home pay by as much as 59 cents for each
extra dollar they earn. In effect, about 80% of New Zealand families will be
locked into the straitjacket of welfare dependency if Cullen has his way.
His blunted incentives can lift costs to 30% of the total tax being
returned, killing growth in the process.

National has trumped Labour with something simple. A bold extension of
existing tax bands enables them to let most taxpayers keep considerable sums
in their own pockets without Labour's bureaucratic costs. National hasn't
removed the existing WFF component, so welfare-like abatements will still
apply for some who make the extra effort to improve themselves. But the
Brash-Key formula appears to provide a cleaner, across-the-board reduction
of taxes for a wider range of taxpayers. It provides big relief for the most
vulnerable at the same time, and will certainly stoke economic growth.

Michael Cullen is the biggest casualty of the bidding war. Each day he
shovels out bribes. They now total the same as National's tax cuts, and
there are eighteen days left of the campaign. Prudence became Santa Claus
and has metamorphosed into a drunken sailor. Labelling National's relatively
clean offer "insane" and "unaffordable" makes Cullen a public laughing
stock. He clearly needs a long rest as his bizarre behaviour at the close of
the TV One debate with John Key revealed.

One way or another, ministers of finance won't husband such large surpluses
again. Nor should they. As Mencken implied, the money shouldn't have been
taken from people in the first place. Cullenomics and election bidding wars
belong to our often infamous political past.