Thursday, March 2009: Charity

If you've ever talked to a rich person, you'll know how they always say that they hate getting tax cuts. Why? Because they can never bring themselves to spend them, right? So John Key is encouraging people to think about giving them to 'charity' instead. Ok.

I have so much to say about this that I don't really know where to begin. Perhaps numbering my thoughts individually will help avoid an incomprehensible stream-of-consciousness tirade.

1) I have no problem, or at least no problem in principle, with tax cuts. I do have a problem with tax cuts favouring the wealthy - I think that supply-side economics is pretty discredited by now. And I certainly have a problem with giving rich people tax cuts in a recession. As Phil Goff points out, rich people spend less as a proportion of their income, and are able to save or invest the rest. If those investments go offshore then, good as it may be in the long term, it does nothing to stimulate the New Zealand economy in the short term, which surely is the point of economic stimulus. Because, after all, John Key is pushing these cuts as stimulus, even though I would chance a pretty heavy bet that they would have happened recession or not. So these cuts were a dodgy proposition in the first place. But that's old news.

2) The second issue here is the exhortation for people who can afford it - that is, almost everyone who happens to be in line for these cuts - to give their refunds to charity. On the surface, this seems noble - we all know that the City Mission or the Cancer Society or donkey shelters could use the money. But, of course, the money is just being redirected - tax money that was going to go towards providing social services is now going to (relatively) wealthy taxpayers, who will then decide whether or not they deign to give it to charity or, instead, spend it on diamond-studded golf tees and gold-plated boat shoes. But wait - there's more. Charities are great. Greenpeace saves whales; that's fantastic. The SPCA helps puppies; cute! The local church helps hasten the Second Coming and Armageddon; sacred! They're all charities. But none of them are (directly) going to provide the same services that will be lost because of lower tax income. Oh well, there's no bed for me at the local hospital because of tax cuts, but at least someone's charitable donation to the University means that the Vice-Chancellor now has a throne with a plasma TV on each arm. Say what you like about the efficiency and efficacy of government spending relative to that of private organisations - actually, don't, because most of it will probably be complete bollocks - but what money does reach charities is unlikely to end up in the places where it does the most good for the worst off.

3) But perhaps what alarms me most about this whole development is John Key's idea of New Zealand being more like America, where there is *ahem* a "culture of giving". Yes, that's right, America, the richest country in the world, where 20 per cent of children (and 40 per cent of black children) grow up in poverty, and with the largest gap between rich and poor in the world. Over there, charitable giving really plugs the gaps left by social services. Apparently, Americans give twice as much as New Zealanders to charity. There could be a few reasons for this.

• Maybe Americans are much nicer people than us.
• Perhaps they pay much lower taxes for social services?
• God told them to.
• Did the hundreds of homeless people outside their front door guilt trip them?

Or maybe, as John Armstrong points out, 'charitable giving' includes giving to any non-profit organisation including "universities ... economic think-tanks, medical research institutions and the like". So when I endow Harvard with $10m so they'll name a chair after me, that counts? Hey, why didn't you say this whole charity thing was so lucrative! Hey, Brian Tamaki - what's the going rate to be ordained a bishop these days? But that's not all: as Armstrong also points out, the US has massive tax breaks for these kind of donations; tax breaks which the government here is intending to emulate. Excellent. So there's less tax revenue because of the tax cuts, then people give some of the money to 'charity' and then, because of that, there is less tax revenue. Then there's the whole thing about how, in the US, the poorest 20% of the population actually give more (as a percentage of income) to charity than the wealthiest 20% - and that includes Bill Gates, so I'm pretty sure some rich people are actually embezzling money from charities and harvesting orphans' kidneys to make that statistic work.

4) I'm also reasonably confident that when John Key says that "60 per cent of the population donated in some way each year without knowing they could claim some of the amount back as a rebate," those 60 per cent of people are the ones who give $5 to the Salvation Army or the Foundation for the Blind, rather than the type of people who have five accountants to do their taxes. So how that is going to work as a further incentive, I don't know. Hey, and you know what else? I'm with Michael Cullen when he said that he was unsure why giving to charity meant not having to pay some of your taxes. If you want to give donkeys a home or protect owls or fund the Maxim Institute, good on you. But it's not clear why you no longer have to pay for police or hospitals or education. Yes yes, I know it's about incentivising behaviour, but I think that other ways of incentivising charitable giving might screw over the poor less. We could give a big gold star to the people who give the most, for example. Or, you know, a knighthood.

Anyway, sorry if that got a bit incoherent. I feel better now.