More tax, higher costs, fewer jobs

The Green Party plans to impose a carbon tax on us:

. . . Co-leader Russel Norman wants to scrap the current carbon pricing system – the Emissions Trading Scheme.

In its place would be a tax of $25 per tonne of carbon on industry polluters. . .

Critics of the tax claim the tax is a burden on households, who pay higher electricity and fuel costs.

However, the Greens say their levy would be offset by a ”climate tax cut” on the first $2000 of income. 

”We can reduce our emissions without hurting household budgets,” he said. ”Households will be on average $319 better off every year under the Green party policy.” . .

Imposing a tax with one hand and giving a tax with another won’t make anyone better off because the tax will lead to other cost increases on fuel, power and food which will passed on, in part or full, to consumers.

Agriculture – which is currently exempt from the ETS – would pay a reduced rate of $12.50 per tonne. This works out as an 12.5 per cent hit on farmers’ income. This includes 2 per cent on the working expenses of the average farm. A Berl Economics report, released with the policy, said dairying will be ”adversely affected.”

Dairying won’t just be adversely affected by the carbon tax, it will be hit by other Green policies too.

But it adds: ”However, at the currently projected pay-out for milk solids, even dairy farms in the lowest decile would remain well above break even in the face of an emissions levy.”

What happens when the payout drops to its long-term average which is well below the $7 forecast for the coming season?

What about the environmental impact of less efficient farmers in other countries increasing production because our produce is more expensive which makes it easier to compete with us?

And what about the poor people who will face higher prices for dairy products, power and fuel?

Other gas-emitting industries – such as electricity and road fuels – are less likely to be affected because they would be able to ”pass-on any production cost increases to households.” . . .

That will be the households whose earners will be getting a tax cut, the benefit of which will be less than the cost increases from the extra tax.

BusinessNZ Chief Executive Phil O’Reilly said the levy may threaten jobs. 

“Our approach should be unlocking business solutions rather taxing business more,” he said. 

As a “small open trading economy” New Zealand should participate in international emissions trading schemes.

Federated Farmers president Bruce Wills said the tax will make dairy farmers “less competitive” in international markets. . .

Less competitive means lower returns which means less export income which means less economic growth which means we’ll be less able to fund the first world education, health and other services we need.

However green they want to paint it, this is a red policy which will add costs, put downwards pressure on wages and threaten jobs.

Bernard Hickey told last week’s  Alliance Group Pure South conference that the election will be close.

He then went on to list the policies that farmers could expect to adversely affect them under a Labour/Green coalition with whichever other left-wing parties they’d need to govern.

They included: capital gains tax, compulsory KiwiSaver and water restrictions and charges.

Those are three very good reasons to vote National and the Green carbon tax is another.

And Steven Joyce points out some inconvenient truths:

 

 

 

19 Responses to More tax, higher costs, fewer jobs

  1. willdwan says:

    I’d like to know why airlines get a free ride. Those big jets put kilotons of greenhouse gas directly into the upper atmosphere, compared to animals which just recycle the stuff. You could argue that they face competition from untaxed foreigners, but so does agriculture. Actually, so does practically everyone. Those Greens do like to fly though.

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  2. RBG says:

    You are quite happy to acknowledge the reality of climate change and then use it to justify this government’s financial support of water storage schemes Homepaddock, but you all shriek when the Greens suggest a method for encouraging reducing carbon emissions. Emissions are going up on National’s watch, what you are doing now is NOT working, so what’s your suggestion?

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  3. Ray says:

    Emissions are going up on National’s watch……………
    Temperatures are going down……….
    Who would have thought eh?

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  4. homepaddock says:

    RBG – what we need is international agreement based on science not politics and emotion.

    Most current policy is the result of a triumph of politics and bureaucracy over science. A welcome exception to that is the Greenhouse Gas coalition promoted by the government which has international support.

    We’re producing more food and doing it more efficiently, there’s no point introducing policies which will reduce what we produce.

    The world needs more protein and any gap created by lower production here will be filled by higher production from less efficient farmers elsewhere.

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  5. Gravedodger says:

    Poor old RBG whistling in the dark, wont light a candle to find the dunny, so just stands there peeing in his Jamie pants because some engine driver has convinced the benighted that the Sky is falling.

    Of course concern for the planet from fossil fuel consumption had no restraining impact on Lucy Brainless flying to the Greens Convention , armed with days notice of Normans latest tax churn bribery scheme, because “she was glad someone was doing something about climate change”, wasn’t in the least embarrassing.

    Oh to have someone in the media challenge the hypocrisy of these luddites.
    Cor blimey, Brainless even admitted she had no clue what the policy announcement meant.

    All as relevant and comprehensible as a bunch of 20 years past their use by date pollies front footing a party allegedly formed to give the internet activity a vote target for disenfranchised yoof.

    Alternative government my arse, have another snort of brandy or whatever enfeebles your mind John Hamstrung.

    I mean to say, taking a billion dollars out of productive NZ Inc and churning some of it back to the idle, disorderly and downright lazy as a bribe to take our nation forward. Like an Italian Tank in the Libyan Desert c1940 one forward gear to assist parking manoeuvring and 4 reverse gears for battle action.

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  6. A tax by any other name is still a tax; just ask Tony Abbott 😉

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  7. JC says:

    I’ve read the BERL report and all of Russel’s speech on this..

    Berl is at pains to point out how complex would be a full analysis of the tax would be and so it’s done a simplified analysis looking at just several areas of th economy and notes its used Green Party assumptions in places.

    Nowhere in the report or Russel’s speech is mentioned the effect on those who are on benefits and Super, ie, the *average* household income they use to show a tax decrease dosen’t apply to about a million people on fixed Govt incomes.. these people get the full passed on costs of the $25 per tonne tax in electricity, food, fuel etc.

    Now, thats not going to fly so an adjustment is going to have to be made to benefits and Super or else the Greens will have simply increased “inequality” on the most vulnerable groups.

    We’ll have to wait to see how the economist bloggers see the plan but one thing I’m personally clear about.. the Greens are on the right track in considering a direct tax .. the ETS everywhere in the world is a rort and we would all be better off without it and if ever global warming becomes a problem because of too much CO2 then a tax is the way to deal with it.

    However, AGW as understood at this time remains the biggest rort of all and is a scientifically untenable concept that like the ETS.. should be binned until we better understand how climate in the world works.

    JC

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  8. RBG says:

    Homepaddock, this government DID sign an international agreement ,the Copenhagan Acord in 2010 and it signed up to a reductions target of 10 to 20% below 1990 levels by 2020. However NZ’s emissions increased 22% from 1990 to 2011 and according to the MFE the four sources that contributed the most to this increase in total emissions were emissions from dairy cattle, road transport, agricultural soils and release of hydrofluorocarbons (HFCs) from industrial and household refrigerant and air-conditioning systems.

    Agriculture contributes 47% to New Zealand’s greenhouse gas emissions. In addition to that in 2010, Fonterra’s manufacturing sites used 5,500 gigawatt hours of energy (dominated by coal, gas and oil). Add to that the tanker fleet travels 81 million kms a year. Yes the world needs food, but there are more efficient ways of feeding people than just exporting milk powder.

    While there is good work being done by the Greenhouse gas coalition this is being counteracted by this government encouraging an increase in dairy farming, pouring money into more roads and promoting the exploitation of fossil fuels.

    BTW someone who remains unemotional about the damage being done to the climate and the oceans is someone who doesn’t understand the science (that obviously includes Ray, JC and many other deniers who comment here)

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  9. TraceyS says:

    “…but there are more efficient ways of feeding people than just exporting milk powder.”

    So what foods should NZ be exporting?

    And for each might you care to quantify the environmental and economic benefits for our country?

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  10. GP says:

    I see sheep and beef farmers are excluded from this, but what about deer, horticultural and cropping farmers? Are they going to be taxed too?

    You also can’t look at this by itself. The greens also want to impost water rentals for irrigation and a CGT. Plus the regional councils across the country are establishing nutrient limits for farmers.

    All of these are costs that farmers will pass on to consumers and I seriously doubt that the so called tax cut proposed in this would do much to offset the resulting hike in dairy products.

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  11. Ray says:

    “someone who remains unemotional about the damage being done to the climate”

    How very true…
    The whole climate change/warming fairy tale is predicated on emotion, not science.

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  12. JC says:

    RBG,

    Your problem is we understand the science all too well. You are simply responding to computer modelling that has failed spectacularly to predict temperature and sea levels, among other things.

    Actual real time measurements show there’s been no statistically significant warming for 17 years and the temperature is on a par with the Medieval Warm Period and sea level is rising no faster than it did 100 years ago. As they say, the models have been falsified and cannot be relied on to even hindcast using actual measurements.

    JC

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  13. Gravedodger says:

    Gee the carbon tax on that latest volcanic eruption will have someone wetting their undies, who will pay that bill I wonder.

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  14. Gravedodger says:

    By deniers RG am I being unreasonable to question, has the unraveling of the carbon scams since the GFC, created more or less deniers and what is being denied.
    You sure seem to deny or at least completely ignore all actual recent data actually collected and published without passing it through a computer model first.

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  15. TraceyS says:

    No point taxing a volcano as it cannot change its behaviour.

    Carbon tax is being promoted as revenue gathering but it is actually intended as a punishment. The folly is thinking that a punishment will change peoples’ behaviour where it is not realistic to. The volcanic eruption is a natural phenomenon but so too are many aspects of human behaviour and we are foolish to forget that.

    It’s far better to provide positive incentives for change and accept that our response to climate change will be more of an evolution than revolution.

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  16. JC says:

    “It’s far better to provide positive incentives for change and accept that our response to climate change will be more of an evolution than revolution.”

    Matt Nolan has picked up an anomaly here.. the revenue from the tax isn’t being put towards amelioration of climate change but instead (my words) is being used to “punish” dairying and giving its money to other tax payers as a bribe.

    This is Obama country of isolating a group, punishing it and giving others a tax incentive to keep punishing it.

    JC

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  17. Willdwan says:

    Yes, that is what really irks me. This is not a tax or a levy as Norman likes to called it, or even an externality. It is a fine…the crime? Producing food for export. Disgusting!

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  18. Mr E says:

    From Lincoln Universities food miles study: Food Miles – Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry

    http://www.lincoln.ac.nz/documents/2328_rr285_s13389.pdf

    • Comparison of energy used and CO2 emissions between NZ and UK Dairy. The UK uses twice as much energy per tonne of milk solids produced than NZ, even including the energy associated with transport from NZ to the UK This reflects the less intensive production system in NZ than the UK, with lower inputs including energy.
    • Comparison of energy used and CO2 emissions between NZ and UK Lamb. The energy used in producing lamb in the UK is four times higher than the energy used by NZ lamb producers, even after including the energy used in transporting NZ lamb to the UK. Thus, NZ CO2 emissions are also considerably lower than those in the UK.
    • Comparison of energy used and CO2 emissions between NZ and UK Apples. NZ is also more energy efficient in producing and delivering apples to the UK market than the UK is. NZ energy costs for production are a third of those in the UK. Even when transport is added NZ energy costs are approximately 60 per cent of those in the UK. Consequentially the CO2 emissions per tonne of apples produced are also higher in the UK than in NZ, reflecting the higher energy use but also the lower emissions from NZ electricity generation.

    The point being NZ is extremely good at producing product per unit of CO2 – Without political interference.

    Consider the UK where they subsidise farmers to encourage environmental behaviours. Yet NZ is a lot better than them.

    Evidence shows – The best thing we can do to reduce emissions is to encourage farmers to lift production. To intensify.

    The Greens tax is simply a discouragement to production. In my opinion, until more mitigating technologies are available, a tax of the most efficient will simply make them less efficient.

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  19. Mr E says:

    So I just finished reading the BERL report. These are my initial thoughts.

    I’ll cite a few comments to help.

    “- These conclusions are tentative because so many factors are likely to influence the viability of farm businesses. ”

    My take on this statement – Ignore these conclusions, they are based on old data that are out of date.

    “-Farmers might be able to adjust their cost structures a little, but a significant number (e.g. the bottom 10 percent) would become vulnerable at a pay-out of around $7 per kg of milk solids. ”

    Banks are currently lending on around $6.50/kgMS and have for some time locally. (incl dividend). Berl are supporting the carbon tax at higher payouts. I’m pleased they are not lending money.

    “Dairy farmers would be able to pass on some of their cost increases to domestic consumers (see section 5), but domestic consumers represent only a small part of the market for dairy products. ”

    From section 5.1
    “The implicit assumption in section 5.1 was that the elasticities of demand for the three commodities are zero in the short term, meaning that their consumption does not change at all when their prices rise. However, in the medium- to longer-terms, the assumption is unlikely to be valid. ”

    Unlikely to be valid…. My take – Ignore these conclusions they are unlikely to be valid.

    And this is the final few paragraphs

    “Again, however, it is cautioned that these findings should be regarded as indicative of the size and direction of the changes in selected key variables, rather than as precise forecasts.

    It should also be noted that the findings are sensitive to the assumptions that underpin the modelling used.

    Lastly, it should be recognised that other factors and policy changes have the potential to influence the findings presented. ”

    My take on this – Run for the hills. The findings for this report are largely based on old data, and in my opinion that is not suitable as a predictor of the future. I think BERL should know better than this.

    I am gob smacked that the Greens are promoting policy on the back of this report.

    Shocking stuff to me. And if that is the best the Greens can do, that is another reason from me not to vote for them. Still – there is much water to travel under the bridge and who knows, they could turn it around, although I am sceptical currently.

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