Hooton on paying for Christchurch

Matthew Hooton says he’ll pay higher taxes for Christchurch in his NBR column (offline):

With horror still unfolding, it’s too soon to be arguing over how to finance the rebuilding of Christchurch but already politicians are being forced into positions against the public interest.

The government’s opening position was correct.  It would rule nothing in or out. John Key initially applied that policy to a national earthquake tax but, within days, media pressure had him limiting likely new imposts to increasing the $60 annual Earthquake Commission levy to $180.

Bill English also tried to hold the line, refusing to rule in or out cuts to Working for Families and interest-free student loans but was immediately over-ruled in theDominion Postby “a highly placed government source.” “A highly placed government source” with the credibility to over-rule Mr English surely had to be someone who outranks him.

Needless to say, after another day of media hysteria, Mr Key went public and as good as ruled out any interest on student loans.  He limited discussion of changes to Working for Families to those on higher incomes.

This is the point I was trying to make a couple of days ago. Ideally the Government should not rule anything out or in until we actually have a better idea of the fiscal and economic cost. But no Government can risk days of scare-mongering headlines such as “Govt considering tax hike” or “Govt considering abolishing interest free loans”.

Hooton then puts up his case for change:

It’s unconscionable that fit, healthy 65-year-old chief executives will get superannuation when Christchurch primary schools need rebuilding.

Interest-free student loans mean the taxpayer is paying to cut the real value of the loans of doctors, lawyers and accountants rather than rebuilding Christchurch Hospital. They should at least be adjusted for inflation.

The problem with Working for Families is not primarily that it gives welfare to high income earners (although that’s ludicrous) but that it churns billions of dollars and creates massive effective marginal tax rates.

I’ll happily pay higher taxes to rebuild Christchurch. In return, the government ought now to take these issues seriously.

My view is somewhat different. I also believe that the age of super should increase, that there should be interest on student loans and that WFF should be reformed – not because of the earthquake – but because it is good policy to do so.