Maxim Institute - real issues - No 222 14 September 2006
www.maxim.org.nz
Who Should Pay For Politics?
No End In Sight To Street Soliciting Problem In Manukau City How To Fix A Leaky Tax System
In The News: New Report Highlights Essentials Of School Choice Policy Draft Un Convention On The Rights Of The Disabled
Who Should Pay For Politics?
The uproar over political campaign funding took yet another turn this week, as Prime Minister Helen Clark announced that
Labour was considering "major campaign financing reform". The suggested reforms include tightening the law on anonymous
donations and banning third-party spending which is not endorsed by a particular political party. Such moves would pose
a serious threat to freedom of speech.
The restrictions on third-party advertising would mean that attack campaigns waged by special interest groups would have
to be counted in a political party's election spending returns. This could potentially stop campaigns, such as those
waged by members of the exclusive Brethren church and several trade unions in the lead up to the 2005 election, from
happening in the future.
The other major proposed change is to prohibit donations over $250 to political parties, which are anonymous, such as
those from trusts. It has been estimated that this would lead to a substantial decrease in the amount of funding that
parties would receive from community groups who may not want their names disclosed to the public. To counter this
decrease, the Prime Minister has suggested that the tax-payer make up the shortfall by increasing state funding to
political parties at an estimated cost of $2.5 million.
Every citizen has a protected right to engage in free speech, and to try to persuade others of their views by putting
out a pamphlet, writing a letter, or attending a political meeting. Political campaigns and political parties are the
concrete expressions of people and their concern for the community they live in. As such, the closer they are to the
people who make them, the better for everyone.
Community groups and individuals must retain the freedom to raise their voices; and that includes the right to open
their wallet to do so. With democratic engagement a constant challenge, any move discouraging public involvement will
only make political parties more remote and less accountable than they are already.
No End In Sight To Street Soliciting Problem In Manukau City
This week, the Local Government and Environment Select Committee recommended that the Bill to outlaw street soliciting
in Manukau City should not be passed into law.
The Manukau City Council (Control of Street Prostitution) Bill was a response to concerns about the impact of street
prostitution in Manukau City, including "increased littering, noise and nuisance, a reduced sense of public safety, and
a decline in property values". The Committee acknowledged that these were "real concerns" but found that the enactment
of the Bill would be problematic.
According to the Committee, a major problem with the Bill was that it would have meant that people would be subject to
different criminal laws, depending on what part of the country (or even city) they were in. The Bill would have meant
that street soliciting, while legal in central Auckland, would be illegal in Manukau. Another criticism of the Bill was
that it would "re-criminalise" street soliciting which would be contrary to the Prostitution Reform Act, which
decriminalised soliciting in 2003.
The Committee highlighted various other measures and laws that local councils could use to try and combat the problems
associated with street prostitution. Significantly, the Committee acknowledged the importance of halfway houses which
provide emergency accommodation, food and clothing to girls and women involved in prostitution, and also offer
counselling and training to give them a fresh start.
Ultimately this Bill was a desperate attempt to solve the problems that have arisen following the passing of the
Prostitution Reform Act, in one part of the country. A far better solution is to amend the Act itself to prohibit street
soliciting, deal more effectively with under-age prostitution, provide opportunities for women to leave the industry and
criminalise the purchaser of sexual services. A working group, formed as part of United Future's confidence and supply
agreement with the Labour Party, now has the opportunity to consider these aspects of the Act's operation and will
report to the Minister of Justice on their findings.
HOW TO FIX A LEAKY TAX SYSTEM
This Thursday, the Centre for Independent Studies (CIS) released a new report on taxation in New Zealand, called How to
Fix a Leaky Tax System. The report states that "New Zealand's tax system has become complicated and distorted, with
avoidance and evasion widespread." It places much of the blame on the progressive tax system and its four different
income brackets.
The report suggests that the problem with any complicated tax system is that it encourages people to focus on how to
reduce the amount of tax they pay, rather than on how to be most productive. For example, according to the report,
incomes appear to peak at around $60,000 (the threshold for the top rate of personal income tax). When people earn more
than this, they tend to find ways to avoid high tax rates, such as channelling their funds through trusts which are
taxed less heavily.
The problem is that paying lawyers and accountants to set up these kinds of arrangements costs money which could be
spent on more useful things. There are also costs involved with running and enforcing a more complicated tax system. The
report suggests that the increase in the IRD's budget over the last five years has been driven by the costs of enforcing
the complicated system.
As the report notes, having a broad-based, low rate taxation system makes things less complicated. Such a system has
more than one source of taxation and taxes those sources evenly, with no exemptions or loopholes. This reduces the
incentive for people to put their energy into reducing their tax burden.
The report is concerned that the corporate tax system may also move away from the broad-based, low rate principle if the
tax incentives proposed in the government's Business Tax Review are implemented. It worries that this will "encourage
businesses to spend time trying to minimise their tax returns and fit their activities into bureaucratic categories"
instead of being more productive.
So what is the solution to the problem of complexity? Ultimately, the report recommends a flat tax, with one low rate
for all levels of income, whether personal or corporate. Short of this, it considers that other moves to simplify the
system, like scrapping the top tax bracket, would be an improvement. When designing a tax system, simplicity is not the
only relevant factor. However, as the report shows, it is an important consideration.
For more detail and to read the report, How to Fix a Leaky Tax System, please visit:
www.cis.org.au
IN THE NEWS
NEW REPORT HIGHLIGHTS ESSENTIALS OF SCHOOL CHOICE POLICY
The Education Forum and the New Zealand Association of Economists (NZAE) recently released a report by Harvard
University Professor Caroline M Hoxby which details three essentials of a successful school choice policy.
Based on economic principles and drawing on empirical evidence, the report argues that for a schooling system to lead to
general improvements in education, schools should have the ability to open, expand or contract according to demand;
funding should follow the students; and schools should be independently managed and free to innovate in all areas of
school operation.
To read the report, School Choice: The Three Essential Elements and Several Policy Options, please visit:
www.educationforum.org.nz
DRAFT UN CONVENTION ON THE RIGHTS OF THE DISABLED
The United Nations recently agreed upon the draft text of a new Convention on the rights of disabled people. New Zealand
delegates played a leading role in drafting the Convention and chairing some of the sessions. The Convention guarantees
a range of rights for disabled people, including the right to life, and upholds, among other things, the right to
medical treatment, food and fluid for all, regardless of disability. The draft text will now go to member governments
for ratification.
To read the draft UN Convention on the Rights of Persons with Disabilities, please visit:
www.un.org
TALKING POINT
"If liberty and equality, as is thought by some, are chiefly to be found in democracy, they will be best attained when
all persons alike share in the government to the utmost." Aristotle
ENDS