New Zealand seems flavour of the month in the States. There's a new book out making the case that New Zealand's living the dream of an egalitarian society based on fairness; it's been getting a fair bit of press. I'm a third of the way through and will blog a proper review when done.*
Thomas Friedman visited the Antipodes this week; he files this report.
I agree with Friedman that the relative absence of a strong religious right makes politics relatively more sane. Religious movements of the more politically active sort tend to be based around Pacific island immigrant communities and lean Labour; a strong secularist bent within the upper Labour echelons keeps things in line. And so Labour legalized prostitution and created gay marriage via civil unions.** Atheists outnumber any single Christian denomination in New Zealand; I'd be surprised to see any Labour or National leader making a point of being seen making any religious observances other than the annual Ratana Church pilgrimage, which to this migrant has always seemed more a recognition of the mana of the Ratana movement than a demonstration of faith.
But I only wish the U.S. Democrats were sufficiently sane that this line of Friedman's could be true:
In New Zealand and Australia, you could almost fit their entire political spectrum — from conservatives to liberals — inside the U.S. Democratic Party.
Here is a short list of current policy, broadly agreed upon in New Zealand politics (as best I can tell), that I cannot imagine fitting inside the U.S. Democratic Party. Just the things that come to me in thinking about it for fifteen minutes; I'm sure there are many many more.
- A relatively flat income tax system topping out at 33% (Labour would prefer 38 or 39).
- No capital gains tax (Labour now claims to favour one, but did not implement one in their last decade in power).
- A highish (15%) and very very clean VAT in the form of GST. Zero politically-motivated exemptions. Books are taxed. Kid's clothes are taxed. Even your city council property taxes include GST: council provides you a service, and that service attracts GST so as not to introduce other distortions in the choice between Council and private provision of services.
- Same thing in income taxes: they're generally very very clean. Most salary and wage earners don't have to file any taxes at all. It's just withheld at source.
- Free trade in agriculture without subsidy. Imagine Obama, today, abolishing the entire edifice of U.S. agricultural protectionism. Labour did it in New Zealand in the 1980s and there's no going back.
- Neither National nor Labour have any interest in ramping up military spending.
- A crazy woman tried hijacking one of our planes a couple of years ago. The country said meh, as did the politicians. I am flying to Auckland later today. I will arrive at the airport a half hour before boarding. If the plane is large, I will walk through a metal detector; otherwise, I will walk directly to the gate. When I get to the gate, I will wave my phone at the sensor. And then I will walk on board.
- New Zealand's abortion policy is de facto liberal but de jure restrictive. Nominally, women need a medical reason for having an abortion. That makes the social conservatives happy. Actually, depression caused by not wanting to have a baby is a medical reason for having an abortion. That makes women who want abortions happy. In America, identity politics would prevent this happy equilibrium.
- Parliament opens with a prayer. I chalk this up to status quo bias. Knocking it out would slap the religious people around over something pretty trivial. Folks here just seem a lot more willing to give the cheap tokens of respect that keep everything running over smoothly.
- Kiwis largely traded away the right to sue for damages in exchange for a government accident insurance fund: ACC. ACC has loads of problems. But, in second best worlds, NZ's solution seems far better. (National's potentially considering privatizing ACC but not wrecking tort.)
I'm also a bit skeptical about Friedman's claims that Antipodean sensibility comes down to compulsory voting systems. The story isn't crazy, and Justin Wolfers seems to endorse it. If you can be assured your base will turn out, then you don't need to do crazy stuff to play to them. But while Australia has compulsory voting, New Zealand doesn't. And I've seen no evidence that New Zealand election campaigns are nastier than Australian ones.
Friedman continues:
To be sure, conservatives out here have all the low-tax, free-market, free-trade, less-government instincts of their American colleagues, but it is tempered by the fact that campaign donations and lobbying are much more restricted.
Ok. Labour*** governed as strong free traders under Helen Clark, giving New Zealand a bilateral free trade deal with China, something else that wouldn't exactly fit within the scope of permissible policy views within the Democratic Party.
But I wonder in which direction causality runs on campaign donations.The NZ Electoral Commission recently released the numbers from the 2011 election; no party reached its spending cap. If the government here is less likely to award rents, then we expect less rent-seeking.
I'll look forward to finishing the Hackett Fisher book.
* Tyler blogged on this ages ago. When it popped up there, I called the University bookstore. They said they could have the book to me end-March for twice the price that BookDepository quoted. So I got it mid-March from BookDepository. I had to get a book on New Zealand - not just any book, but a big scholarly tome from Oxford Press - shipped to me from the UK because it wasn't yet here at the University bookstore. Very much enjoying the book thus far.
** This is almost the perfect compromise legislation. If the religious folks get mad about the word marriage, call it civil union and give it all the same legal status. Except gays married under NZ's civil unions legislation have a hard time in adoption: it's apparently not easy to have the partner listed as adoptive second father (mother) of the other's child or of a child adopted by both. Otherwise, hooray for Labour.
*** Labor governs Australia (but likely soon won't); Labour has governed New Zealand and are favourites to govern again in 2014. I'm sure that Friedman drops the "u" from Labour by accident rather than implying that we've taken the option of Australian statehood.
Don't forget that Helen Clark also signed the P4 free trade agreement (including Brunei, Chile, New Zealand and Singapore) and that many of the big structural changes in the 1980s (deregulation elimination of subsidies) were started by Labour.
ReplyDeleteI'd suggest that in the case of gay marriage/civil unions one of the problems is that the countries of origin for children put restrictions on adoption by same sex couples.
Having lived both in Australia and NZ I think that religion plays a very restricted role in the public sphere in both countries. There is always the odd small religious party that gets a tiny fraction of conservative vote, but nowhere near with the discourse one sees in the US.
Voting is compulsory in Australia for federal elections; there are three states that have voluntary participation for local elections.
In general I agree with the sentiment that politics down under is much more civilized than in the land of the free. My main issue in NZ is a matter of small scale, where things are more expensive and the latent parochialism that, some day, feels like living in a large farm. Long live BookDepository.
Wonder if there are any interesting differences in political campaigns between voluntary and compulsory voting states.
DeleteThe reforms of the 80s, however much Labour now talks about regretting them, seem largely to have survived a decade of a very different Labour government in the 2000s.
to hazard a guess, it's the reporting requirements and disclosure of spending during election campaigns, employed in concert with limits which offers the best policing of unethical, populist campaigning. unfortunately national and labour both operate as 'private' parties, and i think this introduces many problems. the amendments to the electoral finance act indulged in by national upon their rise to power in '08 defanged the act in an abhorrently undemocratic move.
DeleteBoth Houses of Congress open with a prayer too, and there are House and Senate Chaplains, so asserting this couldn't fit within the Democratic Party seems a little off.
DeleteOur political donation laws are also much LESS restrictive than the US - and our Bill of Rights explicitly recognises that corporations are people with rights.
I'd missed the Congressional opening prayer. Thanks, Graeme.
DeleteI always have fun in my public choice class by letting the students prattle on about how big money rules the US because there's no regulations on campaign expenditure. Then I make them go and look at the election regs in the States.
I'm not 100% familiar with election funding regulations in the US, but if my understanding of the article in Time is correct the SuperPACs seem to be a way of getting around some of the restrictions regarding election spending by candidates, certainly in the Rebublican primaries. From what I've read the candidates' official campaigns are restricted in the amount they can spend, but independent lobby groups are able to throw as much money at advertisers as they want. Hence the formation of the PACs, which employ a pretty loose interpretation of the word independent.
DeleteMy theory here (not original I suspect, but I can't credit where I got it from) is that when you make the donations illegal people find a way around it (e.g. SuperPAC). When you do what we do in NZ, you make it mostly legal but force disclosure. It's not worth creating things like PACs, but also you temper your donations to not look too much like vote buying. As usual, regulations create the very problem they're trying to stop.
DeleteThere is no regulation of union politicking in Australia or New Zealand. Our only restrictions fall on civilized decent people with money, and corporations. Certainly some sort of disclosure might be a good thing to prevent government-backed monopolies, but the Australiasian system is a unfair one by comparison to the US (especially pre McMaverick/Feinfuhrer).
DeleteBook price is the roughly the same at Amazon UK, Book Depository and Fishpond NZ - NZ$39.
ReplyDeleteHmmmmm......Friedman made a sweeping statement that may not be entirely realistic.
ReplyDeleteI'm shocked. Absolutely shocked.
I'm not clear on the meaning of this post. For instance, "Neither National nor Labour have any interest in ramping up military spending."
ReplyDeleteAre you implying that the Democratic Party IS interested in ramping up military spending?
Our current military spending is very very low; it is inconceivable that the Democrats could be interested in pushing to anything near where we are. I should have phrased it "Both parties seem happy for New Zealand defence spending to be trivially low."
DeleteOf more relevance perhaps is that a previous government here did away with the air combat wing of our air force. I can't imagine this sort of reduction being plausible in the US. Mind you, our air combat wing was laughable in the extreme, and was to all intents and purposes useless. It could perhaps have performed a ground attack role in support of our grunts, but would have been hopelessly outmatched if it came up against any sort of semi-modern air opponent. And the expense of upgrading to a useful air defence wing was deemed too great given a) the likelihood of it ever being needed and b) our close defence ties with Australia and to a lesser degree the US. It is unlikely that either of these nations would sit back and allow NZ to be invaded by a hostile force, and if such a force ever made it to our shores it is unlikely that our handful of Skyhawks and Aermacchis would have served as any sort of deterrent.
DeleteSuccessive governments have made no noise about reinstituting fast jets, so when Eric talks about ramping up military spending this is one of the areas that a more right wing government might plausibly target. Aside from a few major upgrades to equipment (e.g. we are currently taking possession of new helicopters, finally replacing our old Hueys with NH90's) military spending here is pretty minimal, and it takes a long time for major expenditures to be approved. If we are to believe this page (http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures) the US spends about 4.7% of GDP on its military, whereas New Zealand devotes only 1.2% of its GDP on military spending.
I hope this helps.
Actually, we got a sweetheart deal for F16s from the US, who had originally built them for Pakistan, but then pulled approval at the last minute. They had to pay the manufacturers out (since the govt changed its mind), and basically gave them to us so as to not make it obvious. The incoming Labour govt cancelled the deal not on economic grounds, but because they didn't like military spending.
DeleteThanks PaulL, I'd forgotten about the F16 deal. You're quite right of course, the deal was most likely canned by Labour on idealogical grounds, to appease their Green coalition partners I'd imagine. I don't doubt that saving a few dollars off the defence budget also helped with the decision though.
DeletePerhaps the Democratic Party may not advocate reducing budgets directed to the military bureaucracy, but they have pushed policies intended to make the majority of the US military a joke, like the majority of the NZ military already is. A small military well-equipt to kill people and break things shouldn't cost that much. In the case of New Zealand, we'd be better off hiring people who developed the experience elsewhere, rather than having a bunch of guys with nothing else to do but sit around having wanking competitions and reading peacekeeping manuals.
DeleteI mean, I'm sure it felt nice to a lot of typically stupid New Zealanders to have our army going to East Timor to 'keep the peace'. But when the real game is fighting a proxy war against Indonesia, as in the Malayan Emergency (though not with anywhere near the same level of seriousness, as shown in the rules of engagement that let locals attack our soldiers with machetes), shouldn't we just hire a bunch of South Africans and Rhodesians with prior experience in dealing with that sort of thing and let them have at it?
As a US Democratic political operative looking to travel back to my native NZ after November elections for graduate studies, I really appreciate this post. A few finicky points though. The US has lots of benign nods to religion that don't mean anything. The Senate chaplain reads a prayer before every session, for instance. The first Sunday before the Supreme Court meets every year, politicians of all stripes take part in what's called the "Red Mass" at our 'National Cathedral" (actually a private institution). Whatever your thoughts of the American Religious Right, none of these points are considered controversial or even pious. Just traditional. It's known as Benign Neutrality here. A way of keeping the peace.
ReplyDeleteAlso the Democratic Party houses a full spectrum of ideas on Free Trade and Military Spending. As for airport security, it's wonderful to live in a nation where terrorist threats aren't quite so omnipresent. Whatever your thoughts as to why, US airports just aren't that place. The security is trying to accomplish something.
Imagine though an America where atheists outnumbered any Christian denomination. I'm not so sure that the secular wing of the Democrats would then be as happy to let things sit, but that is speculative.
DeleteAndrew, please please read Bruce Schneier on airport security. The TSA just blocked his testimony before Congress; he has things worth hearing.
He also links here to his debate at The Economist with Kip Howley.
Bruce Schneier has been pointing out the holes in the TSA security methods for ages: http://www.theatlantic.com/magazine/archive/2008/11/the-things-he-carried/7057/?single_page=true
DeleteI haven't travelled via the States since 2004 and things may have improved drastically, but the TSA procedures were so chaotic that if a terrorist wanted to kill lots of people they could accomplish that by simply blowing themselves up in the concourse. Basically if the terrorists actually get to airport, you've pretty much already lost.
The US lets in more immigrants from terrorist-sponsor nations per head of population under their 'diversity visa' free citizenship program than NZ lets in Arab students on temporary visas (which are actually complied with quite often over here- not so much in the US). The openness of the US to dangerous people has made it vulnerable- our vulnerability is tempered by geographical distance.
Delete@ Andrew:
ReplyDeleteAirport security is security theatre and rent-seeking. It's extremely easy to imagine new ways of terrorising travellers (let alone the population in general) that fall outside the airport security umbrella; and this will remain the case no matter how many additional security measures are added in response to novel security workarounds, because when there is a will there is a way.
You note that the tax rate is relatively flat in NZ, that it tops out at 33%, and that there are few deductions to be had. What would you say the typical effective income tax rate is in NZ? And, if you don't mind answering, what was yours?
ReplyDeleteI paid just under 27% of my income in income tax plus ACC levy last year. I paid about $2200 in property tax on my house. Everything I buy attracts GST of 15%. I also paid alcohol excise tax of unknown but not substantial total amount. On top of that, I pay about $1200 per year in health insurance premiums for catastrophic coverage for a family of 4; the public health system covers everything else. There are no other state or local taxes.
DeleteIf you want to compare things across the two countries to see whether you're better off, you have to add to the tax you pay in the US (comprehensive across all levels of govt) what you're currently spending on health insurance.
Health insurance is expensive here, but I think I still come out ahead at present. Owing to the fact that the feds love people like me - lots of kids and charitable contributions - my effective tax rate last year was 5.4%, despite my being in about the 75th percentile of the income distribution. If I owned a house I could probably cut that down to about 2%.
DeleteHealth insurance is expensive here for sure, though. I don't recall, but I probably pay 5-8 times what you do. Plus one has to add in State income and sales taxes. Where I live the sales tax is about half NZ's GST.
You don't move here to get rich. You move here because you can trade a bit of income away and get a lot of freedom in return. Not being molested at airports, not worrying about asset-forfeiture-crazed police targeting me, basically being able to live the way I want without being told I can't - that's something I really value.
DeleteI completely understand. If there were no trade-offs every libertarian would move to NZ. And I'm not saying I wouldn't want to live there (it's still a periodic daydream of mine). It's just that I might want to wait until I've accumulated some extra wealth; inter-temporal substitution and all that.
DeleteAlthough, from what Shenandoah says about taxation of assets, maybe it would be best to move there poor.
I need to check back on whether that was fixed. I know it was on the radar when National came in back in 2008, but I don't know what came of it. If you start and build your assets here, you're pretty safe - foreign investments that are part of your KiwiSaver portfolio don't cause any trouble and there are no capital gains taxes.
DeleteIt can't be that bad though. James Cameron's moving here, Kim DotCom gave it a shot; I'm not sure that either had insubstantial foreign portfolios.
@Eudemonia:
ReplyDeleteThank you for your comment. While i think you raise an interesting argument, debating the merits of airport security was not the intent of my original post. The author claims kiwis 'shrug' when thinking about airport security. This can be explained wholly by conditions of circumstance and location and not necessarily at all by ideology or general political outlook. Airport Security in the US, whether you find it effective or not, is a public policy response to a specific circumstance. The fact that that circumstance is not met in New Zealand (this is a great plus for kiwis btw!!) explains the levels of response in terms of security. Inherent dispositions do not.
I find it exceedingly unlikely that the bulk of costly measures imposed on passengers in American airports have had any effect on the likelihood of terrorist attacks.
DeleteAnyone wishing to do substantial terrorist harm to the US still has rather wide set of choices, many of which would be as dramatic as blowing up an airplane (hijacking a plane and flying it into stuff is now impossible because the cockpit doors are reinforced and the passengers know that something worse than a free trip to Cuba is likely in the offing). Making a list here seems foolhardy.
"Nominally, women need a medical reason for having an abortion. That makes the social conservatives happy. Actually, depression caused by not wanting to have a baby is a medical reason for having an abortion. That makes women who want abortions happy. In America, identity politics would prevent this happy equilibrium."
ReplyDeleteWhose identity politics? Are you saying that the only reason the religious right opposes abortion is to due to their religious identity? Or are you fingering feminism? Or Both?
It seems to me that feminists favor abortion because childbirth is inconvenient, and Christians oppose because they believe it is murder. Not sure what identity politics has to do with it, nor how it supposedly differs from New Zealand.
My contention, about which I could be wrong, is that American Democrats would oppose legislation that appeared to restrict abortion access rights even if it actually worked to increase access.
DeleteImagine a bill came before Congress. It's called "Stopping the Murder of Babies by Godless Abortionists Act". The real effect of the act is to require that doctors wishing to provide abortions affirm that they are not in fact Godless, and that there were all kinds of protections for doctors swearing an affirmation "I am not Godless", although that's hidden in 300 pages of text that talks a lot about just how evil abortion is and talks even more about just how much Congress hates abortion.
Is it more likely that
a) The Democrats let it pass, recognizing that it achieves desired ends;
b) The Democrats quote from the bill in fundraisers demanding more money to help to stop this anti-abortion legislation and back themselves into having to vote against it.
I think the opposite is more likely the case. The "pro-life" side (i.e. almost total overlap with GOP) is not going to support any legislation that supports abortion in any way, even if by stealth in your proposed legislation.
DeleteThe New Zealand compromise of strict de-jure restrictions but de-facto liberal access would not be acceptable to the pro-life side in the US. I could easily see the pro-choice side (i.e. mostly overlaps with Democratic Party) accepting that a pro-forma doctor's concurrence is necessary in exchange for the pro-life side dropping efforts to restrict or outlaw abortion. But, the pro-life side in the US would never agree to such a compromise. Complete abolition of abortion is the only acceptable position.
"The "pro-life" side (i.e. almost total overlap with GOP) is not going to support any legislation that supports abortion in any way, even if by stealth in your proposed legislation."
DeleteYes, I agree the hypothetical is rather bizarre (although I disagree with you that complete abolition is the goal of most conservatives; even the Republican Party Platform exempts rape, incest and life of the mother). The hypo presumes both that conservatives only care about lambasting the godless rather than actually reducing the murder of babies, and that they are too stupid to see the wool being pulled over their eyes.
Moreover, let's say it's true that "American Democrats would oppose legislation that appeared to restrict abortion access rights even if it actually worked to increase access." If you want increased abortion access, why wouldn't you oppose a bill that "appeared" to restrict abortion? You'd be doing so mistakenly, but you're still acting consistent with your ideology. The fact that sometimes people support measures that appear to be productive but are in fact counterproductive says nothing about their political priorities. I believe that liberals care about the poor, and I also believe that they support policies that hurt the poor. That's because they're mistaken, not because they don't "really" care about the poor.
@Anon 7:21: The pro-life side could possibly be fooled by legislation framed the way I have it, and especially if the Democrats shouted about the nominal restrictions on abortion, but that would have it then killed by the Democrats.
Delete@MC: I'm saying the Democrats in the House aren't idiots, would know the difference between what the bill appeared to do and what it actually did, but would play it up as being actually anti-abortion instead of being seen as supporting it.
Clinton signed NAFTA. During the Rubinite era it was typical for Democrats to talk protectionism and then sign FTAs (see also: Blair, Third Wayism, - the movement of the Western left toward economic liberalization was not unique to NZ).
ReplyDeleteCarter, not Reagan, started deregulation, although judging by rhetoric you would never know this.
I'd thought the negotiating work on NAFTA began after the US-Canada FTA, so under Reagan/Bush I. It's to his credit that Clinton didn't kill NAFTA, and even more to Chretien's (the Liberals had actively opposed NAFTA in the 1988 election and Chretien had promised to kill it).
DeleteAgreed completely on Carter having started deregulation; would go even further and give credit to Ted Kennedy on airlines (though he mostly did it because the regs hurt Boston rather than because of any commitment to trade).
But NZ has gone farther than anybody on free trade. Few goods attract any substantial tariffs even where no free trade agreement exists.
It's also a small open economy, relatively distant from its key trade partners. The politics of tariffs are a little different. Didn't deregulation in NZ revolve around floating the exchange rate etc. rather than removing tariffs, which were never dominant to begin with?
DeleteAtop that, observe that it was always a close thing - even in NZ, deregulation under Labour tore apart the party. Certainly it weakened it sufficiently to remove it from government briefly. In the UK, Labour infighting exiled it for more than a decade. In the US, under the overarching culture war?
NZ has best, most secure free trade policy in the world. Yes, it has intellectuals and policy wonks who understand the Smithian/Ricardian/Austrian reasons why free trade is superior but there's another reason. NZ is a small island far away from everywhere else. They tried a virtual autarchy with lots of protection. E.g., they'd import half manufactured TV sets from Japan and assemble them in some pitiful factory in Thames on the Coromandel Peninsula. That regime collapsed in utter ruin in the early 80's under a blustering gasbag PM named Muldoon (perfect!!). Labour came in and under Minister of Finance, Roger Douglas (who was a secret free market guy) just took a chainsaw to regs, tariffs and subsidies. Douglas is hated to this day for it but he saved NZ's bacon. I've met him. He's kind of a jerk but, honestly, he deserves the highest accolades for his unpopular but necessary actions in the mid-80's. Over one weekend, he reduced farm subsidies from a very high percentage of a farmer's income to zero. Wham. But he knew that was the only way he could do it.
DeleteSo, the reason NZ has most secure and most liberal free trade policy in the world is that being a small island, virtually everything is imported. They manufacture very little. So they have to trade for everything that's a sophisticated technological product. Raise tariffs and everyday life there would quickly degenerate to 3rd world levels. Their farmers, movie makers and software coders (3 things at which Kiwis truly excel plus a few inventors/makers of very sophisticated hi tech things) need to have stable trading relationships particularly with Asian countries and US. That's why NZ's free trade policies will be the last thing to go. And that's terrific because without the ability to protect home products from free competition, socialism or a high regulatory/high tax state can't really get off the ground.
A government entity like the ACC is unlikely in the US. First of all, tort lawsuits are generally a state by state issue. And, unlike the NZ Nationals, the US GOP is in favor of wrecking tort. The GOP views tort lawsuits as being generally fraudulent or frivolous and designed to extort money from organizations they support to undeserving plaintiffs and trial lawyers who are key financial backers of the Democrats. Further, the GOP views tort lawsuits as deleterious to society as a whole. The GOP would certainly not want to set up a government run insurance company or agency which would extract money from those they support to transfer it to those they oppose. They'd view it as another wasteful government welfare scheme. The general GOP strategy on tort has been to make it more difficult for plaintiffs to sue or prevail in court and restricting the amount plaintiffs recover when they prevail.
ReplyDeleteIt would be killed by both sides. The tort lawyers would convince the Democrats to hate it; the "Get yer govt hands off me" guys would kill it in the GOP.
DeleteIt is very far from a first best solution; problems are all over the place. But I'll pick it over signs blocking me from doing fun things because land owners are scared of being sued.
When talking about the flatter taxes, it is worth noting the flatter income distribution too. Yes, NZ doesn't tax the super-wealthy at as high a rate, but it also doesn't have the social, political, regulatory and other institutional settings that make it easier to attain super-wealth, particularly through rent extraction.
ReplyDeleteI would chalk the absence of the superwealthy up far far more to the geographical constraints that mean the returns to very peak skills here are tiny compared to elsewhere. Agglomeration effects just can't kick in here.
DeleteNote in my comment below that wealthy people with overseas assets are taxed in a truly insane manner. I called it the "drunken sailor" system. One year I'd pay no taxes (literally) and the next I'd pay 200% of annual income. And you could not know at beginning of year which it would be because it was a function of forex rates vs kiwi dollar. One reason we finally had to exit stage left after living in Auckland for 9 years.
DeleteBut NZ would have a lot more superwealthy if they changed the way they tax offshore assets. In fact, I tried to infect politicians with the idea of taxing royalties on inventions, works of art, etc. at a zero rate. You'd gain a fair number of incredibly clever creatives without very little loss of tax revenue. In fact, the state would gain revenue from all the ancillary stuff creatives generate.
I'd love to move back but until the tax laws change, not possible.
Cheers,
Shenandoah
PS Now living in Boston and I do my best to avoid any interaction with or involvement in the US political system. It's beyond insane. And it's killing the most productive place in the history of mankind.
PPS One other thing re NZ. As many have implied, it's kinda like living in a small town where everyone knows everyone. Hard to fly below the radar unless you don't get involved in any sort of local affairs. We didn't except those involving our kids. Oh and NZ gov't paid us to homeschool our kids. Pleasantly shocked. Someone from Ministry of Ed came around to check on progress at one point and after spending a day with us, said, "I don't know what you're doing but I wish they did it in our schools." Nice words from a bureaucrat. She was actually nice and sort of the opposite of the evil headmistress woman in one of the Harry Potter books. The NZ bureaucrats that we had to interact with, btw, were far higher quality than any I've ever dealt with in US. Home schooling worked well there. Our daughter entered MIT at age 15 and is now, at age 17, a partner in a biotech VC firm in Silicon Valley.
Have they not fixed that yet?! We moved here with no assets so didn't encounter that side of things, but I know that it drove Canterbury's Professor of Finance over to Australia a few years ago.
DeleteYou're right about the quality of the civil service in general; EQC being a current exception (but not entirely their fault; they were never set up for the task they currently have).
Is the offshore tax thing a real barrier if you organise right? I thought the general plan was that you created an offshore company and put all your offshore assets into that company. The company declares no dividends, so all you have is capital gains. Capital gains are tax free. The only remaining trick is to put that company in a low tax jurisdiction.
DeleteThat's a great suggestion. And as I said in an earlier comment, Kiwis are exquisitely Italianate in their mostly legal machinations to escape tax. Problem is in medias res meaning if you knew from the beginning of your business and investment activities that you were moving to NZ at some point, you maybe could arrange things. But once you're working/investing in a structure that has evolved over time, it's not a simple matter to just put everything in a company that declares no dividends. And it really kills interest in wealthy achievers becoming NZ tax residents.
DeleteWhat's weirdly stupid, is that it is such a simple fix that would not cost NZ gov't any revenue. Quite the opposite, it would gain lots from wealthy people's willingness to become tax residents rather than 5-month per year non-taxable residents. I know lots of Yanks who stay in NZ for 3-5 months per year for that reason.
Can I just put in a plug for the great service we get from libraries in New Zealand. I was able to read Tyler's review of David Hackett Fischer's book and find that Wellington City Libraries already had a copy on order. It was delivered to my local library for pick up a couple of weeks ago.
ReplyDeleteWhat is New Zealand like for trade union laws?
ReplyDeleteEffectively right to work. You can unionize, but no closed shop and no effective restrictions on employer ability to pass along negotiated union benefits to non-union workers.
DeleteI lived with wife and kids in Auckland for 9 years (1999-2007). As someone said, it's parochial but also free of lots of hassles one finds in US. But there are other hassles. Kids grow up and leave. Yeah, they do that everywhere. But when ambitious Kiwi kids leave they end up on the other side of oceans thousands of miles away in London, LA, NYC, Sydney, Singpore or HK. So NZ families tend to lack the strong ties found in many US families.
ReplyDeleteAlso the tax system in trying to be clean and fair ends up in lots of loopy Alice-in-Wonderland results. E.g., if you make any $ at all, because NZ is a small place, you end up investing overseas. The way NZ treats overseas income & assets for annual tax purposes is insane. I'd pay zero taxes one year and literally 200% taxes on income the next. And because it depends on forex rates, you can't know at beginning of tax year which it will be. Every high net worth person spends lot of time & $ figuring legal ways around it or they move overseas. So few wealthy Kiwis actually live in NZ except for those whose wealth is generated solely from domestic Kiwi assets.
There is more crazy religious stuff in NZ than you may realize. They've got their Jimmy Swaggarts. The Maori, Tongans and other Islanders, about a third of Auckland population, and c. 5-10% of Euro-Kiwis are hardcore evangelicals. Not enough to swing elections.
Maori, are the swing voters in NZ elections, so Maori are the rent-seekers par excellence who play white guilt like Zukerman plays a Stradivarius. That means a huge % of Maori are on a shockingly generous dole. So Maori and other Islanders harbor a large criminal class. We experienced far more crime, mostly petty theft and burglary than we ever experienced in the US. Here's a shocker: Stats show that the rate of violent crime is higher in NZ than in the US. A lot higher. You quickly learn to adjust your behavior in ways you never had to in US.
You rather blithely blow off the 15% VAT. But to most Kiwis, it's a royal pain in the arse. They've figured out lots of ways around it despite what you said. I betray my Kiwi friends were I to reveal them. Kiwis that have any assets, esp. real estate, well, Italians got nothing on Kiwis when it comes to rube goldberg legal machinations to get around paying taxes.
As for trade union laws, Eric is pretty much right but there are lots of strong unions there in infrastructure industries. And try firing someone and you run into a blizzard of legal crapola you won't believe. And that's one thing that disgruntled Kiwis can sue you about. And they will. I was. It's extortion. I paid out to make it go away.
More to come
Some folks do pay cash to get around GST, but that only works for things where there isn't a substantial GST component to the seller's inputs.
DeleteAlso, because (a) farming and hunting are a large % of the NZ economy, (b) the high rate of violent crime and © the legacy of the Maori wars, NZ is a very pro-gun place. The one exception is no hand guns. Other than pistols (the only exception is competitive target shooters), Kiwis tend to own guns and know how to use them. A Kiwi who managed a farm for me was an unbelievable shot with a rifle. He was also a terrific human being and one tough mofo. Now I'm not a gun guy, but I appreciated the freedom Kiwis had to own guns. Tangential to that is the fact that NZ police are utterly incompetent. For the most part they're nicer than police in other places, but if you rely on them to protect you from crims, you're fitting with a Darwinian moment.
ReplyDeleteI could say lots of great things about NZ and Kiwis but this post is getting long. Despite what I've said thus far, I love the place and have several very close and dear friends there. I visit NZ 1-3 months every year. We will probably return there at some point if they change the tax laws. Most sane politicians (a small % in any country) recognize that the treatment of overseas assets causes an exodus of creative kiwis and keeps talented foreigners from immigrating. So they may change it.
Okay, I'll end with a few more things I love about Kiwis. They have maybe the best sense of humour in the friggin' world. Gawd they make me laugh. Check out the infamous "Bugger!" commercial toyota ran in early 2000's. Or the "yeah right" Tui beer ads. In person, the more intelligent kiwis, at least, see the world straight up and just made me laugh all the time.
RE the tort system. When I bought auto insurance, I asked about an umbrella policy. The agent looked at me and said, "Why would you want that?" I gave him the usual "slip and fall" stuff to which he replied, "Oh but you can't sue for that stuff in NZ." Now, that was delightful.
An Oz engineer once told me, "Kiwis know how use logic more skillfully than any other people in the world." I think he's right. There's #8 or #9 (I can never remember, shoot me) bailing or fencing wire mentality. It says give a Kiwi some #8 fencing wire and he can fix anything. It's real. Kiwis have this amazingly calm, focused logical ability to fix anything in the most ingenious ways. I saw plumbers, electricians, computer guys fix stuff that then worked far better than it did before it broke. Made you almost want to break stuff just to get it running better. And that attitude extends into every area of life.
I often describe life in NZ for an American as like living in a quirky, slightly Anglophile, rural US state in which a Yank should be very careful how he or she uses the words "fanny" and "bonk."
Box of birds (a grizzled Kiwi farmer once said that to me as an expression of delight),
Shenandoah