Emissions Trading Schemers

Tax by Any Other Name is, Well . . a Tax

There are times when it is very clear we would do a whole lot better with Caligula's horse running the government than the current mob. It looks as if the Key Government will inflict an emissions trading scheme upon our already attenuated and blighted economy. This has to be one of the stupidest and most hair brained things our country has ever done--and there is fierce competition for that particular sobriquet.

Let us summarise just some of the reasons why it is so mind blowingly stupid.

It can never be anything more than a symbolic gesture, yet with real and tangible costs to all. Consider for a moment a country, led by tunnel visioned automatons, which had formed the view that the moon was a terrible threat to life as we know it. The view was shared by the "international community", whatever that is. To impress the "world" that we were taking the issue seriously and doing our bit to help (in the hope that it would gain us some "moral" leverage, whatever that might be) the government decreed that all first born children were to be thrown into the sea ten miles offshore, as a sacrifice to the moon goddess to persuade her to stop harming us.

The symbolic gesture would contribute nothing to reducing the supposed lunar threat, but the cost would be all too tangible, painful, and real. The Emissions Trading Scheme will provide no tangible benefits, but its costs will be very real. Governments which act this way have relinquished even the pretence at governing for the interests and benefit of the people.

The Emissions Trading Scheme is a destructive dead-weight geometrically multiplying tax. This kind of tax is the worst kind of all. This tax is going to be paid either directly or indirectly by everyone for everything. Indirectly, everyone will be taxed by having to pay more for all energy costs (which are intrinsic to life, since energy is required for life itself). So, as an indirect tax it will be pervasive and costed into every exchange of goods and services. (There is no offset "input" mechanism like the GST tax; it will simply ramp up the cost structures right through the economy.)

Taxpayers will pay also through the government dishing out money to subsidise the cost impost upon favoured industries, such as dairy farming. (We are talking billions of dollars a year. When that gets factored into the nation's fiscal deficit a credit downgrade is virtually inevitable. So everyone will pay yet again through higher interest rates.)

All taxpayers (corporate and non-corporate) will pay directly through higher energy costs. "Carbon intensive" industries will be forced to pay for carbon credits. This will inevitably be passed on to all consumers.

The end result is that New Zealand will become a more expensive place to live than it already is. It will also, ominously, become a more expensive place to produce goods and services.

It will be destructive to our exports and trade. Everyone agrees that New Zealand's so-called carbon emissions are so small on a global scale that they are in the rounding error. We could treble our "carbon emissions" overnight, and would still be a rounding error. Ah, but the proponents and ideologues argues that it is a gesture which will give us "moral authority" in the world. It will persuade other governments that we are an "ethical nation" which will facilitate trade. It will help us export. It will stop trade restrictions being placed on us.

This does not withstand a mere smidgeon of scrutiny. Our major western trading partners are likely not going to pass their own versions of cap and trade, or if they do they will be so watered down and pocked with loopholes as to be rendered worthless before they start. Remember, no nation is being as pure or comprehensive as New Zealand. All our government is doing is exposing us to the collective derision of the mercantile world--as witnessed by the recent Wall Street Journal editorial, mocking our national stupidity.

Secondly, the greatest emerging markets for our food produce is throughout Asia--which is certainly not going to go anywhere near cap and trade. To Asia, global warming if it is a problem at all, is a western problem, and the west must pay the cost of fixing it. Thus, our trading partners will not care a fig whether we have a cap and trade system or not.

But they will care if they are having to pay higher costs for New Zealand goods. All we will be doing is making our agricultural produce and manufactured food goods more expensive and less attractive in the world market--and our major emerging competitors in the food sector are not in the West, but in the non-Western regions.

Our labour costs are already too high; our productivity too low; emissions trading costs will just dump another dead weight cost on to businesses everywhere making it worse. As we know, capital is fungible. If our businesses cannot compete in the global market place because our cost structures are too high they will simply relocate to less costly jurisdictions where they will have a better show at making a sustainable profit, and where, by the way, they will "carbon pollute" to their heart's content. As a shareholder in such a business, you would have to applaud the decision to move offshore as appropriate and inevitable. And if they did not move, as a shareholder you would cash out and invest in businesses that were.

If there is any action which illustrates just how disconnected our government has become from the genuine and real interests of the citizens, the Emissions Trading Scheme takes the prize in the face of stiff competition. It is stupid. It is shameful. It is arrogant. It plays to the preening pretensions of vapid politicians and bureaucrats wanting to aggrandize themselves on a global stage. It is damaging. It is irresponsible.

Remember the cancelled tax cuts? In view of the present distress to the national accounts and the burden of debt building up upon our children they were wiped. Now we are to be inflicted with one of the most costly and destructive tax increases we have ever seen. It will greatly increase our national debt. It will inevitably consign us to a state of permanent recession, where any economic growth will be off such a permanently low base, it will be little more than an empty mockery to the hopes and aspirations of ordinary kiwis.

There is something grotesque and horrible when a government turns and starts to feed upon its citizens.