Gareth Morgan has released his first policy, for his Opportunities Party, pledging to tax "all income, whether it is in cash or in kind". This is his release:
The current tax regime favours owners of capital and unjustly burdens wage earners. This is not only inequitable, it results in poor utilisation of capital and lower than necessary income and employment.
Nowhere is this more obvious than in the property sector, where speculators and home-owners benefit while those that are renting are punished. It is unfair, pushes up house prices and drives even greater inequality. Ultimately, it is in everyone’s interest that we address the loophole in the tax regime.
Our proposed reform will not collect even one additional dollar in tax – we want to change what is taxed, not the amount of tax collected. Any increase in revenue will be used to reduce income tax rates.
Under the reform we propose, around 80% of the public will be better off, the 20% that aren’t can well “afford” it.
The current system encourages borrowing and speculating on land values. This comes at the expense of investment in our productive businesses, which are held back by a lack of investment.
All productive assets – and that includes the house that provides you with your accommodation each year – are or can produce income each and every year. All income should be taxed, whether it is in cash or in kind. By only taxing the cash income from assets, Establishment parties have hurt many people, and in effect given a handout to property owners.
Not only will plugging this leak in the tax regime make tax fairer and boost economic growth it will over time improve housing affordability, by erasing the reason for property speculation.
At TOP, we acknowledge that all productive assets generate income (either in cash or kind) and by deeming that they produce a minimum level of assessable income, such capital will be deployed in the most efficient manner. This is critical for maximising jobs and incomes. Those that already declare at least that level of income will be unaffected. Those that don’t, will pay more.
Plugging the hole in our tax regime will be done gradually to ensure house prices remain stable while incomes grow. We acknowledge this is a cultural change and some people will struggle to separate their own self-interest from the matter of what’s fair and reasonable. However we believe that a well-informed public is astutely rational. While the property-owning group is a big one, the implications of an ever-rising property to income ratio is that future generations will struggle to rent let alone own, businesses will be starved of the investment capital they need to grow and create jobs, our reliance on foreign debt will keep rising and inequality will get worse.
That is unacceptable to fair and rational-minded New Zealanders. Given only 20% of New Zealanders would bear the burden of this change – and we are the most able to afford it – it’s a small cost to improve the lives of many.
298 Comments
Why, because he has no trouble claiming tax free profit himself but now has a policy that has every homeowner paying tax on living in a home that they have saved for.
The non owners or people that don't provide much for the country will receive benefit from the hardworking everyday Kiwis.
He should concentrate on his cats,
I’m sick and tired of people and their absolute ignorance around the tax system. All property investors do is what any other business does. There are zero tax advantages, not one. Tell me one advantage a property investor has over a business owner? I’ll guarantee that there is not one single advantage compared with any other business entity. Incredible how naive people are, taking in newspaper articles as though they are gospel.
Correct Property King.
I am sure someone will tell us something.
Let's tax people who hold shares as I am sure they buy them on the basis that they go up in value but no mention of that.
If the property naysayers had property investments then they would be on the other side of the fence and see things differently.
Opportunity in NZ to own property is achievable if you have the desire but many want what they can't afford or not prepared to work towards it
It's not a dividend if you sell the share (i.e the capital). So if you sell the share you do not pay tax on any increase of the value of the share during the time you owned it (i.e. no tax on any capital gain). The only people who pay tax on the sale of shares are traders for whom the shares are their trading stock.
The same with property rentals (no tax on capital gains on sale of the property as it is a capital item from which income in the form of rent is derived) versus property speculators or developers (who are taxed on gain on sale of a property as the property is their trading stock).
You can see why there is so much confusion in respect of property investment on this site if people cannot wrap their head around these basic concepts.
OMG.
Yes. You pay no nominal tax on the sale of a share.
Why? Because you have paid an equitable amount of tax each period when dividends are issued.
Given that the face value of a share is directly a function of its expected dividend yield, you pay for the capital gain of the tax period on period.
Traders are only taxed on buying/selling shares to the extent of the profits of the brokerage.
This is different to the property market which is much less liquid and face value is only loosely related to rental yield. Thus, there is nowhere near enough equitable taxation to cover the windfall capital gains when property investors are subsidised through tax write-offs.
This is what the article is all about. It is about utility gain and recovering equitable taxation from it. It is not about hurting professional landlords, provided they don't realise any capital gains.
To quote you, righteously.
"You can see why there is so much confusion in respect of property investment on this site if people cannot wrap their head around these basic concepts."
For your benefit I will point out the flaws in his .... I suppose I must call it an "argument"....
However, if you have read Nymad's drivel and understand it let alone agree with it then my efforts will likely be in vain. Rant over here goes....
The proposition is that there is no taxation of capital gains whether they relate to a residential rental property or a share. Nymad disputes this. I will try with a simple example to prove the proposition is correct:
John buys the shares in a company called Amex Co. Amex Co’s sole asset is a rental property. The value of the shares were commensurate with the value of the house (no surprise to you I hope), let’s say $1m (Auckland average).
Amex Co rented the property for the 2015 and 2016 tax years and its profit after expenses was $20,000 in each year. Amex Co paid tax on that profit (at 28%) and distributed that profit as a dividend to John who paid tax at 33% (he utilised the imputation credits available on the tax paid by Amex Co (i.e. the 28%)).
So John received the $40,000 as a dividend and paid $13,200 in tax for a net return of $26,800.
John sells his shares in Amex Co for $1.25 million which is based on the value of the house (again hopefully no surprises there). That $250,000 gain for the two years John owned the shares in Amex Co is not taxable as it is a capital gain.
Ok, hopefully you are still with me. In this new example instead of John buying shares he buys the house instead. This is how it works:
John buys a house in Auckland for $1m (Auckland average).
He rents the property for the 2015 and 2016 tax years and his profit after expenses was $20,000 in each year. John pays tax at 33% so John received the $40,000 in taxable income and paid $13,200 in tax for a net return of $26,800.
John sells the house for $1.25 million. That $250,000 gain for the two years John owned the house is not taxable as it is a capital gain.
This shows that there is no different treatment as between the two forms of capital assets for taxation purposes (shares versus home).
I hope the above example is enough to convince you that there is no capital gains tax on shares. I wanted to break down Nymad’s “arguments” and respond to them but to be honest they are some form of pseudointellectual babble which I cannot understand (which is often a sign that person has no idea of what they are talking about).
And with that comment your whole argument collapses.
Thanks for highlighting my (and GM's point).
You made an example of a private company owning an asset whose yield is unrelated to it's real value.
Thus, the tax on the yield derived does not intrinsically control for 'capital gain'.
Thus, an equitable amount of taxation is not being derived from the asset.
Should the land value be perfectly indexed to the rental yield, as shares are, there would be no notional 'capital gain'. It would just be a fair value on the basis of future expected earnings. As it is with shares (Effectively there is no capital gain on shares due to the face value always being on the basis of expected yield).
True. I was waiting for someone to mention that.
Obviously the calibre of commentator wasn't previously good enough.
Xero would be another good example. However, these cases are extremely isolated.
In the long term, we would have to expect that these would rationalise anyway and equitable taxation would occur, just deferred.
Thus, we have to expect that market value is fair value in this case.
I've also been considering the 'initially' depressed return aspect as it seems a weakness in your proposition. I'm associated with businesses that run artificially depressed returns on capital for extended periods. Yes, you are correct that it is , in the end, only a deferral but in the intervening , often many, years you cannot claim that a true rate of return that reflects the level of equity in the enterprise, has been achieved.
In response to your false "argument collapses" comment.
You stated above "...You are most definitely taxed on capital gains in shares, given that fair value is a function of dividend yield."
I provided the example of John and Amex Co where John made a capital gain of $250,000 when he sold his shares in Amex Co and he paid no tax on that gain.
You responded "You made an example of a private company owning an asset whose yield is unrelated to its real value. Thus, the tax on the yield derived does not intrinsically control for 'capital gain'. Thus, an equitable amount of taxation is not being derived from the asset."
What you have written does not support your original claim that capital gains in shares are taxed. In fact you have conceded that point (*** the whole point of our discourse***) and then go off topic on why such an outcome is not equitable. What that has to do with your original claim, or my clear rebuttal of it (which you have conceded) is beyond me. Furthermore, oblivious to your epic fail you go on to beat your chest as if you have won some great victory.
If I am wrong above please explain how John paid tax on the gain he made in buying and selling his shares in Amex Co. Otherwise graciously acknowledge you were wrong.
Middleman... Nymads ' is an inane use of logic...
Its' the same inane logic that says there is a tax free benefit as a homeowner because ones capital could have been earning interest which is taxable...
One can take that logic to the realm of bizarre....
Why not tax leisure time ....???? since one is forsaking working ,which is taxable, for leisure time....which has a tax free benefit.. ( using nymads' thread of logic )
I totally get what Nymad is arguing...and I totally disagree....
A little common sense goes a long way.....
Great thread, very informative and entertaining.
Setting aside for a moment the issue of whether a taxed dividend/return approach equates to the same thing as applying tax directly to capital, I am attracted to simple tax systems if only to the extent they mitigate the significant tax collection cost drag effect of current systems.
Re Morgans efficient use of capital argument, I'd be looking to rearrange some of my investments that are tax efficient under the current regime but not so much on a nominal return on capital basis. Which probably supports his proposal.
But giving politicians the power to so quickly and easily manipulate the amount of cash they want to extract for their grandiose schemes and to have at the push of a button detailed information available on the holdings and worth of every citizen, makes me uneasy. Feels a bit big brotherish.
Simplifying Nymad's logic on shares
- A Share was purchased using capital.
- Said share received a dividend.
- As a dividend was received, some tax was paid.
- The original share price went up (it was not sold)
- No tax should be paid on the original capital as tax was paid on the dividend.
Makes some sense, so lets apply it to a house instead of a share.
Scenario 1
- A house was purchased using capital.
- Said house derived some income (Rent)
- As an income was received, some tax was paid
- The original house price went up (it was not sold)
- No tax should be paid on the original capital as tax was paid on the income.
Seems fair, and is basically what should happen at present (No one would ever negative gear here to avoid paying tax would they).
But this is in direct conflict to GMs proposed policy (Which Nymad endorses) This dictates that a tax would be paid, as a Capital Gain was made on the house.
So we can see that the logic is flawed. Either both should be taxed, or both should be tax-free. You cannot tax one but not the other.
Now, lets look at a second scenario whereby we remove the income aspect, and see how the logic would flow.
Scenario 2
- A House/Share was purchased using capital.
- Said house/share did not receive any income/dividend.
- As no income/dividend was received, no tax was paid.
- The original house/Share price went up (it was not sold)
- Tax should be paid on the original capital gain based on current market value/share price, as no tax has been paid elsewhere.
Does Nymad believe this? Given his logic the answer should be "yes". But again this would conflict with GMs policy, as only the House would be taxed.
So we now apply this logic to a third scenario where there is no income and no capital gain.
Scenario 3
- A House/Share was purchased using capital.
- Said house/share did not receive any income/dividend.
- As no income/dividend was received, no tax was paid.
- The original house/Share price went down (it was not sold)
- Would any tax be paid?
Logic would say no. No gain of any sort has been made, therefore no tax can be due. In fact as there is a loss, then the most likely outcome would be some sort of Tax rebate/offset.
Again though, we have a conflict. GMs policy, which Nymad advocates would say yes, tax is due (but only if it is a house) - tax should be paid based on the current market value, as the original capital could still have been used in a more productive asset (i.e. an income generating one such as a share).
As the policy and the logic conflict we can draw only one conclusion.
- Nymads logic and the policy cannot both be right.
Mmm, good comment. However are we not just grasping at linguistic straws?
This is the problem with this site, you have to be so careful how you write your comments due to the varied audience.
The argument is, it doesn't matter if the you are selling the house or not, you are still deriving an economic income through capital gains/benefits/utility associated with it. From the economist's perspective, it doesn't matter if you realise this in aggregate 10 years in the future (upon sale) or period on period. Also from an economist's perspective, we have to assume that the benefit you gain from it is approximated by some opportunity cost. Thus why should you artificially bouy your rate of return on a tax free basis?
In the terms of stock holding, yes, you have a point with non dividend yielding stocks. In New Zealand, this is not an issue really, though - what is it? like 1 in 10 stocks provide no dividend in NZ?
At least the minority of non yielding stocks are a productive usage of capital, though. That is the whole point of GM's argument.
Plus, where did it say that GM was not interested in taxing this personal capital gain. I would have assumed that given his position on taxing utility, this would have been an implied condition.
You aren't getting an income though.
INCOME
money received, especially on a regular basis, for work or through investments.
You do not receive any money until you sell. Until then you have nothing. No income, no earnings, no cash. You cannot tax something that does not exist.
Using GMs logic, the following would be true.
- Minimum wage went up from $15.25 to $20.00
- I am unemployed
- I should be taxed on the potential income (the extra $4.75 per hour) I could have made if I had worked, as it would encourage me to be more productive (i.e. get a job).
ECONOMIC INCOME is the way for persons to account for changes in the value of a given asset in the market. This is the basis for the argument.
Your point is indeed already true.
In theory if we consider relative taxation, that is exactly what happens already...
As wages go up, the unemployed are penalised through an increase in inflation and associated value added tax.
i.e. their effective taxation relative to their income is increasing as minimum wage increases.
So, again, why do they get penalised for being unproductive when home owners don't?
Using that logic, homeowners do get penalised.
a) Interest (taxed at corporate profit level)
b) rates (taxed at GST)
c) insurance (Taxed at GST + corporate profit level)
d) maintenance and repairs (Taxed at GST + corporate profit level)
e) a new build (GST on everything, i.e. 15% of the cost of the house)
Can you show me another investment that bears such a large tax burden?
I should add.
You are effectively arguing for a tax on opportunity cost.
Using that logic, everything should be taxed. Except for the singular most productive investment on earth.
Reasoning being that everything else could potentially be used in a more productive manner.
In the Uk we pay capital gains on all but our prime residence , i was very surprised to see how few if any taxes were attached to property . Took a nice CG on a house in Wellington , somehow just did not feel right . No stamp duty either , NZ is certainly a great playground for rich guys .
nymad, there is a decided difference between capital gains and dividends. One is the difference between the purchase price and sale price, the other is based on ongoing income from the share. High dividends tend to correlate with high capital gains, but the tax paid on the dividend income does not capture the tax that should be paid on the capital gains. Conflating the two is rather sophomoric and silly illogic.
Don't agree that high dividend equate with high capital gains. Especially so for offshore shares. Some of the biggest capital gain shares pay no dividends e.g. Berkshire Hathaway. Companies in expansion mode often pay low dividends e.g. Ryman. I have interests in private companies that have not paid a divvy for years and will not for many to come but they have increased their capital value hugely over that period.
I buy for capital gain and am happy to forego earnings. One of the fat cats Morgan wants to target !
nymad, it appears that you live in a different universe than the rest of us, where facts and logic are conditional upon beliefs.
Capital gain taxes on shares are most definitely not captured via taxes on dividends. You had stated previously that they were captured via the taxes on dividends. Your statement is clearly in error. My understanding is not in error.
Okay. By all means fault my logic, but clearly articulate it.
You haven't outlined why my argument for effective notional capital gains on stocks is wrong.
It's not adequate to just rubbish a perspective with no logical rebuttal. This is exactly what GM is up against.
Notional, and reality. They are not commutative, or comparative.
Capital gains = sales price - purchase price
Dividends = dividend payments typically paid either once or twice yearly as based on the concerns operational profit
Paying the tax on dividends doesn't capture the tax that should be paid on the capital gains (when the share is sold)
I'm rather comfortable in the fact that my shares in the energy companies that were divested have been paying rather good dividends (FAR better than rental income for the same investment), along with FAR better capital gains. I *should* pay tax on the ~60-100% capital gains that I have received since purchasing these shares, if I was foolish enough to sell them at this point in time, although the tax law doesn't currently provide for this tax. The tax paid on the dividends received to date covers the income of the dividends received, but doesn't cover AT ALL the capital gains that have accrued to date.
Would you like any other examples refuting your silly illogoc? There are plenty... google GOOG, or AMZN, or numerous other dotcom shares for examples. Look beyond your nose, and beyond your assumptions.
I just have to laugh every time some ma/pa investor comments on these threads about their investing prowess.
When they then explain their methods, you can just tell how elementary their understanding is.
It's depressing reading. But hey, people like you make me so much money.
Nymad... u might be interested in what Stanley Druckenmiller has to say:
Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.
I agree with him... It is primarliy liquidity that moves markets..
The price of a share is not SOLELY related to earnings... far from it.
So...basically, the premise of your argument is not quite correct
As always,your ignorance of stockmarket investors is impressive. I have over 30 shares in my portfolio and all but 2(under 1%) are held for income,NOT their capital growth potential.
I buy shares to produce dividends to give me income to spend in retirement. I look for those companies which offer not just the prospect of a sustainable dividend,but an increasing dividend. Thus,i look at a company's D/E ratio,its ROE,ROA,cashflow and other key metrics. Now,it just so happens that a company which does produce a steadily rising stream of dividends,is likely to see its price rise and that's fine,but all sorts of extraneous events effect day to day share prices and I pay little attention to them. My focus and that of many other investors,is firmly on the income they produce. There is plenty of evidence to show that the bulk of the total return from equities is from dividends,not capital growth.
Directly from the policy document linked above.
Around 80% of adults will be either unaffected or pay less tax as a result of this taxation reform. 20% of adults will pay more tax – but don’t fret, we can afford it. I will pay considerably more tax, so will John Key.
I'll reserve calling GM a hypocrite at this stage.
He is suggesting that you pay tax to live in a house you own at the same rate as if it was a rental house. A retired widow living in the house her now long dead husband left her in Mt Eden when he died 20 years ago would pay tax on the value of the house she lives in as though it was rented out (previously she would not have needed to pay any tax).
The multi-millionaire hedge fund manager who lives in a hotel would pay less tax.
In your panic you've gone a bit scattergun on it
I believe the first house is hard worked for if you've done it yourself through wages/salaries. Using equity leverage or inheritance doesn't fit the category of work hard. Like it was once said, the devil will find work for idle hands to do
I agree, totally especially coming from Gareth after his tremendous tax-free windfall from the sale of Trade Me.
One needs to understand the egocentric elitist nature of people like Gareth - "What is good for Garth is not good for others, and by jove, cant have ordinary joe-public house owners making tax free capital gains such as I".
Just like the purchase of the beach down south - yipe, I will contribute provided I get total use.
.. that is the point ... and Gareth said so at the time ; do you recall that he said it was inequitable that he could make such a gigantic capital gain , totally tax free ...
He acted 100 % legally under the tax rules ...
... now he has found a way to make good on his rant ... through TOP he can promote a way to prevent such tax free largesse ...
And he will be one of the 20 % burdened by extra tax from the policy he wants to enact ...
... in the light of that , I'm not sure why you felt the need to come out spitting an ad hominem attack upon Mr Morgan ..
He and Winston would make a great partnership, if both of them could just set aside their egos along with their pet projects. Gareth's crew ought to be able to bring in the number-crunching/economics grunt to a big reform platform and Winston has both the longevity/political nous and popularity in the preferred PM stakes to sell it to the masses - particularly those masses that VOTE.
This nutter as you describe has a Ph D in economics and is one of New Zealand's most respected economists.
The issue he has highlighted over many years has lead to a gross miss-allocation of capital to property and it's associated tax free re-valuations both for individuals and corporates.
While individuals may prosper - as a nation we cannot enrich ourselves buying and selling each other houses at ever rising vales.
The current tax rules are a gross distortion and have a huge negative impact on the lower paid and their ability to house themselves.
Coming to politics from left field offering solutions that no other party will even contemplate requires serious consideration of his carefully thought through initiatives.
November 2017 may well see these policies the subject of negotiations with the major parties.
Watch this space !
There is no doubting politicians have got in the way of many a good idea. I am no advocate of their involvement in anything.
There is also no doubting that a degree does not make someone intelligent, nor does it make them the sole expert in a field.
Qualified pollsters failed to see what most people on the street could see in the US and UK.
Qualified teachers have overseen our consistent drop in mathematical ability.
Qualified engineers, architects and builders constructed the CTV building, as well as numerous ones in Wellington.
Qualified IT professionals designed Novopay.
What actual experience do they have in optimising resource allocation?
Do they work on a process chain?
Do they visit factories, mines, gas platforms?
Do they use and review different systems?
Do they deal with human workers on a day to day basis?
So, why is an economist the most qualified to design a Tax system?
Do they have specialist systems knowledge?
Do they have specialist process management knowledge?
Do they have specialist compliance knowledge?
Do they have specialist legal knowledge?
Do they have specialist design knowledge?
Do they have specialist auditing knowledge?
Do they have specialist human behaviour knowledge?
Do they have specialist management experience?
Do they have.....
Maybe we should use some of these other people. Perhaps a combination of these differing opinions could lead to some sensible rules for a change.
"For these reasons, we should be on our guard not to overestimate science and scientific methods when it is a question of human problems; and we should not assume that experts are the only ones who have a right to express themselves on questions affecting the organization of society."
Albert Einstein (1949) apparently
The current mess of taxes were thought of by politicians and special interest groups.
Be thankful we are not America or Australia though, where every attempt to reform or simplify has been blocked by a combination of lobby groups that benefit from some loophole or other.
Where ever did you get the idea that we are different here?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…
Some detail would be nice.
I presume there will be a market rental value assigned to a property which will need to be returned by the owner. Would owners be able to claim as a deduction interest on any mortgage over the property?
I presume in the scenario where we have a little old lady living in her mortgage free villa in Remurewa with a estimated market rental of $100k per annum Gareth wants that house sold ASAP as I doubt granny can pay $30k in tax from her super...
So you own a typical Auckland house worth $1m and have a 1% tax I.e.$10,000
That is OK if it substitutes for much of your present tax paid.
It is not OK for a pensioner with very little other income.
However within a few years (long enough for your pensioner to snuff it) the house will be down by $200k (is that a tax?) and your tax will drop by $2000 (that is a win?)
I think TOP will need a differential rate on the family home if they are to tax it and maybe increasing over many years to the tax on other assets.
TOP or any other coalition partner along for the ride will have to find a better idea that works.
What you highlight is that the horse has bolted. We are close to peak everything so I don't know how much value is to be had with this policy when capital gains turn into capital losses. The discussion, if any (which I doubt there will be), needs to be about managing in a deflationary environment. How does the pensioner get on when all their assets are returning zero or negative, and all their assets are deflating? Do we force people to see their stressed assets, thus making the problem worse? Will happen anyway mind you.
I don't understand Gareth as saying he wants to tax capital gains. My understanding is he wants to tax productive assets. So a person living in a $1m home is required to pay tax in relation to the value of the home which is not been gainfully employed. This would be in effect an asset tax.
Gareth states:
"All productive assets – and that includes the house that provides you with your accommodation each year – are or can produce income each and every year. All income should be taxed, whether it is in cash or in kind."
Is the family car a productive asset (i.e. a taxi)? If so is some deemed value applied on the basis that the car operated as a taxi?
What if someone is utilising an asset but ineffectively e.g. Farmer owns $10m property but runs it as a sheep farm rather than a more profitable dairy. Returns 3% yield on value, interest on $10m would return 5% and diary would return 7%. Is the Farmer taxed on a deemed 5% or 7% yield?
What if someone blows $2m on a golden statute? Do we deem a return on that wasted value or is it exempt as a statute is not productive?...
I think Gareth is out of his depth.
I fail to see what your whinge is really about..
Are you sure you are not just misunderstanding his point?
Of course he is advocating taxation of all productive assets - who wouldn't?
It's logical. What's more, this is our current/incumbent system.
His point is that we aren't currently taxing housing enough.
Family cars/transport is taxed at the marginal rate at which you consume fuel. Also, registration fees.
The farmer is always going to pay on his realised yield. It is at his discretion how he derives the yield. Long term, it wouldn't matter as expected marginal returns of land would equalise.
You think Gareth is out of his depth?
Tell me, where did you attain your PhD?
Aside from the personal attacks, HeavyG asked some really good questions that you have failed to address Nymad. The system proposed relies on someone dictating what return should be achievable on all assets whether they are personal or business.
And if not all assets are included, then this will just create more distortions and affect behaviour much more than is the case now.
You don't need a PhD to see Gareth’s policy is taking the proverbial. The people who are going to suffer the most under his regime are private home owners who will effectively become subject to tax on the deemed rental return on their property. Will those people be entitled to deduct interest they pay to the bank in respect of their home mortgage (as I can do with my rentals)?
Your comment about vehicles already being taxed based on the fuel consumption is nonsensical. A productive asset is not taxed based on its running costs, it is based on the revenue it generates or under Gareth's policy the deemed revenue it could generate.
Your farmer comment is also nonsensical.
I see Gareth is not the only one out of his depth.
Where does he say that he is going to tax people more?
I did not read that anywhere. In fact I read that the tax take is going to essentially be neutral.
My comment was nonsensical?
"A productive asset is not taxed based on its running costs"
So it's not taxed on it's ability to be productive or add value? What is it taxed on then?
Why do we tax on profit, then?
The farmer comment makes perfect sense.
He pays tax on his earnings. Given his land value is pretty much directly proportionate to his expected earnings, he equitably pays for his capital gain period on period.
I do agree, this will deteriorate over time and is fraught with tax incentives but in the present it is adequate. When capital value to productive value diverge, this is when he is not paying enough period taxation to cover the gain.
It doesn't matter if he farms sheep of dairy because in the long term EV will equalise.
Out of my depth?
Possibly.
It's all about being logical, though.
I have to say I agree with HeavyG on the car tax issue. While we might have fuel tax and registration, this is hardly relevant in the context of this article, as it is indirect at best. The relevant point that HeavyG has said is that an asset (car) is taxed on the income generated from its use. This is relevant in this context because of his initial question, being what about vehicles that are not for business purposes - what rate of return should they have to meet? Is it what could be earned as an uber taxi driver?
On the other issue of best use of land for farming, you'll have to explain more about how the value of all land should equalise over the long term.
One other point, land values for farming are not proportionate to expected earnings. Far from it, as farms are also homes.
Every asset has a utility value. It is the utility that is being taxed. In the case of a private car, this comes in the form of a fuel/rego tax. so, the tax is directly proportionate to utility gained through usage.
Farm land is most definitely related to expected earnings - see the trend relative to any produce price index. Where else does it get its intrinsic value from?
I didn't say all land value equalises over time, I said long term that it doesn't matter whether that farm is producing eggs/lamb/beef dairy over the long term. As, provided that all land is perfectly transitionable, rational producers would always seek to maximise return. Thus, it doesn't matter what they are producing as long term returns would always converge to some benchmark figure.
Yes, there is a fuel tax, and we pay rego. I disagree with you on the purpose of those taxes though. The original comment from HeavyG is regarding how the new tax will work on private cars.
On farm land, there will be a correlation between earnings and the value of a farm, but that is not the only driver, as it is also someone's home. You should go look at buying a farm at different places, and try to make it work economically.
The last point... okay so this is purely theoretical - "provided all land is perfectly transitionable".
In reality a sheep or beef farm is not always perfectly transitionable into a dairy farm, and therefore HeavyG's point remains.
Who dictates what the best use of any particular land (or any other asset) is. A good dairy farm should return more than a beef farm.
Okay - what are the purpose of those taxes, then?
Only a correlation, ya reckon?
I would have to disagree with that, sorry. As would any economist/financial analyst. (I would think)
There is definitely strong causation between expected future earnings and asset value. That is categorically proven and completely logical.
Ture. I'll give you that, it is purely theoretical.
However...
If you read Heavy G's comment, you will see it was him that propositioned that the land was readily transferable for usage..Hence, I was just going on his proposition..
Out of your depth? Yes, you fail to grasp a simple point.
The farmer pays tax on earnings, because he has earnings. Real, quantifiable, definable earnings.
The homeowner does not have earnings. So what are they paying tax on?
Potential earnings?
Possible earnings?
Unrealised earnings?
Perceived earnings?
Opportunity Cost earnings?
But the owner does have earnings...Capital appreciation...
How is that not an economic earning (for the individual)?
Please tell me because I am intrigued as to why.
That is his whole point. He isn't necessarily saying we have to tax every year, the statement is just poorly worded.
His point is that we need to capture taxation from capital gain, whether it be year on year or deferred until sale. Everyone needs to stop being incentivised to purchase unproductive assets.
A "poorly worded" economic policy? Well if that doesn't confirm every single belief I ever had about the value of a PhD in economics, then I don't know what will. Maybe we should tax them (Economics Doctors) as they have clearly invested in an "unproductive asset"
But I digress, you asked a question, so I will attempt to answer it.
First - You have actually answered it yourself , it is an unproductive asset. Which by definition can not be an earning as it is unproductive (as opposed to under productive, or under utilised)
Secondly, to further clarify, a primary residence is not "earnings" as,
a) you do not derive any income from it,
b) neither do you derive any profit from it, and
c) you receive no cash, good, or equivalent for owning it.
and Thirdly, if confusion still exists.
I was not" incentivised to purchase unproductive assets".
I did however obtain shelter for myself and my family, something that given the climate and geography of this great country of ours, is most definitely required for basic survival.
If a PhD in economics can not comprehend that a family residence is not an investment. Then I fail to see how he will grasp some of the more important concepts of being involved in a democracy. I can see it now.....
Using GMs logic, we should tax renters double, as not only are they not investing in productive assets (i.e. shares in Dick Smiths, Pumpkin Patch, FCO, or even a local Finance company), they are investing in someone else's "unproductive asset". Someone elses! it's not even their own unproductive asset - what a disaster, if fact it is so terrible, that it should be a crime....oh the humanity, wont somebody think of the children....
If this is the caliber of his premier policy, then I fail to see him bothering the counters on election day.
Yes, sound an attack on intellect.
Obviously you are much better qualified.
I meant it as being poorly worded for the audience. Which you validated for with an attack on intelligence.
You don't answer my question.
a) you do not derive any income from it - when you sell it for more than you purchased it and the prevailing rate of inflation, that is positive economic gain.
b) neither do you derive any profit from it - when you sell it for more than you purchased it and the prevailing rate of inflation, that is positive economic gain.
c) you receive no cash, good, or equivalent for owning it - when you sell it for more than you purchased it and the prevailing rate of inflation, that is positive economic gain.
That is GM's point; you are making economic profit. The point isn't whether or not it is an investment or primary residence.
How is this so hard to grasp?
You think you should be exempt from paying taxes on economic gain? No one else is..
How are you investing as a renter?
You do know what 'investing' is, right? It's not the same as consuming, which is what renting is..
How did I attack his intellect? I merely said he confirmed my opinion of him.
Poorly worded for the audience? His audience is voters. From what I have heard and seen he doesn't have the charisma or likability to get by on that alone, so if the voters don't like/understand his policies he gets no votes.
So back to your question (again) I do not derive income from it because
a) I have not sold it.
b) It may go down in value, potentially it may even be worthless i.e. an ECONOMIC LOSS.
c) I have actual costs (interest, insurance, rates, maintenance) - can I offset these?
d) Like all other goods, if it were to be sold, it would be sold second hand. i.e.
- GST has already been paid in full on the original construction.
- The income used to purchase it (by me, and also the next buyer) has already been taxed.
"That is GM's point; you are making economic profit. The point isn't whether or not it is an investment or primary residence.
How is this so hard to grasp?"
Your whole argument revolves around the words "When you sell". It is not an economic profit until it is sold and therefore REALISED. Why is this so hard to grasp?
There must be a real transaction otherwise a tax cannot be paid, as there is nothing to pay it with.
There are quite literally a million scenarios whereby I don't realise a profit in a house. e.g.
- what if I don't sell my house?
- what if I die before I sell my house?
- what if the market collapses?
- what it there is an earthquake and my house becomes worthless?
Will these see me get refunds? (with interest due to the opportunity I lost investing the tax)
Addressing the other point you made, Economics is not life, not everything must be viewed in terms of profit/loss.
If we impose economic profit on every thing on this planet, it would would be a slippery slope.
We would not save any "unprofitable" resource (and may go so far as actively eradicating them), good by Kakapo, see ya later Penguins and Polar bears, On your bike Amazon rainforest, there is more money in cattle. Look at that unemployed person over there...
"You think you should be exempt from paying taxes on economic gain? No one else is.."
Are you sure?
Go sell a share. Or if you can, sell off your whole stake in a company like GM did with Trade Me.
Sell your gold bullion.
Auction off your art collection.
Sell your car, or watch, or pair of shoes, heck put everything you own on Trade Me
Ask the lotto winner next door how much they paid on their winnings.
All of the above produce actual, realised economic gain, all are currently untaxed.
May also pay to do a quick ring around of the CFOs at Google, Facebook, and Apple. See what they are paying.
"How are you investing as a renter?
You do know what 'investing' is, right? It's not the same as consuming, which is what renting is."
That's right they are different. Investing requires intent. The intent to make a profit.
A homeowner is just a renter without the middleman. Neither derives a financial benefit from the daily occupation of the house.
I know you enjoy your logic, but I'm afraid it appears to stretch thin nymad. consumption of fuel is a very blunt instrument to assume productive use. A very economical limo hardly compares an old banger with poor fuel economy in terms of their respective potential productive profits.
A PhD is hardly a recommendation nowadays. Plenty of idiots have PhD's. And while someone with a PhD may be an expert on the particular thesis they wrote, it certainly doesn't mean they know a lot else in their field. There are also very intelligent people with PhD's.
And there are many, many leisure activities that are not taxed..
How does it stretch thin?
Because you don't understand it? It doesn't suit your agenda?
The example you give of a limo and a banger misses the point completely.
"A PhD is hardly a recommendation nowadays"
Yes, well obviously with the all the attacks on intellect.
No wonder we have such demand for ethnic chefs, retail and hospitality managers.
GM is pretty lucky, though.
He's been in the game since the 70's.
Just a little bit of experience..
Also, name me a leisure activity that doesn't get taxed..
It is effectively an unrealised capital gains tax. This hurts the asset rich but cash poor. It is incredibly harsh when you are talking about peoples homes which they never really saw as an investment. It is going to force old people out of their homes and communities. If the council rezones some areas to allow more density and as a result the land prices go up significantly, is it really fair to tax someone more because they could sell and make more money? Taxing someone on the return they could get if they chose to do something different is a very slippery slope.
How are young rentiers subsidising the landed gentry? Do we not all pay income tax?
A retired person's home going up in value does not offer that retired person any income - they are still in the same position, which in most cases is cash poor.
Should we not care about these people, and force them out of their communities through taxation?
I would have to say the accommodation supplement is effectively a subsidy to landlords. If renters could not afford to pay rent, and there was no accommodation supplement, rents would fall. Or rentals would remain empty for a while then house prices would fall. Win-win. Or I suppose you could get mass protests and have squatters paying no rent en masse instead of renters. win-lose.
Yes it is, and it does indeed discourage the inefficient and wasteful practice of having all of your wealth tied up in an asset and not generating income from it.
Just because a person "didn't see their homes as an investment" doesn't change the fact that they are sitting on a large amount of wealth.
If that wealth increases due to no effort whatsoever on their part, is it really fair to let them keep all of it? When other people whose wealth is increasing due to considerable effort on their part, ie people who earn money through working for it, are required to sacrifice substantial portion of that wealth increase?
I had a read of Gareth's policy and it appears that if you are over 65 your deemed income can be accumulated as a mortgage debt to IRD so that the Government can collect on your demise (how kind). I presume once all the equity has been gobbled up by the state you can live in the house deemed rent free until your death (based on your earlier comment Gareth only wants to tax equity – in which case you would be better of borrowing 100% against your home and putting all that money in the bank. The interest offset would allow you to pay 1-2% interest and avoid all tax implications).
If you are under 65 and cannot pay the deemed income then I presume forced sale and eviction.
These comments aren't crazy; they are the envious coming out of their holes as they see a big wealth distribution coming up in their favour. Similar to sharks circling a whale in the hope the whaler (Gareth) strikes its heart with his harpoon.
I suggest that person do what any person does who cannot afford to do everything that s/he would like.
I'd like to keep for myself, all of the wage that I earn. However, I can't; the Government does not LET me. So I have to make adjustments to what I can spend and what I can save.
Why should it be any different for a person who wants to keep for themselves all the wealth in their house?
Ms de M.... The so called increase in wealth is largely the result of Monetary inflation..ie. Money losing its purchasing power. ( M3 money was $85 billion in 1985... ..$280 billion in 2016 )
SO.... In my view land may be a better proxy of Monetary inflation than the CPI....?
The total value of land in NZ has far more to do with unfettered growth in Money supply than it does with NZ being an a productive, innovative and hard working economy....
So... If you want to be fair.... if you want a Capital gains tax, then allow a rebate for the effects of monetary inflation.... ( Id say that would be around about 5% to 7% )
To be really fair, also allow a depreciation allowance for savers as the Capital they invest in savings really does depreciate...
OR.... do we just want to play with low hanging fruit..??
I was referring to the original example "If the council rezones some areas to allow more density and as a result the land prices go up significantly" which strongly suggests that the value of land in NZ has quite a lot to do with artificial, regulated constraints on supply. In any case it is not earned by the person who happens to be sitting on the land, certainly not in the same way that a worker earns his wage.
Tell me why MdM that if somebody lives in their house and it goes up in value for some strange reason, that they have to pay vastly increased tax every year.
a. Strange reasons include the current lunatic property bubble.
b. They might be cash poor.
What gives you the right to demand they sell up and move because of external circumstances.
Tell me why KH that if somebody works hard, upgrades their skills and earns an increase in their wage, then they have to pay vastly increased tax every year.
What gives you the right to demand that people who work hard to earn a living have to forgo the opportunity to buy a house and instead sacrifice a substantial proportion of their earnings?
Are you seriously saying that the less a person had to do to earn any increase in their wealth, the more they deserve to keep it?
So, only people who work hard to earn their wealth should be taxed and people who acquire wealth without having to lift a finger, through no effort of their own, get to keep it all?
What sort of incentive structure is that?
"Yes it is, and it does indeed discourage the inefficient and wasteful practice of having all of your wealth tied up in an asset and not generating income from it."
For anyone that doesn't understand that it is not an asset maybe they should watch The Castle.
"Just because a person "didn't see their homes as an investment" doesn't change the fact that they are sitting on a large amount of wealth."
What about cars, jewelry, appliances, trading cards, in fact anything that you own? It is all potentially worth something, in fact that picture on the wall could be worth more than the house. Maybe we should tax everything on it's unrealised (or wasted) value.
In fact, lets expand the policy to cover business. Lets tax companies based on their value, now that would get some cash into the coffers.
"If that wealth increases due to no effort whatsoever on their part, is it really fair to let them keep all of it? When other people whose wealth is increasing due to considerable effort on their part, ie people who earn money through working for it, are required to sacrifice substantial portion of that wealth increase?"
Thanks for the recognition - buying my house was completely effortless. I only slaved away working in a job I didn't like for a few years - all while being taxed at about 30% on every dollar I earned. I found that a bit too easy, but thankfully the Govt obliged by taxing me an additional 12.5% on everything I bought at the time as well. I laughed it was still so effortless. I never struggled to pay a bill on time, or wonder how I would cover the rent while I saved. Luckily the govt upped GST to 15%. I don't know about you, but paying 45% tax on everything I earned seemed so much more worthwhile and made me feel really valued.
Anyway, that got me a deposit, which in turn let me get a mortgage (not a house I might add, technically the bank owned that). I just had to pay them a ludicrous amount in interest for the privilege of pretending it was mine. Anyway after that it really was easy. I just kept going about my day to day life all while paying the same 45% tax on every dollar of income I made. Oh plus the extra interest. Did I mention the interest?
The interest is quite important. See I pay that to the bank (who in theory pay tax on it - so potentially we are now closer to 50% of my income being taxed) now if I take the purchase price of my house, and add the cost of my interest. Even were I to sell today, I would still be out a couple of Grand. But hey, who needs a roof over their head?
Anyway, after typing this I now see that you a right. If I can't afford to pay the tax on my house, I can sell it. Go back to paying rent and invest the excess in a really productive asset like shares in Dick Smiths or Pumpkin Patch.
Nothing feels better than knowing my money is helping create jobs for other people. They can then get taxed on their income and join me in my rented hellhole.Once you have 40-50 people in a house, the body heat alone will keep it warm.
Bill has done a fine job of the day to day mechanics whilst John Key acted as front man.
What has Gareth got against homeowners? There are more than one ways to skin a cat. Why not attack the principal beneficiaries and enablers of the current rort, which is the four Aussie banks? The only sense I can make of it is that the homeowners may be cat owners.
... I think that Gareth may be a little concerned that the overwhelming bulk of Kiwis' investments is in unproductive assets , houses ... rather than businesses ... silly things 'like that which employ people , innovate , and provide export earnings for the country ...
You can't lose with houses , Rogie ... they only ever go up ... they aren't making any more land , you know ... location location location !
Look, I get it. I don't own a house. I sold mine in 2008 just before things fell apart. National have just repeated the same mistakes that dear Auntie Helen and Little Michael made. We are a banking colony not a productive nation. I just think Gareth's idea is a giant distraction which attacks one sector of society who have merely done the rational thing in the circumstances. It does not even begin to attempt to address the root causes, it just attacks one of the symptoms and sets one group against another. Therefore I assume it must be about cats in some way that I can't quite fathom.
I agree. Our businesses are our customers and we should help them prosper. I see the appeal of Gareth's desire for radical change, but far better to work on the causes, not the symptoms. Ireland have a 14% company tax rate which they fought to defend when their French and German banking overlords tried to force them to abandon it. They run a current account surplus as a productive nation. Unfortunately they got well and truly rorted by their banking overlords as they borrowed in a foreign currency to fund their housing bubble.
Our problems are entirely of our own making and relatively easy to fix, should we choose to do so. There is no need for wild, radical, destabilising policies, just a steady succession of little changes that favour saving over borrowing, productive investment over glamour and get rich quick schemes.
I just don't see why we need a homeowner tax. Home ownership is a good thing and should be encouraged. The banks, aided by the idiots in the RBNZ and Treasury, have just been allowed excessive privilege, which they have duly exploited.
I can see why a cat tax might be good, but then again it might be mainly the rats that benefit.
This is a great policy - rational, fair, and will ensure that we invest in the productive side of the economy. Therefore, I think it has zero chance of progressing. People will say "He wants to tax me for living in my own home!". Of course the local government does that now, i.e., rates. Also people get tax for working - what's the difference? It is a purely mindset issue. According to their policy it is meant to be tax neutral and 80% will be better off - only the top 20% will be better off. I was interested in TOP before and now I am more and more interested in voting for them.
Rates are entirely different. Essentially it's a bunch of property owners who get together to provide some shared services for their property. Like roads and pipes and stuff. Rates are the way to share the cost. No more than that and fully justified in being attached to the property. Entirely different proposition from Morgans idea.
Done properly this policy is just what we need. Take some of the income tax paying burden away from the PAYE tax payers and let the wealthy who make an income from asset price growth carry some of the weight. Wealthy baby boomers obviously won't be the biggest fans but surely they owe something to the younger, working, middle class generation.
"Done properly this policy is just what we need."
I think that would be the Key point. I disagree about the owner occupied home producing "income in kind". I would suggest that buying a place to live is something for everyone to aspire to for a decent life, and not seen as a gimme gimme money scheme. If the value of houses where people own and live in go up, it speaks more about issues with inflation, debt, and restriction of access via RMA and council. Investments or rental properties I would consider business, so have no problem with asset value taxation in that regard. As another commenter mentioned, if it is tax neutral, there is no problem for owner-occupiers. How many people in NZ have confidence that it will be "done properly"... I would say if there is any left over, more likely the piggies at the trough will give themselves a bit more pie.
On the other hand, dealing with ridiculous affordability ratios in housing by opening up land, increasing supply, reducing immigration, dropping house prices (controlled or not) like that other dude suggested, would be a much better way of addressing the root cause than more taxes. I would be all for that. And if some people crash and burn, maybe next time they'd plan for realistic interest rates/risks rather than 4% 4eva interest-only loans.
I doubt Gareth (who, yes, benefited handsomely be applying the current taxation law in New Zealand that he thinks it nuts. Don't we all adhere to the IRD laws as well?) really thinks his Party has a show. What he's trying to do is stimulate the conversation. If he gets site like this to debate the merits or otherwise of his policies, and that get into the mainstream conversation - then he's done his job. And it's a conversation that New Zealand HAS to have. But I fear that unless he spends quite a bit of his own money a la Trump, his message will be squashed.
While I agree that property prices are overvalued and a correction is needed to improve inequality and associated negative social outcomes. As a freehold owner of only one residential house, which is my family home, I feel it is unfair to be "punished" because others view property as a speculative investment and because successive governments have refused to deal with inefficient planning regulations, cheap offshore cash looking for a safe haven, immigration driven excessive population growth etc etc. My personal view is the family home is not an investment, but a home and should be treated as such.
Kauri, you have it wrong in Gareth's eyes .
Tax any property that people have worked for but he is allowed millions himself from producing nothing from a business that he didn't work in.
Property investment is not the only thing he could tax why not everyone's shares they hold as well
Adjusting the non-sensical tax anomalies around investment property is long overdue. Expect the banking lobby to squeal but isn't it about time that particular transfer of wealth from the many to the few is curtailed.
Taxing the family home on it's rental potential is nuts. What next - the family car on it's potential Uber revenue or perhaps the oven on it's MAMC (maximum annual muffin capacity).
Property tax is already charged on profits and capital gains under 2 years or profit if purchased as a speculator.
If 80 per cent won't pay anymore but the top 20 percent then how much additional tax will it bring in.
Where is his policy to help grow NZ any clown can tax this and that but he hasn't got any substance to his party.
Nymad, cobblers.
He has got nothing except hammer people that own property, he has always been that way!
He was involved in a business that didn't promote property as there was nothing in it for him as he got commission from investments whereas housing provided him with nothing.
nymad it seems pretty obvious from many comments that a large number of posters have not downloaded and read the policy doc. For a business site like this it is pretty dissapoiining, and i guess shows just what Gareth is up against. Instead of intelligent and well made points, this post is filling up with 'Trump' like idiotic comments.
Depressing stuff.
So owner-occupiers face higher taxes for imputed rental income under this scheme; there goes more than half the potential vote. And this does nothing to disincentivise accumulation of property by investors.
Something does need to be done. I am not sure that this is it.
... yes ... the current tax system is creating a small mega rich elite ... the big land-owners and multiple property owners ... which is taking us back to where we were in the middle ages of Europe ..
With the bulk of the population being a down-trodden peasantry ... living in poverty and squalor ... whereas a few , the royals and other landed gentry , lorded it all over the serfs ...
... that is the direction NZ is rapidly heading towards ..
I agree with Kauri's comments above. I would benefit personally from this change, but I couldn't agree to it as I think it is unfair to tax a personal asset. You shouldn't be affected by what others perceive the value of your home to be. There are other causes of this housing bubble that need to be addressed.
The fact that rates are calculated from house values does not justify it either. Rates are a relatively small cost, and if you demanded consistency, then change the way rates are charged.
I would also be very interested to see the effect on pensioners on this total tax change. It seems to me they will be forced to leave their homes in Auckland and move to somewhere else that nobody wants to live, simply because their homes are not being used to produce anything, and therefore they can't afford the tax that will be charged. I find this unfair and morally wrong.
Ill add another twist to your desire for home exmption.
Do you think it equitable that someone who owns a 2 million dollar home mortage free gets a higher work and income benfit than someone who owns a home worth $200k, but has say $200k in the bank)?
The same issues Morgan raises re tax and the family home cut across into our benefit system as well.
My desire is for not taxing personal assets that do not produce income.
As for the scenario, I have no idea how the benefit system works in this specific case, but I presume that you are saying that WINZ takes account of cash held, but not other assets. If this is the case, wouldn't you want to just change that, rather than overhaul the tax system? If that is your specific reason for advocating the wealth tax, then I think there is an easier fix.
No, WINZ ignores the family home, but will apply a deemed rate to other assets. Thus, it means you will not get a higher rate of benefit just because you choose to hold a non performing asset (eg block of dirt).
Those who rent a home effectively pay a tax on their 'home' as the rent they pay is taxed at paye (etc) level.
eg
I earn $500 per week and pay rent of $200. Im taxed on $500.
I own my home, earn $300 and get taxed on $300.
Not entirely equitable as i see it.
The RBNZ, for all of its well intentioned mishandling of the housing situation, is not oblivious to what's evolving here. It knows from past experience that if the market 'goes' stepping in too soon will sooth those who are ingrained with the 'property always goes up bug'.
At a guess, they will step in after the first 30% adjustment by 'normalising' the deposit risks to 20% across the board. This will only give those who are trapped in a last chance to escape with a flesh wound. After another 20% they will reinstituted the old norms of 10% deposit etc and will probably have the OCR, for whatever good it does, at 0%. By then the property market will only be back to what? 2006 levels? How bad is that!
Time will tell, but if you can't tell theeres a storm brewing, you haven't wanted to watch the weather forcast.
I still prefer an across the board ( no exceptions , no exemptions ) land tax ... a small annual levy on the un-improved value of all land ...
.. simple to apply , easy to collect , a recession proof way for the government to collect a stable and slowly increasing stream of revenue ...
Then off-set those monies against tax on the productive sector , wages and company profits ...
Yes, so easy and so equitable. And given the relatively poor performance of most local authorities, it might also be useful for central government to collect all land taxes and redistribute it back to LAs, whilst removing the general rate component of LA rates. Leave them to simple user-pay charging and then a working within their CG allocation for all else.
No, as I understand it, his proposal is a comprehensive capital tax - so it applies to plant and equipment as well (i.e., the cow shed, the boat, the company vehicle fleet etc.). If the business which owns these assets fails to meet that deemed rate of return, the CCT applies. As I understand it, that is. The policy announcement is a bit void of detail - so I'm pretty much going on what I understand from reading the Big Kahuna.
I'm with you - although I'd say his CCT/UBI combo (which would see an end to WINZ - an even bigger plus to my mind than the tax reform side) was a better stab at revolutionary reform than any other proposal I'd read in the past. So, I liked the Big Kahuna - this proposal is only one half of that, and I think someone needs to address both sides of the ledger (that being tax and welfare).
But if he's going for only one half at the moment, a simple land tax would have been so much better.
Here, for example, he talks about lowering tax rates, but with WFF many people pay a zero percent or near that rate anyway. So you can't go lower than nearly nothing where those low income families are concerned. Hence, to my mind he really hasn't put the hard yards into number crunching the full package of reform. And moreover, low income/non-earners (beneficiaries including those on super) need GST relief as well if we really are going to lift those worst off out of poverty. Many states in the US have sales tax rebate programs - again, quite easy to administer.
Welcome to the bright side :-).
One of the real problems I also see with reform of say, the current WFF regime, is that one cannot pare it back because as I understand it, banks have been calculating household income for borrowing purposes by taking that tax rebate into account. Just one example of how embedded and convoluted welfare has become in our society. CCT/UBI is the only 'clean' way out I've seen, but a great deal more tax has to be collected from somewhere - and that requires some serious economic stimulus, which the CCT just might be as it gets people focused on rate of return, as opposed to tax minimisation/tax deductions.
As more industry and work is mechanized and technology takes over, a UBI will have to be seriously considered, also needing to be considered is how to counter the fact that in a capitalist world production that is mechanized is going to aid the concentration of wealth into the pockets of very few people. I will leave it to you to work out how that could be countered.
I think we need to be talking about this now.
Regardless of whether Gareth gains any political traction, raising such issues, adds to the political discourse and applies certain pressures to the other parties. It's at least more constructive than stuff.nz featuring fairly trashy articles on housing bubbles.
I do have one query though....Asset values are cyclical. So how will this policy collect the same level of tax (ie less from PAYE and more from assets) at time when asset values depreciate? Asset values occasionally depreciate quite significantly. Will the government just accept far less tax revenue during those times or will they take on debt, increase other taxes temporarily or make cuts to other government spending to fill the hole?
I'm impressed. At present, the value of the (effectively untaxed) residential rental property in NZ is probably about five times that of the share market. And it earns precisely $0 in export income. So taking away the perverse incentive to invest for passive untaxed property gains, to the benefit of productive enterprises, makes sense. We are the only country in the developed world with this kind of skewed taxation system.
At this state he has my vote.
... I'd heard that the total value of the housing stock of NZ had crossed the $NZ trillion mark ...
10 times the capitalization of all the companies listed on the NZX !
... and then there's those pesky poo ridden plots of land where the moo cows roam ... how much effectively untaxed ( negatively geared ) value is locked up there , in the Fonterrible zone ...
Yes, I think the total value has exceeded that trillion dollar mark but then one needs to look at the total level of mortgage debt on those assets as well - given under this proposal (again, as I understand it from reading the Big Kahuna), the tax is calculated on accumulated capital in that asset only. In other words, the homeowner/asset owner pays tax only on the equity they have in the asset + any notional capital gain.
Hence the OAP who owns the asset outright pays a (sort of) disproportionate level of tax compared to the FHB with a hefty mortgage. I guess the idea is a lot of OAPs might decide to withdraw equity from the house (i.e., take out a mortgage) to invest that accumulated capital in a productive small business? Whether the banks would play along however, is anyone's guess on that.
Of course we should be incentivising them to take those risks - who better, as they have the most life/business experience, so are bound to be better investors/business owners than most! And making good use of that accumulated capital is what creates jobs for the next generation. OAPs these days are not just a bunch of docile grannies who never worked a day in their life :-)..
What would happen to an OAP whose investment went bad? Where would they get the money to pay off the new mortgage, if indeed an OAP could get a mortgage? Or are you suggesting one of these equity release firms that then own all or part of the house? Meaning no inheritance for any children?
First off, inheritance for the children is to my mind a poor goal to have in life. Kids need money when they are starting out, not when they are themselves nearing pension age. So, if as a parent you want to help your children, my thought is redistribute your excess now.
If a pensioners investment goes bad they may lose the house - just like any business owner of any age. And they (at the moment) unlike other non-pensioners, have a guaranteed income which is indexed to the CPI. And on top of that, if healthy, they can continue to work without that guaranteed income being abated.
I'm just not sure what you raise as problems are really problems - many pensioners are really, really well off people - sitting on great piles of accumulated capital that presently contribute nothing to society at large by way of stimulating the economy.
The pensioner losing the house is rather the point though. Most 70 year olds have extremely limited job options so the likelihood of them being able to "continue to work" is slim to none. The current superannuation payments are far too small to be paying rent out of on top of day to day living expenses.The average OAP sitting on a mortgage free house is not "really, really well off" - they're getting by.
If we expect the average 70 year old ex-bus driver from Timaru to be taking out a mortgage in order to minimise their tax payments through "investing" in (say) Pumpkin Patch shares, then I think we as a country have our priorities rather mixed up.
Expecting an OAP to either sell up their house or start taking equity out to transfer to 'productive assets' is a really poor concept. Now I don't think Gareth's policy necessarily would incentivise that if we looked to the details, but on the face of it that seems to be what it implies.
So the smart OAP sitting on a single asset say worth more than $1m, buys a little flat or apartment for cash at say, $250K and rents that out - then borrows on the balance of capital/equity in their main home to the level a bank would allow, perhaps say $500K - and goes for it in terms of buying a small business or some other such productive asset. This way they have a backup place of residence, with no mortgage in the event the business investment fails and the main home has to be sold.
I agree, at present a number of OAPs with a fully paid up home are just getting by. They would be assisted by owning a productive asset instead of a non-productive house and section.
No, I'm just a DIY money manager :-). Buying into a business with a rate of return greater than that earned by investing in government bonds (which is what I think Gareth indexes his deemed rate against) is not necessarily risky investment - it's good investment, but not so good in comparison to the recent tax free capital gains on residential property! That's the whole point.
I think many could see that those finance companies in the pre-2008 period were a high risk passive investment and related party loans should have been major warning signals to the financial advisers of the time. I think a great deal of OAPs who bought into (and eventually suffered the losses with) the collapse of that sector, were direct investors (i.e., without a financial adviser in between) as, if I recall correctly, there was a lot of TV/direct advertising at the time. They really were competing with banks (i.e., other passive investment vehicles) as opposed to productive businesses as an investment vehicle.
OAP = old age pensioner - in NZ those 65+.
No investment has no risk - not even keeping your money in a bank since the OBR was introduced. But, yes, I know lots of investment vehicles and small businesses that generate good returns (that is, in excess of Gareth's proposed deemed rate of return).
From my understanding of Gareth's proposal, if an individual (OAP or otherwise) does not want to invest their excess capital, then they simply pay tax on it. And if cash poor, the TOP policy suggests they could pay the tax via a debt to the IRD, payable only on sale of the asset.
People droning on about finance company collapses, the investment advisers who recommended them in the early 2000's and using that as a reason to bag todays current advisers, is getting really boring. That was light years ago. You won't find good advisers today recommending rubbish like some did back then. Lessons were learned and the world has moved on. Most have, that is.
Isn't the whole point to disincentivize property investment and incentivize productive investment? Just because something is attractive, doesn't mean they're forced to invest in it (e.g. a business). It just means that when choosing where to invest, property won't look like the obvious choice.
that is the interesting point, if you have someone advocating a position and it gains some traction, then the main players will move slighty towards it.
i.e if he pulls enough support 3% it could hurt national so to appease those voters they may have a look at doing away with claiming interest against any house as a deductible item
it will be interesting to watch which direction we head
I rage against the amount of FIF tax I pay on the deemed rate of return value of my offshore equities investments but only because it is so damned unfair when compared with other investment classes. If TOPs policy was implemented my rage would evaporate overnight. Cullen actually designed an elegantly simple system to administer. We'd probably have to follow India's lead and abolish any banknote over $5 in value though. Imagine the job of valuing all those assets. The disputes would make the family court divorce hearings seem like a picnic.
It just makes it glaringly obvious about how much Key refused to consider reforming the tax system to make it equitable & to encourage productivity.
Sure, Labour was just as bad - but Key is supposed to be the economically sound one with the financial nous.
Leaving the system the way it is is probably the most corrupt aspect about NZ nowadays.
Gareth's Opportunities Party is a socialist party.
It's interesting and a little concerning that there are so many people who are enthusiastic about wealth confiscation from the middle classes.*
*No I don't have a house. Yes, I am furiously angry about it. No, I'm not interested in taxing people on "revenuable" assets until they are forced to rent from the state and take state run public transport.
I'm not over the moon about the idea of eating in communal kitchens, killing sparrows or "making steel" either, which seems to be where Dear Gareth would like to take us.
No wait, silly me, it's killing cats that Gareth is into, isn't it?
Come on now, Gareth's been on this cat thing for years.
2013:
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10860618
2015:
http://www.newshub.co.nz/nznews/gareth-morgan-cats-are-serial-killers-2…
2016:
http://www.stuff.co.nz/national/77840638/Gareth-Morgan-pushes-for-crack…
This one's fun:
http://morganfoundation.org.nz/cats/
And that's just Google Page 1.
You want to forget his peculiarities because you are (understandably) desperate for a "viable" politician, after enduring years of hopeless buffoons. But let's not be too desperate to hand over the reigns of power, to individuals with unusual views just for the sake of much awaited change.
Ummm sorry...many TOP supportes do have a house and a good job and investments. To generalise they are all homeless is ludicrous and shows how disconnected you are.
Of interest have you bothered to scan social meadia? There are thousands of followers on multiple sites who are angered by the housing crisis. It is delusional to think they will not discover and vote for the TOP party.
I am going to rather enjoy watching the panic spread...Wathcing our young rise up and get a fair go will be most rewarding.
depends what your definition of 'opportunity' is...
If you think it's milking the housing market, then the status quo is pretty good.
If you think 'opportunity' is much broader and deeper than milking a few ponzi-esque areas, then Morgan's policy is very much about opportunity.
My nephew is going into teaching, he loves it, but doesn't know how long he'll be able to stay in it with its moderate wages. Morgan's policy, with lower incomes taxes (and helping limit house price gains), could help support my nephew's goal of being in education for the longer term. Surely that is opportunity. And education is a cornerstone of enabling opportunity.
Fair point - hes trying to get rid of the opportunists.
Gareth stills believes in quaint notions like level playing fields and that theres plenty to go round if we play nicely - its the problem with economists who fixate on money, not energy. Real growth is dead and has been since pre 08. Since then reported growth has all been courtesy of ponzi finance, population ponzis & merger/acquisitions & operating cuts ... You cant downsize your way to greatness ... sooner or later things will crash.
I think GM paid interest.co.nz some form of payment to get his little political nonsense piece into this website...i cant understand how you would print something like this for free...interest.co.nz can you let the readers know if GM is financially enriching your website in one way or the other? fair question i hope?
In stuff this morning GM is quoted as saying "I want to hold house prices - not collapse them - and give incomes a chance to catch up" here which goes to show he hasn't thought it through. With many homes now at multiples of income well over 10, for wages to catch up, the prices of everything else will go through the roof to. This is frankly IMHO unaffordable. House prices need to come back down.
There is no other conclusion that you can realistically come to. If we do not acknowledge this, things will just carry on as they have. Foreign money (whether from immigrants or non residents) has to be taken out of the existing housing market, the only part of it we can't do anything about is ex-pats returning with the spoils of their years overseas. If it were just them, I don't believe we would have seen what we have, because they would not been so drawn to Auckland, they would have come from around the country, they would likely return.
It has been left so long now, the proper correction will be fairly devastating, but I also see not doing anything just as devastating for another, growing, sector of society. Maybe we toss a coin to see what we do.
Wow. 200 plus posts in less than 12 hours. The property ponzi must not like the possibilty that the tax treatment could change. Businesses cant pay the average man enough to get the average house. Bubble needs popping.
Who among the debt junkies will be left hight and broke when the tide goes out?
Just watched Gareth Morgan on Paul Henry.
Paul made Gareth look extremely stupid and got into a quite heated debate.
Gareth was rather childish and attacked Paul Henry's opinion and showed that Gareth Morgan would not be able to cope with being In parliament.
The asset tax is a communism idea but Gareth says it is not!
Gareth is away with the fairies with this ridiculous tax and Idea and how anyone that thinks can believe that it is a workable tax is deluded!
'
Why wouldn't Morgan attack Henry, it's not like Henry holds back in his views on inequality and anyone who tries to do anything about it. That Henry rails against it, signals to me that Morgan is on the button. Wealth does have to be redistributed as income has not been. What are those left fighting over the measly few percent that the Uber wealthy haven't (yet) scooped up. What should we do for the rest of the population, just print more money for them??
Did you watch the same interview I did? You and Henry seem to display the same levels of cognitive dissonance. Just because Morgan challenges your beliefs doesn't make him childish or communist or "insert vapid clutching accusation here"
Henry was the unprofessional one (again) with blood rushing to his head and being derogatory. Morgan gave it back in kind and owned him.
Australia has its boat people, we have our Boe-ing people. Immigration controls should have been his first plank, not tax policy. We are competing against money printed from all corners of the planet by desperate CB's on a hiding to nothing. This policy is so inward looking its laughable.
Look at whats heading our way; https://rtd.rt.com/films/india-water-crisis/#
The real debts are the ones that nature is going to collect on.
Tax policy, up against the debt-berg; deck chairs after the ice-berg.
I don't mind paying tax on the money I earn but I only want to pay tax once.
If I choose to invest my wages instead of purchasing expensive cars, buying coffee's and paying someone else to cook my food, then that should be my business to do so.
Communism hasn't worked for any economy on the planet. Continually taxing the value of someones financial gains that results from their work and thriftiness is a step towards communism.
Gareth Morgan is an outspoken twat. His dream of getting rid of cats showed how much thought he puts into his announcements. Without cats and other predators the rat population would explode and a rat can get to every bird nest in any tree. Without cats we would have no birds as rats would eat every egg and every chick. The sad reality is mainland NZ needs domestic and feral cats.
He might be an economist but I believe his own financial reality has clouded his sense of judgement and his suggestion of a new tax regime will not reward people to work hard and invest. Under his tax regime we might as well not bother taking responsibility for our financial future. Housing and rent will be cheap so I might as well spend my income partying and eating out.
Hey! maybe he's right, that might have been a more fun life to have lived, taking no responsibility for me and my families future.
Gareth's tax scheme will go down with the electorate like a bucket of cold sick. The people really want a one party state which we sort of already have in the form of a National/Labour duopoly where the policies are very similar and where they even swap policies from time to time. Benevolent one party states are the best form of government after Monarchy.
"Benevolent one party states are the best form of government after Monarchy."
Benevolent to whom? Showing your true one nation colours with that statement. It'd be ok as long as it's your party/nation/king eh? What if it wasn't?
At least Morgan purports to advocate fairly for all citizens and not just for him and his ilk.
Modern democracies have solved the problem by having two almost identical main parties that swap chairs every one or two and on rare occasions three terms. Their policy differences are fairly trivial. In a way it is similar to the Spartan system of having two Kings where the partnership keeps the Kings honest although I think they ruled at the same time. Many people don't vote in the modern system because they cannot really discern much of a difference between them. It is probably a good system as who would want massive changes every election cycle? A viable third party has been missing from the US with very little chance of one gaining traction. Trump got past this problem by essentially launching a hostile takeover of the Republican party. Sheer genius really.
Gareth says we need to charge tax on "imputed Rent"....
The word "imputed" is a word that kinda trys to turn an "untruth" into a "truth".. A fiction into a nonfiction.
It turns common sense on its head....
Since the beginning of time we have always needed shelter... ( a roof over our heads).
This roof over our head has NEVER been considered a "productive" asset..
Gareth wants to tax us for a "PRETEND" income.... ( the income we would have received if we had invested our money , rather than buy a house to live in )...
Not only is this a "PRETEND" income ( a complete fiction ...as no money changes hands )..... the underlying premise is false...
We buy a house to live in... we need a roof over our head.... the choice is ONLY between renting vs owning.... In that context it has NOTHING to do with investment.
I think it is dangerous to tax Capital based on "imaginary" returns....
The idea of taxing businesses based on the what their Money would earn invested in Govt Stock.... borders on madness.
Business has ups and downs..... there are always failing businesses..
Gareth talks about fairness..... yet based on his ideas and principles he would have Farmers paying tax on "IMAGINARY" income when the brutal reality is that they have been struggling to make ends meet ..
( eg.. $5million farm at 3% govt bond rate = $150,000 pretend income ).
A lot of land in this country has a perceived capital value that bears little resemblance to the income that can be earned from that land. This suggests that there is either mal-investment or capital gain speculation. Taxation based on capital value will encourage a change to a more profitable land use or a reduction in capital value. Either case will drive more rational economic behaviour.
All capital values now bear little (read near zero) resemblance to incomes... because
- the money system requires ever increasing debt creation to continue to function
- incomes are actually restricted by the energy surplus in the economy. Everything we consider as wealth is a claim on energy
- Net energy per person is in decline / energy surplus is in decline
- the excess debt creation has to go into capital values ... it has to go somewhere. No new debt = commodity price collapse
So there is no such thing as rational economic behaviour - the whole system has become a capital gains (population) Ponzi ... which must break at some point
All gains should be taxed equally. The distinctions between "capital gains", "income", "earned" and "unearned" are entirely aribtrary, and these legalities have been gamed to the point they distort sensible investment and savings decisions. Those who can use these legalities to avoid; those who have straightforward financial affairs are the losers. We would get better equity on who pays what tax with a simpler definition.
Agree in principle David, but like I said sometime ago "taxing capital gains is like taxing a thief". As Aristotle noted, the making of money from money itself is immoral. So all forms of income are NOT equal. You won't get an equitable system until that principle is clearly understood, and I struggle to see how that can be addressed with a tax (but I haven't give it a great deal of thought). It is on this basis that I believe Morgan is an inferior mind.
The positive tax discrimination in favour of 'less straightforward' enterprise is a primary reason investors risk their cash in those ventures i.e. they are tax efficient compared with other forms of investment. If that advantage is removed through the taxing of notional capital value, the rate of return would need to rise commensurately to compensate for the risk.
I know that I would definitely not be involved in some job creating ventures that I am, if I had to pay tax on the deemed capital value.
You can put nymads argument that eventually returns will reflect the true capital value and that is right. But eliminate that multi year deferment period with an immediate capital tax and many fledgling businesses will be strangled at birth.
midddleman... Don't u think taxing Capital will open another can of worms..???
One of the iron clad economic laws I've learnt is that ... we all game the system... ie. unintended consequences, higher order effects...etc..
Who determines the Capital value of anything...???? Gareths idea opens a Pandora's box of "gaming things"....
There are a hundred and one reasons why there will NEVER be any kind of formulae that shows that returns will reflect the true Capital value of anything. ... ie... that one can determine the Capital value of anything SOLEY based on its returns...??/
How does one account for the discount rate that helps figure out the present value of future earnings..??
( How will Gareth factor that in when determining Capital values..??? etc..etc.. )
Gareth would end up coming up with "imputed" ways of determing capital values.... ie... "pretend" ways..
Take a farm.... If its economic value is only $1 million....BUT an investor will always pay $5 million because he loves the view.... then how on earth does Gareth figure out Capital values ..and efficient use of capital..??? ( After all... we live in a free world country where we can do whatever we want with our money..?? )
Paradoxically though is not the unfairness created by the very difficulties you raise as objections, also an argument in favour of Gareth's proposal ? e.g. the present widespread offsetting of 'expenses' against income to artificially reduce 'income' and the intrinsic asset value versus productive capacity based value issue.
A deemed 'imputed' value would eliminate those distortions but, as you correctly identify, the chief stumbling block (leaving aside the political/social objections) is what basis of valuation do you use?
Current sale value of fixed assets would seem to be the fairest as that reflects intrinsic features and addresses deliberate under utilisation but is unfair to new business that are highly leveraged compared with older enterprises at free cashflow stage.
The logistics of valuing all equity are also mind boggling complex unless you adopted existing mechanisms such as rating valuations for properties and depreciated asset values for business ( which introduces another distortion as written down assets are commonly worth more than their book value). Don't even begin to think about west haven marina and the value of boats, the chopper in the hangar on the farm, or shares in non traded companies.
A pure land tax has some merit but fails because its collection base is too narrow (land is an only minor component in some high revenue enterprises).
A question for David Chaston .......... should the primary residence be included or excluded as a capital asset for tax purposes /
What about someone who dies and leaves her home to an unemployed child or children living at home like an extended family , as is often the case in provincial towns
The heirs stand to be left homeless if the people winding up the estate are forced to sell to pay CGT
Keep it simple stupid principle.? To re-iterate a commonly stated idea, by far more astute commentators than myself, here and elsewhere, simply remove all the deductibility of any expenses on rental property, increases the tax take (by Billions), benefits other real productive enterprises and re-states the principle of homes as primarily residence for residents.
Perhaps the reduction in income tax or even, as he hinted, a threshold up to where no tax is paid, might offset much of that, if not all, maybe even more. She may even be able to arrange her affairs so that she actually does pay herself rent, in which case, she may be able to deduct expenses. I think we have to look further into this than just summary dismissal.
I understand the potential for an offset, but lets look at some examples.
Scenario.
Year is 2000
I earned $30k
I buy a house worth $200k
Example 1
Year is now 2013
I earned $60k
My house is now worth $750k (it should be noted this is due to circumstance completely beyond my control)
Tax is still 30% and 1%
So I pay $18,000 in income tax, and $7,500 in housing tax. This is offset against my income so again, I am no better or worse off.
Example 2
Year is 2016
I am now unemployed/retired/looking for work, i.e. Zero taxable income.
My house is worth $1mil (again factors beyond my control)
Tax is still 30% and 1%
Somehow I have to come up with $10k in tax as there is no offset.
The first example would suggest his policy is nothing but unnecessary bureaucracy. As tax take is no different for an increased amount of work. i.e. net loss to the economy
The second example, well, I would like to see him explain that one.
The only viable option would be to exclude the primary residence. Something he is absolutely opposed to.
Example 2. You have a million $$, no job. So pay the tax or downsize the house to reduce your tax burden and invest in creating a job.
Or do you expect to sit on you butt, contributing nothing, growing your wealth by doing nothing through cap gain...and expect me to pay you a benefit at the same time?
(and think of the tax we can get off all those empty/seldomused foreign owned bolt holes...Bay of Islands, Queenstown..sitting and paying us zilch)
"Or do you expect to sit on you butt, contributing nothing, growing your wealth by doing nothing through cap gain...and expect me to pay you a benefit at the same time?"
Finally someone hits on the key failure in economic theory. Any person not working is a wasted resource. Those damn retirees, consuming away at no benefit to society. They should all be forced to work, or just do the polite thing and kick the bucket.
But back to my example.
Should I downsize to a house that still has a tax? or should I rent?
Should I be punished for retiring?
Should I be further punished for being made redundant after working at Dick Smiths?
Should I be punished for investing in a house, because you choose to invest in shares and rent? (which attracts no additional taxes under the policy)
Should my equity be taken into account, after all if I can't afford my mortgage the bank could sell it and take the profit rather than me?
Should I be taxed if my house price drops, you know like due to an Earthquake or something.
I am not growing my wealth, I bought a house and lived in it. I have not sold it therefore I have not made a profit in any way shape or form.
Also at no point did I ask for a benefit. I asked a simple question, how do I pay tax on something that has no physical income.
Maybe it could be offset against the eventual sale of the house rather than paid in advance. Oh wait that is a CGT which again is not what the policy is advocating.
"(and think of the tax we can get off all those empty/seldomused foreign owned bolt holes...Bay of Islands, Queenstown..sitting and paying us zilch)"
I have no qualms about taxing secondary, investment, or holiday houses. But again, that is not what GM is advocating.
This was great this morning - full clip not in the link but it was a wonderful exchange;
http://www.stuff.co.nz/entertainment/87333109/the-tax-loophole-cowboy-v…
Exactly the type of conversation that needs to be had.
Do you honestly think that what he is proposing is fair to pensioners?
I personally would be better off, but because I have a conscience I could never vote for this.
I find it hard to listen to Gareth saying that he is the one that is fair minded, and that if we don't support the policy we are just self-interested.
I assume you are talking about the housing crisis? No, I think the housing crisis is terrible and we need to deal with it.
Picking on pensioners is not what I had in mind though. It doesn't have to be turned into an us vs them trade-off which is what this is all about.
There are so many other causes of the housing crisis, and none of them have even been talked about.
You keep coming back to the us vs them talk. Yes pensioners are well looked after now, but let's keep it that way.
By your own words, you expect the retired people of the country to get out and be the productive ones and start businesses. That's the wrong way around!!!!!
Yes I agree that young people have it tough now, but that is because of the cost of housing. We need to deal with that specific issue.
This policy is not the fix to the housing crisis.
You have to try and look through the misty clouds , and ask how many New Zealanders are net tax contributors to the economy ?
Many individuals and families get Working For Families , a weekly payment that often equals or exceeds PAYE paid .
They also get free education , almost free healthcare .
There are other receiving the Income Supplement , and others get all manner of handouts from trusts , etc
Love it...the large voluime indicates just how TOP will grow legs. Social media will spread this to the rentier classes, the disenfranchised, the young .. and yes property owners like me. Oh joy to see the tax rort of the ppty classes finally tackled.. Thank-you Brexit, thank-you Trump and thankyou John Key for making the populace so resentfull that they will finally awaken.
The populace will finally awaken rastus?? By taxing what people have already paid for??
We have a housing crisis, we have house prices going through the roof, we have a huge deficit of infrastructure, we have no growth in wages.
Why tax and punish NZers??
Reduce the population growth and the housing problems will solve themselves as they are problems of supply. Wages will have a chance to catch up as well.
sooner or later and it looks like sooner, interest rates will go up and the mum and dad investors will race for the back door and house prices will come down.
As for the deficit of infrastructure caused by allowing 100s of thousands of immigrants in, in just a few years, that is the biggest problem and will take 20 plus years to sort out and even more years to pay for.
That is the financial disaster that no one including the media want to talk about.
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