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Robert MacCulloch
Robert MacCulloch is a native of New Zealand and worked at the Reserve Bank of NZ before he travelled to the UK to complete a PhD in Economics at Oxford University.
In an interview with TVNZ’s Jack Tame, Labour’s Chris Hipkins mislead Tame and five million New Zealanders about the economic implications of population ageing, which he states requires imposing capital and asset taxes. Hipkins says, “The big question is what happens with the working-age population. If it stays the same and the population over the age of 65 grows then yes we will [have to increase the percentage of tax revenue compared to GDP] ... We have to be honest about that. Let’s go back 10 years, there are now 200,000 extra people over 65 ... there’s another 400,000 that’ll be there in the next 10 years. That means our population over 65 will have gone from 14 per cent to 21 per cent ... You can’t say to people over 65 that we can give them everything that we gave them when they were 14 per cent of the population and not increase government spending – the maths just doesn’t add up.” What. Bollocks.
Hipkins uses the word “honest”, but what he says is dishonest. Many nations face ageing populations. NZ’s fertility rate ranks as higher than many, at 1.7 per woman. By contrast, Singapore’s is only one. The Straits Times reports, “Singapore’s population is ageing rapidly, with the proportion of citizens aged 65 and above increasing to 18.4 per cent in 2022.” How is Singapore dealing with this issue? Fantastically – many scientific articles are lauding how its over-65s are doing. Hipkins says the “maths” shows population ageing must require higher taxes and government spending. He prefers capital and asset taxes (but not for Māori authorities, which he won’t dare tell anyone since that would mean an end to parliamentary sovereignty). Is he telling the truth? No. How come? Compare Singapore’s taxes with NZ’s. Its GST rate is nine per cent, top income tax rate 24 per cent, corporate tax rate 17 per cent, and tax revenues as a fraction of GDP (which Hipkins says must rise in NZ to pay for population ageing) are around half our level.
How did Singapore do it? Hipkins misled Kiwis by not telling how a bunch of other nations solve this issue by using funded social security systems (with the savings of their people). Instead of paying many welfare bills with taxes, individuals have savings accounts for their retirement, health and housing needs. In Singapore these funds are invested by the State's Central Provident Fund, earning returns on equity markets. The current NZ welfare system is different. It’s ‘Pay-As-You-Go’. When public funding runs dry, like now, there are few personal savings to use and our government resorts to higher taxes and borrowing as we ‘go’ along. Contrary to Hipkins’ mathematically and economically illiterate musings, “the maths” of welfare with an ageing population adds up in Singapore, even with taxes half of ours, since people enjoy compounding returns on savings accounts that fund many of their welfare needs. Can it work here? Yes. Together with a former Finance Minister, I did a full NZ plan & prepared budgets to 2035. Seems Hipkins doesn’t know how it works, even though some in his caucus have talked to me about it, without his knowledge, it seems.
Source:
https://www.1news.co.nz/2024/09/08/full-interview-chris-hipkins-on-labours-tax-policy-pivot/
This article was originally published by Down to Earth Kiwi.
