Friday, 12 April 2019

Making The Tradies Pay.

Crunching The Numbers: On the subject of the Capital Gains Tax, it is simply not sufficient to assert that all income is the same and, therefore, must be taxed the same. Those who say this ignore the fact that, as RNZ’s Guyon Espiner so rightly observed, not all income is made the same. The working life of the small business owner is very different from that of wage and salary earners. In addition to plying their trade and/or providing their service, they are saddled with a great many other responsibilities.

IT’S A CLASS WAR – of a most unusual kind. The looming battle over Labour’s Capital Gains Tax (CGT) pits a pampered and overpaid Professional and Managerial Class (PMC) against the constantly expanding class of tradespeople, service providers and independent contractors: the tens-of-thousands of small businesspeople whose daily labours continue to make, move and mend this country.

The PMC is determined to protect its cosy position in New Zealand society by making sure that any expansion of the state’s revenues is secured by taxing something other than their salaries.

They have been made aware of the rapidly rising incomes of the “tradies”. How could they not, with their brand new SUVs clogging the streets outside the local school every morning and afternoon? What’s more, they strongly suspect that all this new-found wealth is not being taxed in the same way that their incomes are taxed. They may not know much about running a business that isn’t funded by someone else’s money, but they’re pretty sure these nouveaux riche boofheads are dab hands at short-changing the IRD.

Clearly, these upstarts need to be taxed at the same rate as themselves – 33 cents in the dollar. And because, as the owners of small businesses, they can get away with paying themselves ludicrously low wages, they must be made to hand over to the IRD one-third of the currently tax-free capital gains they make when they sell their businesses.

They’ll squeal and moan, of course, but a CGT is by far the fairest fiscal solution. Capital gain is a form of income – and all income must be taxed. Besides, it’s just not right that people with nothing more than a trade certificate (or whatever they call it) and often with no qualifications whatsoever, should be making more money than someone who spent four or five years at a university getting properly qualified. A university, mind you, not a dreary polytechnic tucked away in some provincial hell-hole like Wanganui or Invercargill!

But simply saying that all income is the same, and must be taxed the same, ignores the fact that, as RNZ’s Guyon Espiner so rightly observed, not all income is made the same.

The impressively credentialled members of the PMC, large numbers of whom are employed by the state, turn up for work every day and are paid every fortnight. All the necessary deductions for tax and ACC have been taken care of by their employer. If they’re teachers, nurses, social-workers, or just plain, common-or-garden civil servants, there’s a very high probability they’ll be members of a union. Regular pay-rises and improved working conditions are expected – and delivered.

Life for the small business owner is very different. In addition to plying their trade and/or providing their service, they are saddled with a great many other responsibilities. They have to take care of their own tax payments – as well as the tax payments of any staff they may employ. Then there’s Kiwisaver and ACC payments to sort out. They must conform to the provisions of OSH legislation and deal with the infernal complexities of the RMA. For many, being able to pay their bills depends upon other people paying theirs – and getting some debtors to cough-up can be a nightmare.

So, Guyon is right. Not all income is made the same. Which is why not all income is taxed the same.

Which leaves the PMC with a problem. They are only too aware of the need for increased government spending on health, housing, education and the environment. After all, so many of their jobs are about providing these public goods. On the other hand, they have a lifestyle to maintain; overseas trips to pay for; kids to finance into university and home ownership. Yes, their salaries may be large – but they’re fully extended. They are not keen on paying higher income tax. Not keen at all.

It might not be so bad if all these tradies; these restaurateurs; these independent contractors were caring and responsible citizens. But dammit! What’s with all these monster SUVs? Haven’t they heard of global warming? And the things they say! Honestly, it borders on hate speech. Sexists, racists, homophobes: the whole kit and kaboodle. To call them “deplorables” would be to seriously understate the problem. And then they get to retire with a cool million bucks – tax-free.

No bloody way!

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 12 April 2019.

23 comments:

kiwidave said...

The Tradies in our town are doing quite well at the moment, certainly in contrast to six or ten years ago when the building industry and much of the real economy tanked as a result of the GFC. The young wives/partners all seem to be pushing prams, not having to work and proudly raising healthy happy families. More power to them.
I feel sorry for the misguided fools that are coming out of uni with, mountains of debt and a twisted view of their fellow man and society due to the Marxist, feminist, snowflake, intersectional, gender studies bullshit getting shoved into their vulnerable young minds.
https://youtu.be/QUAZDfND_dE

Guerilla Surgeon said...

"If they’re teachers, nurses, social-workers.... There’s a very high probability they’ll be members of a union. Regular pay-rises and improved working conditions are expected – and delivered."
I'm a little surprised and sad to see Chris Trotter taking a swing at teachers nurses and social workers. Maybe not teachers, because they used to having people take cheap shots at them. Usually people who wouldn't last for seconds in a classroom in a low decile school. And as someone who spent 25 years in low decile schools, coping with the changes that David Lange claimed he wasn't responsible for, I know a little bit about what I speak.
Must be a long time since you've had anything to do with the union Chris, because you should know that these "expected" and "delivered" regular pay rises are fought for, often bitterly. And often it's not the regular wages that they want but some form of betterment of conditions. Conditions which in the private sector are dire, because their unions have been gutted.
I had occasion to ring the post office and find out why a parcel hadn't been delivered the other day – they said "His GPS said he was at your place at........ " workers are now being controlled to an extraordinary degree, such that they might as well be in Foucault's panopticon.

My son's taxes are all taken care of, but he has no choice as to when he works, and as I have explained before there are times when he can't be trusted to drive, and there is not much in the way of public transport for the people who keep the city going at night time. So I have to run around a fair bit.
When I was teaching, I would have loved to set my hours and chosen my classes, but of course I had to do my share – probably more than my share considering some people couldn't handle them – of teaching fuckwits and criminals.

Which brings me to my major point. While small business people do have extra responsibilities – and I have actually been self-employed and didn't find them to much of a burden – they have the freedom to choose their hours, choose their jobs, and usually get it quite a bit of money. And judging by the difficulty I'm having getting an electrician to do a small job around my house, they're not backward in dismissing smaller opportunities to make money. So pardon me if I'm not particularly sympathetic to their having to pay capital gains tax if they sell their business.

KJT said...

Bit of a cognitive disconnect here.
The overwhelming majority of tradies own a business with one to three staff, which depends on the labour and skills of the owner to remain viable. From NZ labour force survey.
Only a very few, are ever worth enough on sale to attract capital gains taxes.
Though many of us hope we get something.

The payers of capital gains taxes will be that very managerial class that you are talking about, with their three or many more rentals, the children of the wealthy, and corporate farmers with millions of dollars in land speculation.

High land prices, and the necessary borrowing for trade premises, make life difficult for genuine businesses.

Slugger said...

The wife of an electrician up the road insists that her husband is a businessman.

And talks of how long he has been in 'business.'

Tom Hunter said...

Had an amusing story from my sister about a couple they know in Wellington. The guy had put in a good, solid 20 years plus in his government job there, long enough to score a pension. But he could see the writing on the wall with a sinking lid policy that would force out most of his age group.

No matter. Plenty of money to be made in the private sector, contracting and advising the same government departments.

Except, oh dear, all of sudden, all the little things that had been taken care of for years by unknown functionaries on his behalf now landed on his plate. GST, Fringe benefits tax, ACC, home office calculations. various other rules and regulations, many with monetary impact, not to mention the far greater attention that had to be paid to cashflow, which trended up and down. His wife continued in the sector, earning good money, so there was that padding.

Unfortunately he made the mistake of bitching to my sister about all this during a visit to them and she, being a life-long farmer, basically let him have it right between the eyes, starting with a bit of a lecture about what they'd been telling him for years about their business/"lifestyle", along with dredging up some of his past jabs about their asset wealth and being on the pigs back.

Possibly not the most fun dinner he's ever had, but I'd like to think it gave him pause for thought on the flight back to our Capital city.

Kat said...

Quite a rave Chris, you must be looking forward to the cannabis referendum.

Kiwiwit said...

You may be a curmudgeonly old lefty but by God you’re right on the mark sometimes!

pat said...

As always with stereotypes theres and element of truth...but for every tax dodging contractor theres probably two that are being royally shafted....its never so simple

Nick J said...

Taking care of your own tax is no fun. Neither is sending bills, and collecting overdues and bad debts. Then there's keeping fine detail records of multiple transactions, managing cashflow and spending time on no income finding work. And when a downturn comes being the first to feel the pinch.

I've moved from Wellington to a small town, it's really brought home to me how cossetted the public servants are. Their life appears to provincial NZ as parasitic and paid for by yours truly. Fertile ground for National, and not without reason. Add to that the PC liberalism of those classes not at the hands-on grindstone then Labour really has an issue. Still the polls say Labour is safe, so long as there is no downturn. That's playing with chance in my book.

Larry Mitchell said...

"Ouch".

Take that! ... all you risk-free/averse, entitled, underwritten and unionized civil service factotums.

Simon Cohen. said...

But Chris how dare you be on their side.They are all capitalists.

Geoff said...

A top notch column Chris !
Should be compulsory reading for the COL...can you please bring it to their attention on our collective behalf?
Cheers :-)

greywarbler said...

You've been earwigging at the free house pub get togethers have you Chris?

There could be a happier lower class if some reasonably radical changes w4ere made, ie GST down to 10% again. But the PMC class are favoured; when they are good for the people they get grudging thumbs-up but they can behave like old-time government employees, not very helpful, but on much higher salaries.

Tradies are different. When they are good, they are salt of the earth and though they mightn't be getting quite the PMC rate, their receipts are tied to their work output, doing satisfying physical work with observable results. That's when they're good; when they are bad they leave a toxic cloud behind that's over the burdened owner of the debt for fixing their shoddy work.

And on TS some anecdotes about fruit picking from the lower/no income wage class. Drive 20 minutes to work at your own expense, sit in it for half a day waiting for the brix? level to be right in the kiwifruit I think, get paid for working a half-day and drive home. Or wait on site for the fruit to dry before picking starts, or get there and be told no picking today.
This sort of work is what the precariat is putting up with at present.
https://en.wikipedia.org/wiki/Precariat

And then there is the beneficiary. If you earn more than a set limit, though that would help pay for your rent or children's, or your own shoes, then your grants go down - you may be worse off. Your income is monitored closely in case you get a little bit more than the PTB have decided, you may have to refund. The idea is to keep you slaving, unhappy, unsettled, with little joy in life. The clawback on your grants plus the PAYE to be paid on earnings from work can bring your income to less than the benefit and grants you had been allowed.

Encouraging people to go out and work to advance themselves and not keeping a tight rein on every $ with a monthly summary and adjustment but with wide bands enabling you to keep most would be a forward move. Also with decent case managers who are there to help. All this is needed as much as CGT but I don't think that governments can walk and chew gum at the same time.

Guerilla Surgeon said...

" Marxist, feminist, snowflake, intersectional, gender studies" = I don't really know what these words mean but I like to throw them around in a pejorative way because they sound good. -50 – someone getting close to negative territory here.

Gosh a lot of bitterness about public servants here. I must say I have some sympathy, because the average public servant sitting in an office gets a damn sight more than the average teacher at the chalk face. But even so, let's remember that a good number of the civil servants' jobs are there to actually keep the public safe. From everything from bosses rorting your wages to making sure your food is unadulterated. Even Bob Jones – hardly a Marxist recognise that the public service is absolutely necessary. My main beefs are – that they get paid so bloody much to do it comparatively speaking, and the ones at the top who get paid so, so, so much bloody more to act like CEOs of private companies.

Plugger said...

@ Kiwidave 12 April 2019 at 14:54

Those uni students that you mention that are mis-guided probably get to that point because their degrees are essentially worthless.

It comes down to marks in their academic transcript.

I give you the eg of my sister. She took a law degree from Otago. And for the last 30 years hasn't practiced one day in the law. Why? Because her marks weren't good enough. A collection of 'C's' and the occasional 'B' means law firms won't employ her. Fact.

About a decade ago a professor at Otago told me: 'If there are 25,000 students at this university; about 20,000 shouldn't be here. Their degrees will essentially be the equivalent of toilet paper.'

Of course, it suits governments to have all these people at university as they can't be counted in the unemployment stats.

Trev1 said...

How many ex-tradies do we have in government at present? Zero? They are virtually all from the PMC's despised career politician subset and they are relying on envy to do its dirty work among us. Great column Chris.

Anonymous said...

So property speculators shouldn't have to pay tax because... tradespeople?

Adam said...

You seem to have bought into the National Party attack lines, and mixed it up with some bureaucrat bashing. This idea that it will be an attakc on small business which will be taxed on sale. Where's the data? Where are all these people "building up" small businesses and then onselling them?

Anonymous said...

There are more than other stereotypes at play here. Fancy stereotyping Invercargill as a hell hole. For you, Chris, from Dunedin, as am I, to those north of the Bombays, Dunedin is a hell hole....

Anonymous said...

Monster SUV's and global warming - when Stuart Nash, Minister of Police, drives one proudly emblazoned with "Labour Party MP," or the like on it, you know someone somewhere has lost the plot.....

kiwidave said...

Guerrilla surgeon; it doesn't take much to trigger you does it. I didn't realise it was a competition with points and all. What fun!
My experience with young ones making their way in the world is grounded in real life. We have interactions with a very large number, a large extended family, their friends and workmates. Our place is a popular gathering place and I like to engage with them, listen to their concerns and offer some (hopefully useful) advise and wisdom. I have noticed a very concerning trend with some studying at our universities; a cynicism, lack of genuine humility and a pathological aversion to the society, its founders, traditions and institutions that gave rise to them and all the freedoms and prosperity we now enjoy. There seems to be a denial of the reality they should be able to see with their own eyes; a wilful blindness. This attitude is saddening in ones so young with their futures ahead of them. The joy of starting the adventure of life is replaced with an unreasonable and self destructive morbidity. I can't imagine why anyone would want to do that to them; I don't like these people.
Quite a contrast with the young ones courageously and wholeheartedly embracing the challenges and rewards of becoming useful to others, learning skills, falling in love and starting families and businesses.

alwyn said...

"Monster SUV's".
Stuart Nash? Surely not. Before he got to be a Minister, or perhaps before he even got into Parliament, he used to have a Fire Engine.
He could actually have done something useful with that.

John Hurley said...

Formal Complaint to RNZ

...has the official reaction to the Christchurch mosque shootings caused something to break in the political fidelity of those New Zealanders not invited to signal their virtue on Wallace Chapman’s ‘The Panel’, or Jessie Mulligan’s ‘The Project’?

Is a quote from
http://www.oliviapierson.org/blog/the-right-wing-of-nz-needs-courage

Chris Trotter is writing on Whale Oil's -Incite (Members Only)

How can the public be sure Radio New Zealand's Overton window aligns with that of the general public?