NZ Alcohol excise, in context

The Tax Foundation provides some helpful context for NZ alcohol excise.

Well not directly; NZ isn't on this map. But we can add it pretty easily.

O'zapft is! 🍻💸 #Oktoberfest pic.twitter.com/grM1lNSUpd

— Alex Mengden (@amengden) September 19, 2023

So let's add New Zealand.

Excise on beer is $35.451 per litre of pure alcohol.

A 330mL bottle of 5% beer then has $0.58 NZD = €0.32 in excise at current exchange rates.

If NZ were a European country, our excise on beer would be three times the median - at least of the set of countries here listed. There are 28 countries listed. The fourteenth and fifteenth highest have excise of  €0.10 and €0.09. 

We'd be tied for fourth-highest with Sweden. 

Perhaps helpful context. NZ's prohibitionists sometimes like to complain that excise here is less than Finland. Finland is the highest in Europe, at six times the European median. 

FWIW I still like the idea of replacing NZ's messy excise tables. 

Beverages with less than 2.5% alcohol get taxed at 53.170 cents per litre of beverage. Beer and other stuff that's between 2.5 and 6% alcohol gets taxed at $35.45 per litre of alcohol contained in the beverage. Then there are goofy rates for wine, assessed per litre beverage at $2.84 for wine that's 6-9% and $3.55 per litre of beverage for wine between 9% and 14%. And stuff over 14% gets charged $64.57 per litre of alcohol.

It's a convoluted way of assessing a higher excise rate on spirits and higher concentration alcohol, but with a distortion favouring wine over beer - and charging a lower per-unit-alcohol charge on 14% wine than on 9% wine. 

If you put the whole thing on same basis per litre of alcohol in the beverage, evaluating at the top of the range of alcohol concentration, very low-alcohol stuff gets taxed at $21.27 per litre of alcohol; beer is $35.45, wine just at 9% is $31.51, wine at 14% is $25.32, and spirits are $64.57. 

There's a simpler and less distorted way of getting an increasing average excise rate while having a single marginal rate per litre alcohol, regardless of what it's in.

Just exempt the first 1.27% of alcohol from any taxation. 

Why 1.27%? If you drink bathtubs of water that had no more than 1.27% alcohol in it, you'd die of water poisoning before you died of alcohol poisoning. So it makes for a nice cutoff. Ken Henry pointed it out ages ago in a tax review. 

A $45 per litre alcohol excise, across the board, with the first 1.27% exempted, would have the same excise on low alcohol and on 6% beer. It would have a higher excise on wine than is currently the case - the excise in a litre of 14% wine would increase from $3.55 to $5.73. And excise on spirits would come down. $45 would have the thing pivot around current excise on 6% beer. 

Or you could calibrate the thing to pivot at current excise rates on wine. That'd be fine with me too. 

At $37/litre of pure alcohol, the excise on a bottle of 8.9% wine would be about where it is now, excise on a bottle of 14% wine would increase from $3.55 to $4.71, but excise on everything else would drop. 

The current setup is basically war on people who prefer cocktails to wine. I don't know why policy should pick a side in that. I like both.

In other Tax Foundation news, the 2023 International Tax Competitiveness Index is out. NZ dodged a bullet. Labour would have wrecked GST. But we will maintain our Number 1 status. 

🌍 2023 International Tax Competitiveness Indexhttps://t.co/Akuy0M6Ol9 pic.twitter.com/5A6METe9Ug

— Tax Foundation (@TaxFoundation) October 19, 2023

Afternoon roundup

Eight browser windows each full of tabs. Something's gotta give.

• Excellent quips from our Treasury Secretary in response to RBNZ pleading for even more money.
• All the BS speech restrictions that apply on election day. 
• I don't get how Brian Albrecht doesn't yet have a syndicated national column in the US. Gold!
• Bits from me and a few others on whether National or Labour is 'better for business'
• My column at Newsroom this week expanded on last week's post on the NIMBY problem. 
• British Columbia's Supreme Court backs the Squamish Nation's push to build a pile of needed apartment towers on Squamish land in Vancouver, batting back NIMBYs. 
• A Commerce Commission that were on its game would be checking into just how the existing cartels have managed to block a new nurses' training school from training new nurses. 
• Excellent piece by Bill Watson on competition policy versus actual competition.
• Interesting ideas from Andrew Body and Simon Jensen on improving prudential bank regulation in NZ. But there's still the bigger question of whether we ought to split monetary from prudential.
• Noah Smith thinks a three-state solution is needed. I can't see how that works while Hamas runs Gaza, but maybe somebody will figure it out.
• "The region's pipes are ageing at a faster rate than they can be fixed." Wellington is such a mess. But I simply don't buy the claim that "Our councils are pushing their ratepayers to the limit in order to fund [Wellington Water]." Our council is set to spend $350m earthquake strengthening a building that could be bulldozed and just built a convention centre and is spending $100m more than necessary on a central library.  
• Queenstown has the country's worst housing shortage. The Infrastructure Commission points out that Queenstown's new plan will enable about 31-149 houses over ten years. Neither National nor Labour are really serious about housing.
• The final chapter in BusinessDesk's excellent series on the state of the NZ public service and the legacy of Peter Hughes. I still think an incoming government should fire Hughes pretty much on day 1 rather than let him see things through to February. 
• Years back we'd been arguing for a variant on city deals. They're in fashion now, with some risk of monkey-paw problems. 

Fattening a lamb?

New Zealand has a lot of job search websites. 

MSD thinks it needs to build its own job search website for beneficiaries. 

I don't know whether they're serious about this or are fattening up a lamb to sacrifice when an incoming MoF asks for budget cuts. 

Kate MacNamara has some details. 

The Government has pushed ahead with a $36 million job search platform for beneficiaries, despite Treasury warning of the plan’s dubious value for money.

A March report to Finance Minister Grant Robertson repeatedly noted that officials did not support funding the employment platform: “The Treasury has a different view on the scope of Horizon One. We do not support funding to develop a digital employment platform within Horizon One, whereas MSD [the Ministry of Social Development] considers this a critical part of Te Pae Tawhiti,” the document, released under the Official Information Act, said.

A Treasury spokesperson said the agency had not changed its view since the report was written.

The employment platform – a key purpose of which will be to match prospective employees and jobs – was funded through Budget 2023, and is part of the first phase of the MSD’s multi-billion dollar Te Pae Tawhiti programme of change. It is aimed at improving the digital provision of the agency’s services.

I'd put in an OIA on this one back in August, but in keeping with the Hughesean Spirit of Public Service, MSD punted the request until after the election, nominally for consultations, but almost certainly because they didn't want the stuff out before the election. 

I expect MSD wants the fattened lamb to be ready for sacrifice after the election, not for a political talking point before the election when the Minister of Finance likes to pretend there is no fat out there. 

This was my August OIA request:

Dear MSD,

I understand that MSD has proposed a platform that would match potential employers with beneficiaries seeking work. 

I’d like to know more about the proposal. I’m particularly interested in knowing what problem the platform might solve that isn’t already solved by Seek.co.nz, Student Job Search (https://www.sjs.co.nz/), or other alternatives. 

Please provide:

1) Any documentation prepared in support of a funding bid for a job search platform for beneficiaries. I am particularly keen on anything addressing problem definition, where other platforms already exist to match workers and employers;

2) Costings for the development and deployment of such a platform, including relevant risks and timelines;

3) Any advice received from Treasury or DIA on the proposal, including minutes from relevant meetings;

4) Any information regarding whether the proposal was reassessed subsequent to signalled cutbacks in overall expenditure. Was the proposed project’s value-for-money reconsidered as the fiscal outlook changed after BEFU?

I've put in a request to the Ombudsman about what counts as proper consultations that could delay an OIA – particularly one that could prove politically sensitive and helpful for voters in an election campaign where agencies are claiming there’s no fat to trim. 

The NIMBY Problem

Standard drill in a lot of the urban econ lit is that governments need to pull planning up to higher levels to get around local NIMBYs. The small number of loud people with infinite time to stall local planning just don't get the same hearing if planning's decided at a regional or state-level rather than at town council. 

And there's some decent evidence for that. Auckland's Unitary Plan is more enabling than the prior underlying plans were. A pile of apartments were built because of it. 

David Foster and Joseph Warren go through a countervailing force in the Journal of Theoretical Politics.

Nimbyism is widely thought to arise from an inherent tradeoff between localism and efficiency in government: because many development projects have spatially concentrated costs and diffuse benefits, local residents naturally oppose proposed projects. But why cannot project developers (with large potential profits) compensate local residents? We argue that local regulatory institutions effectively require developers to expend resources that cannot be used to compensate residents. Not being compensated for local costs, residents therefore oppose development. Using a formal model, we show that when these transaction costs are high, voters consistently oppose development regardless of compensation from developers. But when transaction costs are low, developers provide compensation to residents and local support for development increases. We conclude that nimbyism arises from a bargaining problem between developers and local residents, not the relationship between local decision-making and the spatial structure of costs and benefits. We suggest policy reforms implied by this theory.

Ben Southwood goes through it here, arguing that when NIMBYs can't be paid off at the margin, they instead aim to wreck everything: throw so much sand into every set of gears that nobody can ever build anything anywhere because building is just too hard. 

I've liked the idea of giving councils a share of the upside that central government enjoys when councils facilitate growth, so that councils can both find ways of dealing with costs they have to face in facilitating growth, and so they have the resources to provide whatever local amenity improvements are needed to overcome local opposition. 

The only thing you'll be nursing is your whisky

Either New Zealand has no shortage of nurses, or New Zealand is a fundamentally silly country. 

Look on, ye voters, and despair. 

A new nurses' training school is ready to train, but has to sit empty. Why?

Here's the bit in BusinessDesk: 

Instead, bureaucracy and an absence of pragmatism is coming before both the pressing workforce crisis and urgent patient needs.  

The delays all come down to an historic technicality requiring education providers to offer a Bachelor of Nursing programme before they can offer an Enrolled Nursing programme.  Yet enrolled nurses trained by UP Education in Australia are able to live and work in NZ using this exact diploma. 

They’re high-quality nurses who make essential contributions in hospitals, private practices and aged-care facilities. 

Let’s repeat that. This qualification is a cornerstone of the Australian healthcare system. Those who hold it can work immediately in the NZ healthcare system. Yet it is not allowed to be taught as a standalone qualification in this country.  

This outdated standard is likely why the NCNZ, the nurse training regulator, originally agreed to consult with its members on the removal of this standard.  

However, the NCNZ has since decided to bundle this specific review of a single technical clause into a much wider review of sector-wide nursing competencies across the country’s entire nurse training sector – for enrolled and registered nurses. A technical standard that could have been reviewed and removed in a matter of weeks has snowballed into a review requiring consultation across the whole health sector beginning late this year or early 2024, potentially delaying our nursing programme a further 12 to 18 months. 

Newsroom covers it too:

Rivera said she had been told the registered and enrolled nursing scopes would be wrapped together from early 2024.

“Then there’s the consultation on what the actual education standards might look like, so I said to [Nursing Council chief executive Catherine Byrne] that this sounds to me like a 12-18-month delay.

“I didn’t get a reply, but that is my assumption given how consultation processes work with the Nursing Council.”

At the extreme end, Rivera’s estimated timeline could push the opening schedule to early 2025.

The facility, which got $370,000 in taxpayer funding through the Tertiary Education Committee, will sit empty until the consultation comes to an end.

“I have staff hired and ready to go, but luckily we're quite nimble and I've got them working on other health qualifications, so they are doing other things.

“The broader issue is we thought we could be part of a solution to a problem, and the bureaucracy around it is astonishing. There's just no movement.”

Rivera accepted the scope of practice needed to be looked at. “But it shouldn't mean that when there's a crisis, everything grinds to a halt and no new player is allowed in the market.”

 

...and make the platforms pay for it

I still hope that NZ looks over in horror at Canada and pulls back from making it risky for platforms to link to news.

Facebook's clearly decided that being in news just isn't worth the aggro. Look at this. Facebook referrals to top global news sites dropped from 120 million per month to about 20 million per month. 

News turns into outclicks rather than more scrolling for updates from family (and ads on Facebook's platform). 

Another reason that Canada has just been incredibly stupid in guessing that Facebook was just bluffing. 

Axios says:

Traffic referrals to the top global news sites from Meta's Facebook and X, formerly Twitter, has collapsed over the past year, according to data from Similarweb.

Why it matters: Website business models that depended on clicks from social media are now broken.

What's happening: Regulatory pressure and free speech concerns have pushed tech giants to abandon efforts to elevate quality information, leaving the public more susceptible to misinformation ahead of the 2024 election.

• Meanwhile, news companies are scrambling to find business solutions while simultaneously fighting to protect their work in the AI era.

Morning roundup

The morning's clearing of the tabs...

• Price theory is the core of everything that's good in economics. Albrecht and Hendrickson explain the basics. Price theory emphasises exchange and emergent outcomes. Public choice studies politics as exchange. It's fun to think about what would happen if an incoming government required Ministry Chief Economists to pass a test based on workouts in the old Alchian & Allen textbook.  
• Like the idea of government paying a bonus to people for having kids? Robin Hanson has a neat way of doing that. But I doubt that proponents of baby bonuses will like it. 
• This came out a while back but I'd missed it. Surprisingly enough, hydrogen deposits seem to form underground in spots where olivine is prevalent in the presence of heat and water. NZ has a lot of olivine, and heat, and wet. I wonder if anyone's gone looking for hydrogen - geological deposits hadn't previously been thought possible. If we have some, stick a pipe in it to power a boiler and generator above the deposit, and you'd have electricity that generates water rather than CO2. Seems a longshot, but would be pretty sweet.
• Chris Trotter is nostalgic for a joyous left. Excellent piece. 
• This kind of thing pushes electricity toward a global law-of-one-price, doesn't it?
• Henry Thompson on the Industrial Organisation of the Mafia, forthcoming in the JLE.  
  

  This paper uses economic reasoning to analyze the organization of one of the most successful criminal groups in modern U.S. history: La Cosa Nostra (LCN). Drawing on recently declassified FBI reports and a hand-collected dataset, I argue that the costs of violent disputes are key for an economic understanding of LCN’s core institutions. Violent disputes were costly for LCN as they consumed resources to produce and were destructive. However, violent disputes were especially costly to LCN because of its need to keep a low profile. As a member did not bear the full costs of a profile-raising police investigation, each had a perverse incentive to resolve a dispute with violence. Hierarchical firms and a sophisticated court system were LCN’s solution. They gave bosses the authority and incentive to limit violent disputes and to use violence judiciously. LCN’s longevity and success are, in part, a testament to the institutions’ efficacy.