Sitting in Finance Cttee listening to Treasury officials describe tax as a 'burden'. Right wing political ideology runs deep in Treasury!
— Russel Norman (@RusselNorman) September 17, 2013
Tax is price we pay to live in a civilised society. If Treasury thinks it's a 'burden', perhaps they'd suggest abolition of public health.Taxes are a bad, public services are a good. Saying the first doesn't mean denying the second.
— Russel Norman (@RusselNorman) September 17, 2013
More importantly, economists use the word 'burden' in a particular way. A few useful notes about Principles-level (maybe intermediate) economics for someone who thinks himself qualified to be finance minister:
- 'Burden' measures the total cost of a tax. The 'excess burden' is the amount by which the cost of a tax exceeds the amount collected. Treasury tends to reckon that excess burden is around 20%: it costs us about $1.20 to raise $1.00 in tax. The $1.00 raised is a transfer from the public to the government; the $0.20 is pure loss due to distortions in economic activity consequent to increases in our current mix of taxes.
- Tax incidence theory is important: it tells us who bears the burden of any particular tax. Suppose we wanted to add another 5% compulsory Kiwisaver contribution. The 'burden' of the tax would fall on both workers and on employers with the precise mix depending on how employers and employees change their labour demand and labour supply with changes in wages: it doesn't much matter whether we say that employers have to pay it or whether employees have to pay it. Regardless of statutory incidence, economic incidence - the burden - will remain the same. Meteria Turei understood this when she said that the accommodation supplement paid to tenants is largely a subsidy for landlords. Alas, public understanding of such things is imperfect, allowing for shenanigans where measures imposing burdens on one group are framed as costing somebody else instead.
- If a genie appeared able to provide public health services, for free, this would be a good thing, right? It's impossible, but it would be good. The services paid for by taxes are good, the taxes are bad. We need to be sure that the value delivered by services are greater than the burden imposed by the tax. At current measures of excess burden, a project must return at least $1.20 for every dollar in spending.
Russel Norman suggests only "right wing" economists talk about tax burden. Here is a JSTOR search on "tax burden". There are 61 pages of search results with 100 results per page. Item number 177 on a date-sorted list is famous Right Wing Economist John Maynard Keynes discussing the Colwyn Report on Natinoal Debt and Taxation. Item 398 is rabid right-winger Nicholas Kaldor's call for wage subsidies to reduce unemployment (1936).
Burden is just the term used by economists to describe the cost of the tax and to help sort out the difference between statutory and economic incidence. Like "While X writes the cheque to IRD, the burden of the tax falls on Y and Z." That's it. It's the standard term used in the main texts to describe this thing. Richard Musgrave (centre, maybe centre-left) uses it. James Buchanan (right) uses it. Pick a random public finance text, you'll find "tax burden" or "excess burden" somewhere in it.
Update: egads, it gets worse. Lance Wiggs tries explaining that it's just a word we use. Russel Norman replies:
Update 2: this is way too funny. A Twitter correspondent points me to two press releases by Russel Norman.
First:
Burden is just the term used by economists to describe the cost of the tax and to help sort out the difference between statutory and economic incidence. Like "While X writes the cheque to IRD, the burden of the tax falls on Y and Z." That's it. It's the standard term used in the main texts to describe this thing. Richard Musgrave (centre, maybe centre-left) uses it. James Buchanan (right) uses it. Pick a random public finance text, you'll find "tax burden" or "excess burden" somewhere in it.
Update: egads, it gets worse. Lance Wiggs tries explaining that it's just a word we use. Russel Norman replies:
@lancewiggs Taxes do change behaviour. To call it a burden or distortionary does buy in to general equilibrium model w all its problems
— Russel Norman (@RusselNorman) September 18, 2013
Update 2: this is way too funny. A Twitter correspondent points me to two press releases by Russel Norman.
First:
"It's not fair to expect income-earning New Zealanders to carry a disproportionate share of the tax burden while some of New Zealand's wealthiest individuals pay none," said Green Party Co-Leader Russel Norman.Second:
Unlike the National Government that has chosen to shift the tax burden on to the lowest paid New Zealanders, our tax changes would focus on those not currently paying their fair share.
