Gordon Campbell on regressive taxes, and Frightened Rabbit

smoking-imageThe headlines would have you believe that inflation is safely under control, but a Statistics NZ press release yesterday indicates that isn’t the reality being experienced by the poor, given how the steeply rising costs of smoking, petrol, rent etc are falling disproportionately on low to middle income earners. Here’s how Statistics NZ put it:

The lowest-spending households experienced more inflation than the highest-spending households in the March quarter, partly because cigarettes and tobacco are a greater proportion of their living costs. Cigarettes and tobacco make up approximately 3 percent of total household living costs for the lowest-spending households, compared to 1 percent for the highest-spending households. Price increases for rent (up 0.7 percent) and petrol (up 2.5 percent) made the next-biggest contributions to price rises for the lowest-spending households.

That press release was cited at yesterday’s post-Cabinet press conference.by Bernard Hickey in an interesting exchange with PM Jacinda Ardern. The exchange begins at around the 27.26 here.

Basically, Hickey challenged PM Jacinda Ardern on the extent to which her government’s tax changes (thus far) have been regressive for low and middle income earners. In particular, Hickey cited the tax increases on cigarettes and tobacco, the potential rises in the cost of petrol, and the scrapping of tertiary education fees as being contributors to inequality. (Extending GST to small online purchases would fall into the same category.) All of these measures, Hickey argued, would fall regressively on low to middle income earners – while at the same time, the government is apparently not considering raising taxes on wealth, or on high income earners.

In reply, Ardern strongly challenged the notion that the government was implementing regressive tax policies:

If you factor in the overall boost those exact same families would receive from 1 July after the full implementation of the Families Package, you will see on average those low income families benefitting by up to $75 a week. On top of that the Winter Energy payment as well, which goes directly to those who are on government support, [will provide] an extra $450-700 over those winter months. Those are the most significant changes we’ll see to those families in over a decade. And I see them as being transformative.

The criticism being offered, Ardern continued, implies that all those families smoked. “The reference to excise [tax on petrol] if we’re talking about someone in regional New Zealand, would amount to 3 cents [per litre] Does $75 dollars [per week] make up for that? Yes, it does.” Improving the transport options available for low income families, she added, was desirable. “We’re also trying to turn around the biggest impact on those families, which is housing costs.” That, she said, involves not only improving the supply of state housing, but providing assistance on factors such as letting fees.

Is it possible to address inequality without taxing the rich more? “I think you’ll see we’ve already done that by cancelling the tax cuts,” Ardern replied, “which the last National government brought in, and which were – of course – giving $400 million to the top ten per cent. We’re re-prioritising that [amount] using tax credits, which are a much more targeted way of providing support to those that need it most.”

Smoking taxes

On the face of it, the large hikes in the price of cigarettes and tobacco over the past few years do appear highly regressive. But, unfortunately, so is death by nicotine. As Professor Nick Wilson of Otago Medical School points out, there is clear research evidence that the large price increases for cigarettes and tobacco have been the prime reason for the marked decline observed in smoking rates. The case is made here.

During 2001-2010, tobacco tax only increased in line with inflation. However, since 2010, there have been annual 10 per cent increases in tobacco tax, in addition to inflation adjustments. The larger increases have made a difference. The evidence shows that tobacco consumption per person reduced during 2010-2016 at about double the rate of that during 2000-2010.
Moreover, Wilson adds, the same body of research shows that young smokers (or potential smokers) are especially sensitive to those price signals :

The difference can also be seen for ‘current’ (at least monthly) smoking amongst young adults (aged 18 to 24), a key priority group. During 2006/7 to 2011/12, the percentage smoking barely changed (from 27.7 per cent to 27.3 per cent). However, from 2011/12 to 2016/17, smoking among this group declined from 27.3 per cent to 20 per cent.

Even so, the prevalence of smoking remains strongly associated with ethnicity and with deprivation. While the overall incidence of smoking is around 15 % of the population, it climbs to 30-40% among those on low incomes and among Maori, where the incidence rate of smoking is more like one third. However, there are some positive signs that the price signals are working among Maori as well :

For Māori, we also see encouraging results. Daily smoking among Māori fell by only 1.5 per cent from 2006/7 to 2011/12 (from 39.2 per cent to 37.7 per cent ), but fell by 5.2 per cent between 2011/12 and 2016/17 (from 37.7 per cent to 32.5 per cent). Modelling suggests that these benefits to Māori are likely to continue.

Given that nicotine is such a highly addictive substance, I asked Wilson, is there any recent research evidence on the impact that the cigarette and tobacco price hikes are having on the budgeting choices among poor and/or Maori households as to the extent to which spending on this addiction – regardless of price – could be crowding out the spending on essential household items?

No, Wilson says, not to his knowledge. (The available research on this point could be 15 years old.) But, he suggests, there are three common options facing smokers, in response to the higher price signals for cigarettes and tobacco. Smokers can cut out the habit, they can cut down their intake, or they can continue as before but reduce their spending on other household items. The first two options, he points out, serve to increase the money available within the rest of the household budget.

For that reason, he concludes, most economists now regard the price changes in cigarettes and tobacco as being a “progressive” policy instrument, and not a regressive one. What bothers him more is the huge and unjustifiable imbalance between the revenue that the taxes on cigarettes and tobacco generate – some $1.5 billion, he says, annually – and the paltry amount (circa $50 million) devoted to smoking cessation programmes.

This imbalance, Wilson says, is “shameful”. While steps have been taken on packaging, there have been no mass media television advertising campaigns advocating smoking cessation. Given the addictive nature of the substance being taxed, Wilson strongly believes that the tax involved should be a “hypothecated” one, where all the revenue goes straight back into preventing the behaviours that inspired the tax in the first place.

Hmm. But, given the health consequences of smoking, isn’t there an argument for much of that revenue going into the general fund, to enable the public health system to treat the outcomes of smoking? Wilson is not convinced by that argument – as he says, smokers may not live long enough to impose enduring burdens on the health system, and nor would they live to incur the costs associated with national superannuation.

On the question of regressive vs progressive taxation, he is more concerned about the increase in the excise tax for petrol – which, he says, is definitely regressive given that the benefits of public transport and alternative energy sources for transport will take such a very long time to arrive.

Getting Winston’s Goat

Clearly, it is going to be an interesting six weeks after Jacinda Ardern goes on maternity leave, somewhere around her due date of June 17. Winston Peters will become Acting PM, although Ardern will remain PM, and will still be being briefed and consulted about the ongoing business of government, and on any matters of political or national significance. Why, if the baby has trouble sleeping, the arrangement may even increase the time she has available – say, around 3am – to work on Cabinet papers.

Judging by Peters’ tendency to spar with the press gallery though, the transitional period will be something of a culture change. A few testy exchanges for instance, marked Peters’ appearance at yesterday’s post Cabinet press conference, which included his demand for an apology after one journalist cheekily asked Peters whether it might be a strain for him to have to be on his best behaviour for six whole weeks. Significantly – and for the first time in months – yesterday’s post-Cab proceedings were not transcribed and posted last night on the Beehive website. (Eventually it did appear.)

In Sesame Street terms, it will be as if Ernie has been replaced, briefly, by Bert. All of which could be rich pickings for the gallery, given that when Peters gets on his high horse, he tends to say odd and interesting things. So, come mid June, expect some needling of the Acting PM. The process may unfold a bit like this:

Frightened Rabbit, Goodbye

Scott Hutchison had named his band after the nickname given to him as a very, very timid child, by his mother. As he once said, it felt good – given the extent of his social anxiety- to use that name for when he had to perform in public, before crowds of strangers. This following section of today’s column discusses suicide. Helplines are available here:

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Lifeline – 0800 543 354 (0800 LIFELINE) or free text 4357 (HELP)
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For those of us who love the Scottish band Frightened Rabbit it has been a dismal, dismaying week, starting last Wednesday (NZ time) when news first came through that the band’s lead singer and songwriter Scott Hutchison had gone missing. On Friday night it was confirmed that he had in fact, died. Probably only Cat Power and before her, Elliott Smith, has had a fan base so aware of the personal frailties of the musician who inspired their loyalty. For now – and this next point is the least important factor in all of this – Scott’s suicide can’t help but change how we hear much of the music he made with Frightened Rabbit.

Celebrity death is a strange thing. (Only last year, Scott had satirized it in a song called “Die Like a Rich Kid” that typically, also dealt compassionately with how poverty fuels the whole business of celebrity envy.) You can feel the loss personally, but it is also entirely vicarious in that –obviously – what family and friends go through is so much worse. Usually, when some loved musician dies, you can play the records and go through the combinations of regret, gratitude and nostalgia.

Not this time. It used to be possible to hear the classic FR songs as being defiant, and in a way triumphant. He was still here, right? Scott Hutchison’s gift was to embody a very Scottish version of alcohol-soaked, blackly comic depressive honesty about how hard it can be to get through the business of day-to-day living, how badly at times we treat the people we love, and how we need each other to survive.

Obviously… Scott didn’t survive. As several of the tributes have mentioned, he died exactly as he’d predicted on the “Floating In The Forth” track from the band’s 2008 breakthrough album, The Midnight Organ Fight. Earlier this year Frightened Rabbit went on a brief tour to celebrate the 10th anniversary of that album, and they’d played the album tracks onstage in their original sequence. (Reportedly, at these shows the crowd would yell back the song’s line ‘I think I’ll save suicide for another year” as an affirmation of their, and his, survival.) Only three weeks ago, in what proved to be his last interview Scott had said this :

Thinking about songs like “Floating In The Forth”—I didn’t kill myself. I took that forward into other records. There’s got to be a sense that, as fucked as life can get, we’re still alive and we’re still doing this and we’re going to attempt to carry on. I do think [the album] is wrongly perceived as a very sad record, although there are some miserable moments on it….

And then he added:

It’s a real thing. It’s a real thought. It’s a thought that I’ve taken to a place that I’m far less comfortable with… I’ve gone 90 per cent of the way through that song in real life. But at the same time it’s gratifying. It’s heartening to know that I’ve been through that, and I’m stood there performing that song, alive and feeling good about it. It’s a tough one. My mum and dad were at the show in Glasgow. We can joke about it, but it must be really hard to hear your son sing about that.

So…what to play this morning that won’t sound emptily prophetic, or really ghoulish ? At some time in future it will be possible to appreciate that he got as far as he did, and left behind so much great music. There’s a verse in one of the other tracks on Organ Fight that says hey, no big deal:

And you know when it’s all gone, something carries on
And it’s not morbid at all just when natures had enough of you
When my blood stops, someone else’s will not
When my head rolls off, someone else’s will turn
You can mark my words, I’ll make tiny changes to earth
And while I’m alive, I’ll make tiny changes to earth

Here’s a few of the ones that still seem listenable right now… I’ve picked mainly live, acoustic versions that convey some personal sense of him. “Candlelit” would have to be one of the most intensely romantic songs ever written:


Finally, a lot of the self-loathing that Scott Hutchison expressed made him seem like an archetype of the self destructive, “indulge me I know I’m imperfect” genius male artist – but we only know this because he kept on telling us about it, in dozens of songs. There was no proportion to that self-criticism – and surely, that’s a big part of the condition. It was the problem that eventually killed him. The last two tweets on his website were his final attempts to deal with it.

Personally, I’d like to think that someone this self-critical couldn’t have been as bad as he thought he was, even if no-one else could convince him otherwise. The first Frightened Rabbit song I ever heard was “The Modern Leper” ten years ago, and it, too, deals with this same dilemma. Because Frightened Rabbit was a band as well, I’ve also included the studio version of “Holy” a terrific song from their most consistent album, Pedestrian Verse.