By Gareth Morgan
In its election campaign Labour promoted a capital gains tax. That at least recognises that we have a terrible hole in our tax base, and what results is a misallocation of capital to the detriment of the economy.
Investors quite rationally invest to maximise their after-tax returns, and when you have a hole in your tax regime they will gravitate to opportunities where tax can be avoided totally.
That is seldom the same place where the benefit for the economy as a whole can be maximised.
It is in the interest of policymakers then to ensure these effects are minimised.
In New Zealand over recent years there has been a gross over-investment in property, caused not just by the tax loopholes but by the uncontrolled expansion of credit that the global deterioration of central banking prudential standards underwrote.
New Zealand is well known for the unaffordability of housing, blamed too frequently on not opening enough farmland for urban sprawl. More likely it is because housing is entrenched as the holy grail of unearned wealth accumulation so in essence the speculative demand has outstripped any demand for housing to meet accommodation needs.
As long as this is the case of course the "affordability" of housing will remain low - purchasers of property for their accommodation needs are but a small portion of the market demand.
Part though not all of that is because of the tax loophole that housing offers, particularly the tax-free nature of the return from owner occupation. This was highlighted in the McLeod Review of 2001. In fact, in the first draft of McLeod's work the recommendation was that the tax on all capital (not just housing) be extended to include income earned whether it is cash or imputed. That was a sound taxation principle that politicians couldn't stomach, and for whose neglect we are now paying a high price.
In the book The Big Kahuna we expanded on the concept of a comprehensive annual capital tax designed to fix the loopholes in our current selective income tax regime.
The benefits are that owners are forced to use capital efficiently and low-return uses of capital face a higher tax penalty to discourage that inefficiency. An effective 1.8 per cent tax on the value of a house year in, year out would recognise that owner-occupiers are receiving free rent in effect. That would knock the wind from the sails of speculative investment in housing that accrues courtesy of its tax-free status.
Labour's capital gains tax was a big improvement on the status quo but nowhere near the optimal approach for taxing the return to capital.
It is unfortunate that the comprehensive capital tax proposed in The Big Kahuna still gets referred to as a "capital gains" tax by uninformed commentators. The confusion with a capital gains tax as proposed by Labour has caused serial misreporting of this topic.
For example, it's been reported that I favoured a capital gains tax on the sale of my investment business, and even Phil Goff toured the country claiming Sam Morgan advocated a capital gains tax on the sale of Trade Me.
Nothing could be further from the truth.
The prices paid for both those assets reflected the reality that tax is paid on company earnings each and every year. If that annual tax wasn't paid, net earnings would be higher and so would the price the buyers paid for the asset. It would be helpful if commentators could get their heads around this.
The objection I have to the tax regime is based simply on the reality that for some forms of capital not all of the return is taxed. Put $400,000 in the bank and you pay tax on the interest, and then from those after-tax proceeds you can pay your rent. Buy your house with that $400,000 instead and you enjoy a rent-free life.
As long as we all can see that this tax loophole is a no-brainer we all buy property for the tax advantage and of course the more we do that the more certain it becomes that the price of the asset will rise more than inflation over time. And if I think this to be the reality then as a committed speculator I'll buy four more houses on debt, gear them up just so I can offset the rent with interest and then enjoy a tax-free capital gain.
It is a national obsession. And of course it's self-fulfilling until finally your lender says "no more". Then you are terribly exposed. But as we've seen it can take decades to come to that.
Apart from the inequities that arise from the tax-favoured status on this particular asset type - pity the poor souls that never manage to get aboard the property-owning gravy train - the extent of investment that is misallocated and consequently the GDP growth that is forgone, manifests in incomes lower than they could otherwise be, and more people unemployed than needs be.
The concept of the annual capital tax is to ensure all forms of capital (land, buildings, equipment, structures) attract tax in an equal manner every year and that capital that doesn't make a minimum required return (the government stock rate) faces an increased tax burden while capital that does is unaffected by the presence of this tax. It negates the need for any capital gains tax.
And what of the situation when it is time to sell a business? Changes of ownership do not trigger a tax liability under an annual capital tax. The business would have been paying tax annually on capital it owns anyway.
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Gareth Morgan and Susan Guthrie are authors of The Big Kahuna - Turning Tax and Welfare in New Zealand on its Head.
This opinion piece was first published in the NZ Herald.
101 Comments
I get zero government money in the form of WFF or any other subsidies, just to be clear. I admit to some kiwi saver subsidy through the tax credit. Wish I had joined sooner to claw some more of my tax money back.
On top of the rates I already pay on my house which are significant and the taxes on my PAYE and the taxes on my small retirement fund and the taxes on my again small savings emergency fund which is paying me peanuts in interest you also want me to pay more taxes on the family house I bought to try to avoid poverty when I am too old to work and the government runs out of super? Which house by the way we put every penny we earned into, doing without to get the mortgage paid off as fast as we could and doing all the insulation, renovations etc. ourselves, some winters without walls and one notable winter with the toilet outdoors a walk down a plank.
Are you trying to entirely kill off what is left of the almost-middle class? Almost middle because I am living pay cheque to pay cheque with a VERY frugal lifestyle and growing my own fruits and vegs. I don't think NZ has a real middle class anymore, we're all just broke and broker except maybe the one percenters on top. You must be one of those.
You want me to pay MORE tax on my house? Is that what I just read? Get stuffed!!!
So you want the odd government subsidy and expect everyone to feel sorry for you because of YOUR own personal debt decisions ?
Putting 'every penny' you earned into a fancy "prison cell of debt" conned out of you from a bank was your decision. Now you say you're struggling? Tough titty!
Well said Justice.
Add up the deposit and interest paid, that is a substantial bit of capital that could be put into starting a productive buisness. People in NZ think renting is so below them, and must mortgage themselves to have somewhere to live. Owning a property is something you earn, not a birthright.
It is not necessary for councils to become the developer of first resort. All that is necessary is for plans and boundaries and permission processes to CEASE to be an enabler of semi monopoly gains for the owners of "land banks" - who are not necessarily "developers". Developers are often the meat in the sandwich.
The 200 odd cities in the USA that never had a price bubble, have sections for sale all the time at $30,000; big top end of market ones are still under $100,000. This is simply because the raw land price is normal farmland price - under $10,000 per acre. And this is because there is no limiting and rationing of where anyone can develop. There is simply SO MUCH land within a k or 2 of the urban fringe that it is not worth anyone's while trying to "corner" the supply.
Stop spreading such stupid miss-information. This kind of supply and demand analysis doesn't apply to markets,
http://en.wikipedia.org/wiki/Sonnenschein%E2%80%93Mantel%E2%80%93Debreu_theorem
"Thus microeconomic rationality assumptions have no equivalent macroeconomic implications."
"The objection I have to the tax regime is based simply on the reality that for some forms of capital not all of the return is taxed. Put $400,000 in the bank and you pay tax on the interest, and then from those after-tax proceeds you can pay your rent. Buy your house with that $400,000 instead and you enjoy a rent-free life."
Why not erradicate the tax on the interest earned on the deposits...afterall the parasitic banks leverage it 30 times and loan out about $10,000,000 on a $400,000 deposit....and it is that which is causing the property speculation...........The economy is bloated on credit!
GM fails to see that if govt were stealing less tax from the economy, running a frugal and prudent fiscal set of policies instead of buying votes....then people would save more knowing they would not be taxed on the interest...and the interest payments could be lower....and the capital needed by real export earning enterprise would be that much less costly...
Yes it would demand some real controls on the LVR levels...not the free for all crap we see today...and a govt with real leadership would screw the banks with mortgage taxes on all credit above 40% LVR to the ceiling of 65%...that second mortgages et al would be unlawful.
People and business would have to save if they wanted to buy property or invest in a venture. They would save knowing the tax was less...fat chance of any such thing happening in NZ.
The so called paye reductions were a farce...the GST rise took care of that...and nailed the lid on the building sector coffin....stupid bloody govt.
Agree completely on tax on interest.
It stinks that politicians think they should introduce a fandangled subsidised savings scheme when all they needed to do was abolish tax on interest - if they wanted Kiwis to save again.
I also think company taxes were always a misguided spite tax. Why tax profits BEFORE they are distributed as income to anybody? Is not company growth just as good for the economy as things like Student loans, that politicians think they should subsidise?
A growing company is obliged to go to the finance sector for capital for growth that it SHOULD have been able to fund out of profits. This is just one glaringly obvious thing where the finance sector loves political interference that benefits THEM at the expense of "main street".
The current housing affordability commission talks good sense on this.
Firstly, capital gains taxes are unfair if they are not net of inflation.
Secondly, nothing can escalate in value indefinitely. Unusually high capital gains in things like property, have to be accompanied some of the time by capital losses. Presumably it is equitable then for government to "pay back" taxes to the one-time "capital gainer".
The fact that interest is taxed, ALREADY represents a tax on debt if the investment is based on borrowed money.
In the case of property, local body rates and GST already represent a reasonable tax burden.
I am all for the tax burden being shifted to some extent, OFF income, interest, profits, "capital" and buildings and improvements; ONTO LAND itself. There are numerous justifications for this. Taxing PRODUCTIVE capital is not a good idea.
I also like "Tobin taxes". The finance sector of economies has grown like a cancer, at the expense of "main street", producers, and labour. Time to shift the tax burden onto "wealth transfer" and off "production".
Another interesting point the Housing Affordability Inquiry made, was that INSTITUTIONAL investment in housing has been very LOW - most of it has been mom and pop investors. This suggests that most of the investing has been based on myths that institutions see through because they do more due diligence.
You lose credibility from the outset Gareth.
"That at least recognises that we have a terrible hole in our tax base, and what results is a misallocation of capital to the detriment of the economy."
You of all people must be aware that it is a debt based system and not capital at all.
JD - that's exactly what they will try and do - tax the existing 'equity' of ordinary folk. When the hoo-ha about CEO payments is investigated, it doesn't stack upagainst the mass of ordinary folk, and they're down to being cash-poor, house rich. Perhaps we can pay IRD a brick at a time.
Snippy - it's a growth-requiring system, land is finite and you can't 'supply it' without displacing something else. Globally, we're going to be asked (physically, forget financially) to produce more food in the next 40 years, than we have in the last 8000. Won't happen, but don't expect the effect of the attempt to either increase subdivisable land, or make it (relatively) cheaper.
Scarfie - quite right. Morgan is like most vested interest types at this point - has to believe in something that you can see is obviously gone. What would that 'GDP' growth be based on? Selling to someone overseas. What will they be doing? They live in houses too. That last phase of growth needed all stops out - maxed debt, biggest houses, fastest building rate, total globallity. Nothing else goes close to that scale, nor ever will. The only way you get significant GDP is by indulging in signficant consumption, and it has to be by a significant portion of the populace. The tax-take on the way back down, has to start carving into existing assets.
That reflects reality - the same way the Crafar sale reflects our collected debt; it's like selling a part-mortgaged house. Listen for the howls as folk realise they're going backwards, watch for the triage of services, and the deteriorating infrastructure. And the collective negative ROI's - but hey, they'll be a tax loss....
I am not so sure JD will be in trouble PDK, I heard once that the 1930's was a big land grab on behalf of the banks. I can see the same setup here and anyone with a debt is vulnerable. The money is only electronic, but in a failure the banks get to seize the assets the loans are secured against which I am sure will be to their liking. The banks won't allow "their" assets to be taxed. Open to argument on that position though:)
I've not read the Big KaTaxer, don't intend to, but in fairness to Dr Morgan (whom I have no love for whatsoever as I view him as a Nanny Statist, and he called my wife a wanker and a dropkick :) but does he mean the annual imputed capital tax (dreadful because it's another bloody tax, and it's imputed so will probably be dreadful to administer) to apply to your own home, or just investment properties? This piece makes is sound like it does apply to the famly home,namely:
The benefits are that owners are forced to use capital efficiently and low-return uses of capital face a higher tax penalty to discourage that inefficiency. An effective 1.8 per cent tax on the value of a house year in, year out would recognise that owner-occupiers are receiving free rent in effect. That would knock the wind from the sails of speculative investment in housing that accrues courtesy of its tax-free status.
I know one of the ladies posting to this forum has read the Big KaTaxyer, would you care to edify me please? I thought the family home was to be exempt.
If it does tax the family home, then JD has it in one. And Wolly's right also. To 'balance up', instead of inventing more taxes, just get rid of the taxes that are distorting in the way he doesn't like, that is, taxes on income and investment, and thereby return us to limited government, limited State, and give me my freedom back. When will Kiwis wake up to the Nanny State: really, listen to this, a school has to sell 40 sausages just to pay the council compliance cost to run a sausage sizzle - offensive.
Snippy - sounds liked the mixed horsepoo one hears from Labour.
When species go into overshoot, their numbers will decrease. Most species can't contemplate future developments, but we should be able to. Either we decrease our population voluntarily, or mother nature will do it for us. No third alternative, and the latter will be the messier.
Unproductive? Silly comment, until you've defined 'productive'. (and the plural is 'are').
Horses? Given where we are re fossil fuels, some may turn to them (but things will be so out of kilter by that time, that it won't help; just do the 'horsepower' math, and add the land required for grazing).
Lets take it from the top, logically:
There will be more labour, and less transport available. per acre.
That's a given. So you can expect smaller holdings, more of them, and probably a resurgence of existing towns and villages, and some new ones. BigAg relies on oil every bit as much as urban car-based sprawl, so both are in increasing trouble.
There are two types of lifestyle blocks (or smallholdings, same thing) - those which are actually more productive in terms of land husbandry and sustainability than BigAg, and the big-house-ride-on-mower type. The latter don't have a prohibitive footprint, and so can become the former with a mere attitude change.
Perspectivet tells you to look bigger - if the ability to repay sprawl mortgages is due to dwindle (further) and the time vs maintenance of infrastructure has to be triaged against greenfields development under a sinking energy lid, the funding will progressively dry up. Read some Herman Daly, re World Bank and Bankable Projects.
You also need land to feed ppl......and energy to transport the food to them.....when energy is no longer cheap transporting food great distances to compact populations becomes expensive, prohibitive even. If you go back to the 1900s cities were a mess and yes horse poo rather common....pretty much pushing their density limits.....Today we have new limits can only be sustained on cheap fossile fuel energy....since that isnt the case going forward how we live will change. Currently I suspect we will go more and more back to local and the numerous villages, some towns and few cities layout of the past......it evolved like that for a reason....it worked given the annual energy limits.
Yes lifestyle blocks are pretty un-productive.....silly sods have over-paid for large sections they get no real return off......their day job subsidises that....
regards
Even if you doomsayers are right, the parts of humanity that have the most resilience and will be left standing longest, are the ones with the FREEST markets, especially in land.
Running a Ponzi in urban land and making young people pay dozens of times too much for their piece of dirt to exist on, is like "selecting against yourself" in Darwinian terms. It is like being made to run a "death race" in a sci fi dystopian movie, and deciding that because most of us are going to die anyway, we must put chokers around our children's necks before the race starts.
While we all go broke just paying for housing, the Yank car and sprawl lovers will just stop using V8's and start driving 4 cylinder cars, instal solar panels, low energy appliances, and downsize everything a bit - AS and when they HAVE to. But we won't have any room to move, the "inflated urban land cost" chokers round our necks have already made us downsize and trade off every bit of discretionary spending.
The Eco Nazis buff over starving humanity off the planet faster than nature would have done it, with their vile politics.
4cyl cars, there is the issue with sprawl and distance as well....changing that isnt so easy...funny but the few americans i talk to wouldnt downsize they want their v8s no matter what.....you still dont get it....this isnt a downsize a bit.....this is use 1/2 the energy you do now....in a few short years.....
"eco nazis" yeah right.....all you aim for is to take a biiger and bigger slice of a diminishing resource....at some point, you have can kicked until its a huge drop, instaed of a more manageble decline...this is reality.
regards
Read "Decentralisation and the Stability of Travel Time" by Alex Anas.
Where is your data to prove that there is a correlation between urban planning growth constraint and reduced resource consumption and CO2 emissions, that is NOT explained by the falling incomes and rising unemployment that growth constraint causes? Or that is not explained by higher petrol taxes (as in Europe).
This is what I have studied in depth. Urban growth constraint planning is a failure differing from the totally planned Communist economy only in the SCALE of its failure. It is every bit as much illustrative of "unintended consequences" - Hayek must be hooting with laughter up in economist valhalla.
It does NOT IMPROVE jobs-housing balance, it DESTROYS it. This is because it forces the base price of urban land up so much, that "location" premiums (eg for homes near the CBD) make efficiently located property UNAFFORDABLE TO MORE PEOPLE.
Look at any city in NZ or Aussie or Britain; or Portland, Oregon, or LA. Look at the relentless ABOVE average density development and infill going on in the locations FURTHEST from the city centre.
Look at the graph on Page 12 in THIS paper:
http://alain-bertaud.com/images/AB_The%20Costs%20of%20Utopia_BJM4b.pdf
See what has happened to “where most people live” in Portland since they established an Urban Growth Boundary?
This finding is supported by further academic literature by Patrick Troy, Jan Breuckner, and Anthony Downs.
Is the average commute to work in Wellington, NZ, pop 350,000, shorter in time than in Houston, pop. 4,200,000? The amount of preening and self congratulation that goes on among our sneering anti-car elites is classic "emperors new clothes" stuff.
There are actually just 3 factors that matter here:
1) the level of jobs-housing imbalance
2) the level of centralisation or decentralisation of jobs
3) the amount of road-lane space per vehicle
Intelligent planning of junctions etc is assumed.
Increased density without increased road lane miles always leads to congestion related losses greater than the gains from the small % of behavioural changes. Centralisation without road lane miles always also has the same outcome.
The low density low land cost cities of the USA will be the last ones standing if your worst predictions are true. The cities and countries that imposed "indulgence" type penalties before and on top of the free market price increases of running out resources are "selecting against themselves" in Darwinian terms.
Not that anti-human deep Greens dislike this idea, far from it. Deep civilisational self-loathing lies at the bottom of much P.C. mantra today as well as environmentalism. They actually do not mind at all deep down if some totalitarian power gets our land and resources one day and turns our country into similar form of "ecocide" that is seen in China and the former USSR - what they hate most, is business men making a profit on resources, and happy western civilisation's "consuming" families. As long as everyone is poor and starving a la North Korea, they don't care about the environment at all - again, North Korea exemplifies their desired balance between total environmental devastation, State-imposed equality, gross inefficiency, and starvation.
Gareth ignores one huge reason that New Zealanders love property. It's about the only one that you can avoid interaction with the financial services industry. Given the rapacious behaviour of the industry in which Gareth is a core participant, and how the customers of it have been fleeced in every way, the mum and dad investor wisely avoids it as much as they can. The much maligned house landlord is often in that business simply to avoid all the crooks in Gareths industry. It's time to fess up Gareth.
Ah yes, the slick and slimy salesman's career choices - car sales, real estate, life insurance, poltics, stocks and bonds; in increasing order of intelligence required. Not that all salesmen are bad but they are subject to temptation. The more intelligent they are the more dangerous they become.
I tend to agree, but there are some that are genuine. If you look into the MBTI type ESFJ they are types focussed on service to others which makes them very good at sales. I guess they are not immune to being dazzled by the dollars but they are more resistant to it. I know a few sales reps that are pretty laid back.
All profit / interest should be taxed equally....
In effect tax is paid, if I pay someone interest they pay tax as its profit....
Also I fail to see how that effects how ppl invest....which is a significant part of the issue.
Are you saying ppl shouldnt be taxed on bank deposit earnings? only? which is in effect an almost risk free rate of return. What about intrest/profit from investing in a business? which is risky? thats still taxed?
You appear to make no sense....
regards
KH - that's the accepted view, re investment and ROI, but it's historical. Note the graph.
http://www.indexmundi.com/energy.aspx
That expected ROI expects to go out and buy a 'something'. That graph tells you the amunt of 'something' that can be produced. (the only caveat is a flattening of the graph via 'efficiencies', but given that you can't be more than 100% efficient - and you'll never get there - if you start from, say, 50%, you can't 'double', ever).
That graph tells you - in the absense of any proven technological replacement - that any type of interest (and profit) is increasingly in trouble, underwrite-wise. Flat fees will rapidly replace interest, is my pick.
The work requiring the taxes in the first place, will increase beyond incomes too (rates and taxes will increasingly exceed inflation), it's gonna be interesting to watch.
"rates and taxes will increasingly exceed inflation" yes interesting stuff.....the roman empire tried to ensure that income by locking ppl to the land....and ever increasing the burden on them....but unless you intend to hold down today's society/ppl by force of arms I cant see how it will work as the burden (ever) increases so will the opt out of taxable income.....ppl wont have that choice....they will have to grow much of their own food.....so no GST there.......etc etc.....
Q is just when will councillors and Central Govn understand/accept that ppl will simply go "bankrupt" in ever increasing numbers under that accelerating burden...and once you have nothing you cant be taxed... So they take more and more ppls houses? as its their last asset....which will be what, almost worthless and a burden on the council/Govn and not an asset? (who will be buying?) What happens to the ppl then, put them back in the same house on "welfare?" put them out on the street? .take your home grown food? forced labour? re-introdce indenture (slavery)? it sure doesnt look pretty....makes no sense........cant see just how this will pan out.....
regards
If we really want to get working on correcting incentives, then given the havoc, including increasing violence, and poverty produced, by the welfare state, there's a good argument for taxing childbirth rather than not subsidising it. Make parents think about their decisions, and have families responsibly, and only through natural love and affection.
Though as a libertarian it's geat to be able to say exactly the same would be gained by simply not subsidising childbirth via WFF and DBP. No new taxes please. Taxes were never, ever, meant to be used to influence the behaviour and actions of individuals, just fund the basics of the limited state. By ignoring that we've ended up with Nanny's Police State.
Historically taxes were takenby force to provide for the needs and wants of elites that did not want to work.
The "nanny police state" came about a realively very short time ago. It can be argued that all the state is doing is keeping money circulating. The state does not save money, it spends all that it gets every year. Payments to the poor keep rich people rich.
Rent subsidies prop up house prices for landlords etc.
One thought, Labour shortages created New Zealands egalitarian dream. right from the start labour shortages thwarted the plan of the elite speculators to build another britain with tenant farms, serfs etc.
More recently without any vote being taken labour shortages have been eliminatedas we have been repeatedly told we needa larger population. yet the Dairy Industry only needs around 60,000 workers all up. The up dorr immigration policy has been to one purpose, to supress wages. Thats all. We do not need a vast increase in our population a lower rate of population growth together with a growing economy focused on quality exports could see us in a different place one where people were valued because they were not so easiy replaced. And technology employed rather than simply adding more cheap labour.
The argument that subsidising child birth is a major influence can only have any credibility in a non-factual context. In fact both poor countries and sectors of society have some of the highest birth rates, regardless of subsidies and welfare. This is quite easily statistically measured.
It is equally apparant that lowering of the birth rate is tied to
1) providing education for women (which might include education subsidies).
2) providing access to contraception (which might include subsidies).
3) facilitating a role for women in society.
As to the statement "taxes were never ever meant to be used to influence the behaviour and actions of individuals", well the opposite is true. Taxes were used to subdjugate people by Alexander the Great and the Roman empire. Of course nobody said that the influence was 'benevolent'. Adam Smith advocated a 'benevolent' form of influence, which was suppost to eliminate all forms of un-earned income or rent from the economy. This would mean, as the economy grows in output the financial system grows in line. This is basically the opposite of what happens today where lots of un-earned interest is extracted and financial incomes and incentives therefore have no basis in the real economy.
Yes Andrew it is a prick of an idea. But at least you follow it which Steven doesn't. Obviously too far outside his world.
Repeating. We want people to invest. Now we tax them. But when people borrow we give them a tax deduction. Isn't that back to front.
If it's desirable that we change peoples saving/borrowing behaviour would we not do it the opposite. Tax on interest paid. No Tax on interest earned.
Now. You get your bank statement: You see interest earned followed by RWT withheld. (tax!)
Future. You get your statement. (overdraft) You see 'interest charge" followed by Tax charged on that.
A prick of an idea yes Andrew. I am interested in comments on what effect that might have on taxpayers behaviour.
Whats the real difference between investing money you actually have and borrowing to invest? Both are done for a profit....at least if they are productive investment.....realistically most ppl/comapnies can never expand/grow fast enough without borrowing....So no we dont want to stop productive borrowing, we do however want to curtail wasteful borrowing or investing.
regards
It sounds like a Tobin tax, but only applied to interest payments. Maybe I should have said T***n tax. Is there any difference apart from being slightly more selective?
I actually don't think there is a need for new fangled taxes, so much as a return to a really regressive tax system. Many problems can be traced right back to the Regan, Douglas, Thatcher period when taxes on the top were drastically cut. Businesses really did re-invest profits then, and there was good reason for that.
I see various suggestions about how to tax landlords - including Gareth above. Which somehow will reduce rents.
I can't see the mechanism that the Gareths see.
It seems to me that if you make landlords task more expensive, then rents will rise, albeit modified by market realities.
Can anybody outline for me the 'mechanism' of Gareths suggestion. Because I can't see it.
Rents have been artificially low because of expectations of capital gains on the part of property investors. This situation is highly temporary. I agree with you, that taxing landlords is an illogical way to reduce rents.
Another interesting point the Housing Affordability Inquiry made, was that INSTITUTIONAL investment in housing has been very LOW - most of it has been mom and pop investors. This suggests that most of the investing has been based on myths that institutions see through because they do more due diligence.
That is a good point - so house prices have to come down, rents really can't go up to restore the sensible P/E relationship between house prices and rents.
I am more and more convinced that institutions stayed out of all this precisely because they do due diligence. Mom and pop property investment has been based on mythology, the same mythology as what is really the underlying cause of the GFC.
This particular article came out a couple of days ago and you would be hard pressed to find a good word said about it in the NZ Herald or here. I find that really interesting. The very small number of people that own most of the land/assets in New Zealand do not even have to bother defending themselves from this attack from GM as for a whole bunch of reasons a large number of regular people see it is in their best interest to protect the elites at all costs in a misguided belief that their own interests and the interest of the elites are the same or at least aligned. It is almost impossible for them to see that for most New Zealanders we have more in common with, more interest in, and more connections with the very poorest in our society rather than with any of the elites -The Todd family the Spencer Family - the list goes on and on but not nearly as long a list as you would think own most of New Zealand. GM has a hard road to bring people in NZ to any sort of understanding on this issue. Maybe it would help if we knew who actually owns this country and where they got it from.
New Zealand has been a real estate scam by some elites from the very start. If we could acknowledge this and understand that they nicked the lot and then sold it off bit by bit then we might see that what GM is proposing is actually on the side of fairness.
Why should we go along with the current system that taxes us for working, taxes us for buying and selling, taxes us for employing, but does not tax elites who sit around with their hand out.
Do we really not get the fact that they are the budgers and they are costsing us far more than the people on the dole ever did.
Why not have a bit of the 'creative destruction' that is so great about capitalism and have a changing of the guard, I am sure that the inheritors of the Todd Family and the Spencer Family fortunes etc would relish the opportunity to prove just what great capitalists they really are and do it all again. And maybe dthey would then do some real work for a change instead of getting the rest of us to pay for their lifestyle.
But probably best if we just blame the poor. Much easier all round.
While most people do have more in common with the poor than the rich, its a little bit like Cullen setting the top tax rate at earnings over $60,000. After a few years it affects a lot more people. This tax affects a lot more people because of the low threshhold.
You also get penalised for owning commercial property, duh
Let alone having a tax on my capital invested with GMK which loses money!!
Interesting comment. I've come the view that the kind of taxation problem GM is trying to address could be thought of as 'economic apartheid':
http://www.interest.co.nz/opinion/tuesdays-top-10-nz-mint-nz-australia-very-exposed-if-chinese-growth-slows-feds-us110-mln-printing-er#comment-591748 I doubt Soujth Africa would have been able to introduce a capital gains tax regime without removal of their racial apartheid system: http://www.realeconomy.co.nz/144-capital_gains_tax_pros_and_con.aspx What's NZ's excuse for not grasping the nettle in this area of taxation? Cheers, Les. www.changenz.co.nzNot so fast there, misdemeanour. The other day I was in Parnell and I took the opportunity to spy into the backyard of the elites. And what did I see there, but thousands and thousands of nicked acres all stacked up against the back fence! That’s right, it was outrageous. And what do you think they were doing, well let me tell you, they were sitting around and laughing! Laughing! In fact I could even here one of them gushing, “I’ve got a Porsche”, before they all broke out into quaffs of laughter. The Police should be called!
I guess you are kidding but
The founding of New Zealand was a gaint real estaet scam. The country was basically stolen from its owners the Maori. You do know this don't you. The British Elites had been doing this since they invaded Ireland. (it was close and hardly any french was probably the reason). They use laws created for them and by them to expain away the theft but that is what it is.
You could say that private property and the rule of law were exactly what the colonials did not bring. Because lets face it they simply stole the whole country and used pieces of paper to prove that hey owned it and the Maori didn't. My only point is that we need to understand what actually happened in New Zealand a very few years ago. And not pretend that it was all for the best
Whatever could have happened, we should acknowledge what did happen and not the notion that it was all for the best. There were plenty of other ways it could have gone down.
1. The English elite turn up a few years earlier and systematically wipe out every single Maori. Almost happened by chance, image if theye did the same here as per the out come in the US
2. They could have turned up a few years later and done deals with the local chiefs to extract anything and everything but left well enough alone
Actually I think that the temperate climate meant that they were laways going to invade.
Excellent points. Yes most of us are a lot closer to those at the bottom of the heap than the top. It only takes a calamity for many of us to need the help of the state that many here bemoan. A mate of mine was only too happy to slam the "nanny state" and bludgers, that is until he lost his wife, his job and his health. I certainly don't support the extent of our welfare system, but I certainly support its core intent. It's also worth reiterating that our planning system also favours the elite at the expense of the majority yet somehow left leaning planners defend it to the grave
The components of this very debate is being played out in the US right now. First China has a CGT rate of 20%. Second, USA has a CGT rate of 15%. Third AU has a CGT rate of 20%, Fourth, NZ has a CGT rate of 0%. Warren Buffet pays 15% tax while his secretary pays 30%. Mitt Romney paid 14% in 2010 and 2011. The answer is both Buffet and Romney earn all their income from Capital Gains. If both Buffet and Romney were domiciled in NZ their tax rates would be 0%. If USA had no CGT Romney would have paid no tax for the years of 2010 and 2011, and he wouldn't have a snowflake's hope in hell of becoming the Republican Nominee. While that inequality in tax regimes continues, New Zealand will continue to be the receptacle of hot-money seeking to escape the ravages of the CGT imposts in the originating countries.
This is confusing. The trouble with capital gains, is that only some of it is net of inflation; and also what goes up can, and often does, come down.
Buffett and Romney actually earn a lot from dividends - sure the tax is only 15% but the profit of the companies involved was taxed at 30 to 45% BEFORE dividends.
What I have been arguing for a while is that there should be NIL tax on company profits reinvested, but taxes on distributed income (Buffett's dividends, etc) can be as high as politically expedient.
We also need to be clearer about the difference between productive capital and non-productive "capital". We should not be taxing productive capital. Taxing land is a good idea because that captures uplifts in value that the owner has NOT necessarily actually DONE anything to deserve. If you DON'T tax the land owner's "capital improvements", all the incentives are right.
Utter twaddle icono....if the govt demand for tax dollars is slashed there is no need for any CGT theft. If they are stupid enough to think they can win an election with a CGT, they will lose big time, because the bulk of the economy is property exposed to a CGT including the family home....but probably not holiday property in Hawaii....!
Think about the damage exposed by the GST rise...look at the building sector....do you think handing the stupid fools more tax will solve the problem of spendfest govt behaviour?
Stop thrashing about for support icono....my first act would be to slash my own salary by 25% and then chop 15% off all the senior state sector salaries...Where is it written that state bosses are not subject to the same sort of cutbacks as the workers at the bottom of the heap. Not one state sector boss has said "I will take a cut in pay"...not bloody one.
Before you go handing govt a big fat new tax...you might want to work out what the consequences might be. The fools didn't think through the GST/paye flip flop and look what it's done to the building sector!
And before you go yelling about the chch disaster....decades of gross mismanagement by successive NZ govts have been a dam sight more of a disaster.
GSt should at a maximum be 10% over that and it really starts to get in the way. massive insentives to offshore as much activity as possible.
PAYE is basically a payroll tax for comapanies so again, set it too high and they simply offshore stuff.
In the end we will have to lowere these sorts of taxes and find a replacement- yes sure lower government spending- but really that is not the bi problem, redistributing money moves it around gets it working.
So in the end we will have to lower GST and PAYe etc and tax Land in some way because land is easy to find, impossible to hide and you can tax it no matter what the legal entity that owns it is or is based.
So sure have a smaller government, but will we still have to have a means of moving money around- rich people simply do not spend enough- how many butlers can they have etc. That is why trickle down did not work. And in the end we will have to tax land. After all it is taxed already - it is called interest payments to offshore banks who created the money we used to buy it with ( Thank you Ian)
Yes Wolly, why is it that to solve a 'problem' the government standard answer always seems to be to increase tax. They should remove tax from savings - people have already earnt that money.. they paid tax on it when they earnt it.... and they pay tax again when they spend it....and they pay tax when they save it... honestly why doesn't the government give everyone an allowance enough to support life, and just take the rest?
Clearly economist, you are not employed as a state servant!...and it's odds on you are not a politician. Yep I figured what you was up to.
Sadly, less taxes...smaller govt....these are not going to eventuate in NZ...at least not this century.
You could scream pure logic about real job creation into the vacuum between political ears for an eternity and get nowhere....they do not want to know.
I learned long ago to bend with the wind...living in wgtn helped. The name of the game is rort the country for all you can and move what you grab to a place safe from thieving govt...this is what the pollies do...and no doubt all those on the receiving end of the inside info.
Alias Wolly - we will all end up servants to the state if the government keeps spending us into ablivon like some are suggesting it do... whether we are employed as such or not. You can't spend you way out of debt... although the government thinks we can...that's what keeps the fony credit system going...
I've always been in the private sector and have run multi-million $$ businessses (although not my own) - now I'm in the charity sector dedicating my time to helping others more directly...NZ could easily be such a rich country...anyway....
Read an article the other year where Obama said politics is in effect about 'governing the people not representing them', was on an Air NZ flight - which I would have kept it...
The ex-assistant secretary of housing in the US came up with a perfectly workable solution for the US - but they weren't interested... they had already decided to move the wealth off shore.... I don't know where this thing will end - maybe bringing back the dealth penalty for treason...
Good on CHC for saying no to the executive raise... I hope we see more of that.... it's not like there are no other people who could do the job...
Oh but economist...... you can print your way out of debt!....Obama is a liar and a user of people for his own political ends.
The salary the chch CEO opted to hang on to is still far higher than the going average for that line of work. Chch ratepayers deserve to be rorted and scammed because they have allowed the waste and stupidity to carry on for so long. No different to NZ.
If and when the collapse arrives, expect the IMF to turn up with the same attitude they have taken into Greece. On that day half the state sector staff will be fired. The bosses left will have their salaries chopped in half. The bonuses will be history. The contracts for flunkies game will end...the working party pigfest will stop....
But until then the party will carry on with the waste and fiscal farce....
Its all about keeping up confidence at that level Wolly, he couldn't tell the truth even if he wanted to.... just like the central bankers - they only lie when their lips move - so at least it's easy to discern for us non-technical types...I don't think it matters what Obama says. It's what he does that's important (some Americans are waking up to this now...finally). Although he does have great speech writers, 'hope for change' and all that - inspirational stuff! - very entertaining, cruel, but entertaining...
Elections in the US have become the American version of Political Idol - it's just about personality plus. The CFR run America, not the white house... oh wait...hold on... the CFR are in the white house... hang on - what?
More and more bailouts forever - yah! Still at least it keeps government spending and borrowing up and keeps that credit following...that's the really important thing... I mean if that's how you grow an economy why don't they just print (borrow) another 10 trillion and spend it.... no wait.... they are.... no I didn't actually mean that... no seriously, you can stop printing now... STOP STOP I say.... why are you not listening? - do you not know how to do any other tricks you silly silly pony?... can't you see the taxpayers are enough in debt already?... no wait? what's that? the debt change stats aren't included in GDP growth figures? Oh okay, all's good then, as you were.... those 'green shoots' of recovery sure are taking a while to come through though...
Maybe, but the whole point of Gareth's article is that he is not talking about a tax on capital gains. He is talking about a tax on capital. That is, you pay tax on the value of your house even if you don't sell it and so have not made any gain, even (presumably) if its value has gone down so your total wealth has actually reduced.
MdM: Agreed: Was trying to be brief and make the point that it needs to be done. The absence of a "tax on capital" in whatever form, attracts capital from higher taxed domains, resulting in outsiders exploiting the differential at the expense, or disadvantage, of the locals.
Do you have any actual proof of this, iconoclast, some facts and figures, and some concrete examples to support your argument, or is this just pure conjecture on your part? As I have to tell you, I'm not aware of a flood of capital coming into New Zealand with the purpose of taking advantage of our lack of capital gains taxes. In fact far from it.
This video encapsulates the problems .. there is mass migration occurring from east to west which in turn is pushing westerners from north to south.
The conclusions are biased and politically incorrect .. but the numbers are about right http://www.youtube.com/watch?v=Ys4zYe0qiJw
I wonder how to value capital in order to tax it. Some assets are difficult to value and their would be strong incentives to lower the valuation as much as possible.
I also wonder what would happen to "under-developed" capital, e.g. Maori land, which start getting taxed at rates higher than what it is currently earning. The repercussions as the economy adjusts would be enormous, much greater than, say, Rogernomics.
"What is the diffrence ?
I buy a house for $ 400,000 and sell it for $ 600,000 = $200,000 Profit or Income"
Isn't there a problem here? If it's your primary residence and you trade in the in the same market for similar, where's the taxable profit? What if you're a BB trading down to provide retirement funding?
Will you also allow for losses??
The problem funding an insatiable state appetite is the result of successive govt's turning voters into beneficiaries. We are rapidly running out of "other people's money" The adjustment to reality is going to be very painful. Taxing everything that moves to chuck money down a black hole is only going to make things worse and fuel the "black economy". And yes I believe a CGT will target the family home and taxing that kind of "capital" is nothing short of bloody theft. Your home is already a tax paid investment.
But a rich guy pushing this daft idea makes it OK???
A Frenchy once said "The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing" Colbert 17th C.
This idea og GM's has got the geese hissing .
I own my house to live in. I don't want to pay a tax on unearned wealth. I suspect most elderly people on pensions would have a hiss too.
If there's a hole in the tax base then politicians can fix it by spending less.Stop plucking us.!
Gareth's plan is simply a way to enrich the rich.
Any already wealthy person could move all their capital off shore and therefore not pay his capital tax.
While grandma in her little bungalow (in what is now a desirable street) is forced to pay more than her entire income on this new tax!
What about those that spend money on a car or tv. Is that capital taxed too? How about the books on your shelves?
It's a stupid idea aimed at discouraging property ownership, which of course will impoverish even more people into a life of perpetual renting. And even worse it only punishes owner occupiers.
Property investors like myself who earn well above the 6% return that is suggested will pay no more tax, and those like Gareth and Sam Morgan who have made huge capital gains continue to pay no more tax than before (while still paying a disproportionately low rate of tax).
All this tax does is punish those that own assets for other than financial reasons:
- Someone who owns a forest or a building simply because they wish to preserve it for the future will be penalised.
- Those that own a property for enjoyment will be penalised.
- Those that own land for cultural or historic reasons (particularly Maori) will be penalised.
- Those that had the good luck of buying in an area where values increased will be penalised.
- The elderly, the retired and the poor will be penalised.
The winners will be the rich investors who can pick up prime real estate being disposed of by widowed house wives who can no longer afford to stay in the home they have lived in for decades.
Morgan's ideas are selfish and self serving.
Morgan doesn't understand that people own assets (whether it be land, buildings, vehicles, art or antiques or diamonds and gold) for reasons other than just financial return.
Your argument had merit until this statement;
The winners will be the rich investors who can pick up prime real estate being disposed of by widowed house wives who can no longer afford to stay in the home they have lived in for decades.
Because those rich investors will have to pay capital tax on the newly acquired asset which the widowed house wife (according to your argument) couldn't afford. to pay.
It's one of those strawman "poor little old ladies" (sympathy) argument - normally used by everyone but these "poor little old ladies" - many of whom would delight in moving into a well insulated granny-type, modern brick and tile - but the kids keep insisting they should get an astronomical price for their 1930s bungalow - and hence they don't sell.
Kate, you'll find the elderly who can't afford taxes are not some fiction drawn on to garner sympathy - look at today in ChCh - thousands of predominately older residents so upset at how matters are being handled protesting against the mayor and CCC CEO. Their anger I'm sure is as much directed at faceless insurers who have been wearing them done for almost a year and a half.
I've bought a lot of properties in areas where there are long term elderly residents, and in general when I speak with them (as a neighbour) they have no place in the world that they would rather live. Even with earthquakes, damaged homes and vacating streets many would rather never move.
It's remarkable that many older residents live in their homes often with limited modern conveniences (even no electric hot water or indoor toilets - I've bought a large number of central ChCh properties over the years with no indoor toilets from owner's who lived at the property for over 40 years), most of these types of owner only move when health forces them into care. I suspect they make up a larger proportion of the population than many think.
My grandparents lived in their first home for nearly sixty years. I bought a house in 2008 from a lady who bought it in 1930 (she was in her late nineties). A neighbour of mine bought his house about 1936 (now in his nineties) and only left because of earthquake damage.
Punishing the elderly is the downfall of Morgan's ill-conceived and selfish plan.
Sure there are those elderly with nothing to their name but the pension and the house - but also look at any old clip of say a Blue Chip or a Hanover Finance investors meeting - they were a sea of grey hair. It was indeed the "poor elderly" that these companies targeted and very successfully indeed (clearly they weren't so poor!).
Then check out the four standing in the dock at the moment - all pensioners I suspect!
Meantime, many of NZs young families couldn't afford to save for the deposit on a house - let alone choose to speculate with their spare cash in the commercial real estate financing market. And yes, many lost their life savings with the finance fiasco - that's what being motivated by an extra few basis points on your savings sometimes does to those who choose to speculate. And the majority of those retail speculators by number were the elderly generation.
To top that off we presently have the most generous (60% of average wage) and universal state provided pension on the planet. I'm all for treating our elderly citizens with respect and believe they (and everyone) is entitled to live and die in dignity - but not at the expense of future generations. Something has to change - and what I like most about the Big Kahuna is that it encourages self-help options. An elderly person living alone presently gets a larger pension than one living with a partner. With the Kahuna, one doesn't get "punished" for sharing accomodation with others - be you a pensioner or a solo parent. Much wiser use of our housing stock would result over time, I assume.
Kate, that is just a bizarre self centred argument.
Most elderly are not former Cabinet Ministers or Company Directors.
Most are retired workers who paid taxes at higher rates than today.
Who are these young families who can not afford a deposit on a home? Because I see lots of young families happy to spend up on trips to the Gold Coast, big 4wd vehicles and flat screen tvs.
It is a myth that property is unaffordable. It may be expensive in Central Auckland, but elsewhere property is relatively cheap.
A comfortable home can be purchased in the Wellington suburbs for $400k, in ChCh suburbs for under $300k, in Dunedin for $200k, or in South Auckland for $300k.
That is hardly reason for a change in taxation which would see people penalised for paying off their mortgage. All that would be acheived by Morgan's tax would be making it harder for someone to own their own home once they paid off the mortgage - people who have paid off their mortgage are generally near the end of their working life and have the leaset ability to pay more. Investors and young high flyers with big mortgages are either not affected by the capital tax and are probably better off because of his other changes.
It's that reason alone why Morgan's idea of a capital tax is despicable.
The ONLY motivation behind fund managers discouraging property ownership is encouraging savings in managed funds which they can clip the ticket in fees on.
Morgan is a disingenuous fool, looking to swindle hard working NZers out of their savings in order to enrich himself by clipping the ticket on their capital.
Less taxation, less interference is the answer, not more unmanageable, unfair tax rules.
I assume that under Morgan's truly awful plan, tax will only be fully paid on that portion of capital assets where the capital has not been borrowed?
The answer then is self evident surely? As a home owner with no mortgage, I'll simply borrow sufficient by way of a mortgage to minimise any capital tax that I might be liable for.
Kate/ChrisJ - fascinating interchange.
You can look at the oldies as 'poor little old ladies', and it is true that those on a fixed-or-lowering (by inflation) income are increasingly in trouble paying their way.
On the other hand, they represent a generation who rode the crest of the energy wave, and no generation will be as 'rich' per head. It's hard to discuss that with someone who thinks we've 'hardly scratched the surface', but if you think the oldies are in trouble, so too are 'investors/funds, and the tax-man.
Globally - and you can never take you eye off the big picture - we're in the same position as Helferrich was, in '21-'23. We all know how that panned out....... and we'll go through the ersatz diesel phase on the way down too.
Why folk don't stand back and see the big picture, I can't understand. Growth is history now, bumps being just aberrations on the trend, so we absolutely have to expect a reducing tax-take in REAL (the work that can be done with it, not the $ figure) terms. In that light, we have to be anticipatory in what we tax, for instance profit and interest must trend down, so taxing them would always have to trend up.
I am one who thinks we need central leadership, am happy to both pay for it, and to vote for whatever level it should be, democratically. The only way to fund that is tax, but until the 'hoping for growth to inflate debt away' mindset goes away, Govts are in the same cloud-cukoo-land that everyone else is - somehow expecting 'money' to be able to be exchanged for 'work'. Historically, Rome, Spain and others all made the same mistake.
Morgan's problem is that the most recent global growth demand had to include housing: nothing else, globally, was big enough. He doesn't survive without growth, and without housing at the rate we had circa 2007, it can't be had. Or could have been had, because the energy required to recreate 2007, ain't there.
So let's see your plan for what Govt spending and Govt depts you want axed, PDK.
I haven't spotted anything of that nature in your regular rants about a resource-runout future.
Most of your Green cobbers are opposed to cuts in Govt spending of any kind. Funny, when the ability of the economy to generate tax revenue will be so constrained.
The biggest idiocy of all is the one where apparently we will all catch trains to office jobs once we can't fill our cars with petrol any more. As if office jobs can comprise an entire economy without wealth being created somewhere by the use of resources.
Kindly keep your pre-assumptions out of it. You continue to categorise me as some type you think you're familiar with - which says a lot.
First, why 'axe' any depts? That immediately says you haven't stood back and thought. You're assuming that 'jobs' and 'incomes' are presumably 40 hours a week and some tens of thousdands a year. Did I say that?
Clearly, if society decides it needs central services (those who whine that private enterprise should be doing it are just telling us that they're up against limits, or they'd be happy growing elsewhere) then it can only pay what it can pay.
Which means that - unsurprisingly - I would expect public servants to be 'paid' less, and that this will parallel what will be happening in the outside world. I've stated that before, here.
Trains to office jobs is indeed going to be a reducing activity. Trains, however, are easier maintained, more efficient, and so should be kept as goods transport. You are right though, many folk keep a BAU picture in their heads.
"Created somewhere out of resources"? I'll keep a tab on that one, if you don't mind. You can't claim growth forever and that wealth has to be created out of resources. The last part is 100% correct.
What do I think Govt should be doing? The first legitimate target is energy efficiency, and it shouldn't be too controversial as it 'saves money'. Hard to convince folk that it will save increasingly more with time, but there you go. Obviously we shouldn;t be selling it, either. It's always going to be worth more tomorrow.
Then we have to look at what can be maintained, as globalisation reverses. The Locavore and Transition Town efforts are there in part, but I see BigAg collapsing as a model, and urban sprawl likewise. Both require fossil oil, and there's nothing that really replaces it in bang-per-tankful.
Legislation that encouraged revitalisation of existing villages/towns (not expansion, that's entirely different). would be a good first step, and Identifying 'holes' where others could be sited, another. The problem will be lead-time, there's maybe 20 years, more likely 10.
I think BigAg will be carved back into small-holdings (say 1 - 20 acres on high-class land, bigger on lower) as there will be more folk doing the producing. Enabling legislation required.
Education needs to give the kids the skills to address an energy-constrained future, while being careful not to run a guilt-trip on them (it was us).
Medicine - if left to it's own devices - would become an option for the remaining 'rich', and I suspect that has to be egalitarianised, maybe it's time for doctors to join CEO's in reappraising their worth.
Welfare - pensions are toast, as are all but sickness benefits (we can debate them too!). I suggest we'd be better teaching those out-of-work folk some skills, like gardening/horticulture/agriculture/permaculture, so they're more capable of looking after themselves/contributing.
Fiscally and otherwise, Govt have to oversee the morph from a growth phase, to a steady-state regime, which eventually means absolute limits, boundaries, takes etc. Might be a place there for re-educated out-of-work former economists.....
Now there goes something we can axe - Economic Development. Another would be the Productivity Commission, unless they're better scoped. Most, though, need to be steered, re-focused, and paid less.
Ministry of Womens Affairs? Ministry of Art and Culture? Ministry of Social Development?
Where do you see the fine line between low density urban "sprawl" and "lifestyle block" living?
Can't you see the point that you call me "Johnny One Note" for, is that people SHOULD be allowed an affordable ACRE to live on; not charged ten times as much for a tenth the size? This is all part of the reason why I say those dreadful "sprawling" American cities have FAR MORE "resilience" to resource shocks than we do.
The more I learn about the intuitions of conservative USA, the more I marvel at it. An affordable acre of land each is a principle not to be negotiated away in the service of some neo-pagan ideology. If only NZ-ers were not such a bunch of easily-fooled sheeple.
Got you. And it's from Texas. Ain't physics and math a bugger?
http://www.zo.utexas.edu/courses/Thoc/land.html
Divide this figure by the current human population of 6.8 billion (that's 6,800 million people) and you get 2.3 acres (just under one hectare) per person. If all the habitable land on Earth were equally distributed among all human beings present on the planet, this is the per capita share of good land per person. Again, however, we have not allowed for any amenities such as highways, schools, hospitals, shopping malls, stadiums, agricultural fields, rivers, lakes, reservoirs, parks, golf courses, etc. Even so, could you live on 2.3 acres?
A person living the lifestyle of an average American requires almost 24 acres, ten times the world per capita share.
Someone may have made a similar observation here, I've not checked the thread through, however, this debate might get a bit further if it started off by asing the question, "How can we reduce tax for most people and in particular those involved in real income generation?" Or put another way, "How can we get PAYE and corp tax down, and while we are at it remove distortions in the system?" The answer doesn't have to be, 'The Big Kahuna.'
gareth morgan's views will make home owning less affordable. that in turn will further impoversive ( in a non economic way) our society. however the real problem is his diatribes take focus off current tax practice & abuse. gareth certainly doesn't want tax on financial transactions. thus he doesn't want to look at the speculator who makes $200 000.00 off buying & selling shares. nor the company that takes its profits off shore before tax etcetera. nor at the non tax of the sale of trade me & such. and if we look at his reasoning, we find in fact little or none - at most innuendo. He says - unsurprisingly - nothing could be further from the truth that he & his son advocated a capital gains tax on the money from the sale of trade me & his kiwisaver . he then writes "the prices paid for both those assets reflected the reality that tax is paid on company earnings each and every year If that annual tax wasn't paid net earnings would be higher and so would the price the buyer paid for it It would be helpful if commentators could get their heads around that" is this meant to be an explaination? i'm sure commentators understand what he has said perfectly well. lets look at it the basic premise is that the more money made by a business - the higher the earnings - the more it will sell for. i don't think anyone would question that. the 2nd statement is if a business hadn't had to pay tax, it would have higher earnings. again i don't think anyone would question that. the question remaining is "so what?" none of that has any bearing on whether the businss should pay tax each year nor wheter tax should be paid on the sale price of it when sold but if we play about with gareth's statement some interesting questions arise. eg if a business paid its' workers less it would have higher earnings and thus be worth more. if it outsourced its labour to another country were workers get starvation wages (but we can console ourselves by noting the workers are actually better off than before when they had no work which i think is a real dilema) then the business is wirth more. the business pays company taxes in the home country. these are lower than personnal tax. the reasoning for this includes that businesses bring all sorts of benefits to the country that it is 'located' in. this needs looking at. what are the benefits. should we distinguish in tax rates between businesses that outsource the labour component of their business and take their profits offshore etcetera. gareth doesn't touch any of these issues.
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