Introducing Mortgage Payment Deductibility

Now, ordinarily, I am not in favour of encouraging an increase in the demand side equation of the housing market, but I’ve been pondering what would happen if we introduced mortgage payment deductions for home owners. This is similar, in concept, to what the US offers (and what the UK used to offer – I don’t know NZ’s history in this area). The basic arrangement would be that the interest component of your mortgage would be deductible from income tax (so if you paid $5,000 per annum in interest on your home loan, you’d be able to deduct that as an expense against your income tax liability).

Now, in order for this not to advantage rental property owners, the effect would need to be limited in two specific ways: you’d need to limit the deduction to only a mortgage over your current ‘home’ (the property you maintain your physical presence at) and you’d need to limit it to the loan taken out at the time of purchase (if you allow top up loans to be counted, you may end up partially subsidising consumption, renovations, etc.).

What would be the effect of this be? You’d get a deduction on your income tax (possibly one which could be applied directly through your bank – a reverse of your RWT rate, in effect) and this would reduce the burden of a new mortgage on first time buyers (and going forward). This isn’t a fool-proof plan, but if the state is going to ‘encourage’ home loans, with a specific target of new buyers, wouldn’t it be best to simplify this, not be directly involved (beyond offering the tax credits), and in a way which doesn’t complicate matters?

I am not particularly inclined to increase demand incentives at this point (as I think most of our problems stem from the limitations in the supply side), but I often wonder how much thought actually goes into our tax system (beyond finding ever new and innovative ways to tax us).


After the Common Market

So the UK has voted to leave the EU* and will now have to negotiate what a ‘Brexit’ will look like. That’s a daunting task (in domestic, European, and international terms) and one which is going to consume a considerable amount of resources (Bastiat would point out this is no free lunch and all the work involved is self-imposed, rather than specifically being for the enhancement of the country – so a lot of work just to keep things consistent). However, as a ‘Leaver’, I think there are some fundamental points that need to be outlined.

Isolated View

One of the staggering features of the campaign was the extremely isolated view portrayed by the Remain campaign. Europe, apparently, is the centre of the universe and not being ‘in’ is the equivalent to economic death. The ‘free movement of people’ means European Union people and nobody else. An isolationist bloc, which ignores so much of the rest of the world (and often imposes trade and economic policies which are designed to hinder other areas), is apparently ‘free trade’ and ‘free movement’ and plenty of good people got wrapped up in that.

What’s worse, Remain supporters often portrayed anyone who isn’t ‘pro-Europe’ as being a xenophobic, economically illiterate, ‘Little Englander’. The fact that an isolationist view was being taken by Remain (isolated within the EU) wasn’t even seen as ironic (in fact, any such suggestion incurred yet more wroth at the ignorance of Leavers). The world outside of Europe was ignored, in terms of how Britain would be involved in it, beyond a few statements from the US, a few other ‘world leaders’, and so forth about how remaining was ‘important’.


The sheer negativity, on both sides, was impressive. Oddly, subjective assessments were presented as definitive arguments. Lots of economists didn’t believe ‘Brexit’ would be good for the economy. The long-term economic consequences of leaving were discounted in favour of immediate impact (a what is seen, versus what can be foreseen problem). Endless unpleasantness, name-calling, and so forth came out of the Remain camp (which is a great way to alienate people who are, otherwise, willing to listen). While the Leave camp was focused on how bad the EU was, it often seemed as if the Remain camp was focused on how bad the Leave camp was. Thus, the debate had a nastiness to it that didn’t leave me, at least, with any sense of positivity.

To the ‘Remainers’

When I was a young man I read a copy of ‘After the Common Market’ (written by an ex-chairman of the Board of Trade, who was old Labour). The book looked at the negatives of the EEC and the likely problems it would mean for Britain (as it said, a small free trading nation). The arguments then are very similar now. Yes, Europe will continue to make up an important trading partner, but it will no longer be something which is going towards ever closer social and economic ‘integration’. Britain will be free to trade with whoever it wishes, to set standards of its own again (and see if anyone wants to follow them), and to be, simply put, British again. It has more in common with Canada, Australia, and New Zealand than it does with France, Germany, and Spain. That doesn’t mean it should return to isolationism, but it can move forward now as a free state (free to choose, on its own, what it does and with whom). At this rate, they might even get me back at some point.

* I should note, as a dual national of the UK and NZ, and having been resident in the UK in the past 15 years, I was eligible to vote and did (voted Leave).

Spark’s CEO gets a basic economics fail

The Herald (I know, I got roped in) has an article from Spark’s CEO. Forgetting my broader opinions about the subject matter, this statement really got up my nose:

‘And not only that, cause New Zealanders to pay more tax to make up the difference required to fund our schools, hospitals and welfare.’

Sorry, but that is a basic fail. If you increase their tax, we’ll end up paying for it, one way or another. There is no free lunch. If they’re making a 30% margin at the moment, they’re hardly likely to just go, ‘Oh, heck, we’ll just take 21.6%’, let alone now charging GST on top of that. We are a microcosm and they’ll just charge us more for the services, either through higher prices or +GST.

Our ‘Little New Zealand’ mentality, as an import from England, is a major fail and what’s being advocated here. We should be utilising our position to encourage more business here, including through improving our tax system, not trying to rope foreigners into complying with our tax laws for the sake of ‘fairness’.

And, in the end, if we wanted them to pay more tax, we’d simply change our tax laws. Enforcing it would be nigh on impossible, and would probably result in a withdrawal of services from our market (or loss of future services), but it’s doable. So stop complaining about how little tax foreigners pay and accept that the GST and income tax nets just don’t work so well online (and we should be looking at alternative tax methods to deal with base erosion).

Refuting the Economics of Star Trek

So a good friend of mine (my roommate at university) recently posted on Facebook about the supposed economics of Star Trek. The basis of this is notionally that money has been eliminated and sufficient material comfort is available that we no longer have ‘want’. Thus, we end up with endless amounts of sanctimony (on television), while humans look down on people who are less evolved and not as morally superior as we have become. However, at the same time, this was later lampooned (to varying degrees) on Deep Space Nine, as the inherent contradictions were show (‘What does “we work to better ourselves” actually mean?’, ‘It means we don’t need money!,’ ‘Then you obviously don’t need any of mine’). The simple premise, as I’ve just stated, is that with the advent of technology which eliminates certain aspects of material depravity (in terms of there is endless food and basic comforts). As a consequence, man is now free to pursue all his own interests, without the need to worry about the basics of life (and by basics, we are understood to mean a living standard superior to modern Western countries).

Now, setting the stage for such a fantasy world, let us look at some of the simpler problems.

Buildings & Land

Who allocates or decides on the quantity of buildings and land which are to be available to whom, when, and why? If I want a flat in London, a flat in New York, and a farm in New Zealand, who is to decide whether I can or can’t have them? The counterargument that, with space travel, near infinite amounts of space make land become irrelevant are simply foolish: someone will always want a certain piece of land more than another. The fact that land at the outskirts of Auckland is cheap does not mean the price of all land in Auckland is cheap. Providing more land will certainly reduce the total value of land, but the relative value will remain constant (if someone wants a piece of land in the inner city twice as much as on the outskirts, than a price equivalent to 2x is sensible). No mechanism is catered for this is the Star Trek universe.


One of the key features of space transport is that it tends to be bulk / large scale. How often, beyond capitalist species, do we see individuals with their own starships? How do they even procure these in the future? What if I decide I enjoy flying, who decides that I can or cannot do so? What if I want to do long-distance travel? Who determines that’s ‘acceptable’ or not? In our world, I purchase a car, a yacht, or an aeroplane based on my available funds and skills. In this future, we’ve just glossed over that. The military are the only people who seem to have access to reasonably unlimited hardware and even they don’t have anything resembling the degree of transport which we are accustomed to now (everyone doesn’t have their own, personal, shuttle). So how transport actually works is simply ignored in favour of plots in which everyone is, literally, stuck on the same boat.


How human initiated services are supposed to be achieved is never specified. Why do doctors do their jobs? Why do they even train to be doctors? Because it merely ‘benefits humanity’? You can imagine such naïve people flying around space buying ever bridge someone has to sell them along the way. But in all serious terms, robotics are advancing sufficiently fast that a lot of services will simply be eliminated, and whatever else isn’t possible will be handled through holographic means (something which Star Trek did cater for). However, whatever remains for people to do, we will no longer have a means to recompense them, and that creates a real problem. Why would anyone work if they were not required to? Why would they do what others even wanted? (For instance, we might still need computer programmers, but why should I do any of the tasks which others want of me? – I can just program along as I see fit).


So we are left with a set of basic economic problems which cannot, as yet, be overcome. Money exists because, as a means of transaction, is allows us to place values on things that we may want, and while reducing the cost of some things to zero (or near zero) will certainly cause some economic change, it will have no effect on the means of value assignment itself. I have ignored resource extraction here, but it’s another valid area. The simple reality is that Star Trek, for better or worse, is a television show, and was written by nominal ‘Progressives’ (at different points in time, thus different perspectives as to what the future of economics will look like). What’s fascinating is that people spend so much time trying to convince themselves that reasonably straightforward fantasies are, actually, deeper in meaning and explain to us more about the world than we really see (regardless of how silly that really is).

The Joys of a New Labour Government

So the earlier announcement around ‘plain packaging’ is the final straw for me. The once ‘National Party’ will now be New Labour from now on. They can claim to be free markets, but their decisions and thinking have been fundamentally nanny-statist and bureaucratic (and the word ‘free’ next to markets seems to have taken the same turn as with trade). The constant battle cry seems to be ‘let’s see if we can make the government work’, which doesn’t mean they look at structural changes, but instead that they take the existing apparatus of state and continue to development it (but with a ‘blue bent’). I simply cannot support that. We’ve lampooned NZ First in the past for living in the 1980s, for Labour living in the 1970s, but I am not really seeing where the difference is anymore. The solution is constantly to erode personal choice and to create ‘solutions’ to problems which are well outside of the role of the state (I should note I don’t smoke, nor find it very nice when people smoke around me, but that doesn’t mean we should be banning a company from legally displaying anything but plain sodding text).

This is an extremely dangerous development, as we are now going down the thin end of the wedge. When Coke and cheese can’t have anything but plain packaging, and you’ll need to ask for them out-of-sight, we’ll go, ‘That’s just stupid’. Well, this is just stupid (who actually buys fags on the basis of how pretty the colours are?). So a pox on them, I guess they don’t need my vote anymore (as they’re getting lots of new Labour voters to join them).