By Geoff Simmons*
It appears that the Tax Working Group (TWG) is quietly dropping the idea of a capital gains tax (CGT), although the Labour-led Government is still talking up the possibility. This isn’t surprising. Despite the fact that the Government’s Terms of Reference didn’t leave the TWG with a lot of room to move, experts will struggle to find much evidence to support a CGT.
Why a CGT is a bad idea?
A CGT excluding the family home has largely failed in controlling house prices overseas. Countries with a CGT have seen a similar rise in house prices, and still face similar challenges with affordability. At best a CGT has simply taken the edge off their real estate booms.
Why does CGT fail to solve the problem overseas?
Firstly it exempts the ‘family home’. Given that this makes up a 60% of houses and a large percentage of house purchases, it won’t act as a disincentive for bidding up the price of housing. Exempting the family home means that John Key would still not pay any tax on the sale of his $20m Parnell home. As I’ve argued before, we simply can’t have a fair and efficient tax system with an exemption on the family home.
Exemptions also cause all sorts of problems in the working of the tax system, as we can see overseas. The fact is that rich people can afford an accountant, so they are much better at exploiting exemptions than you or I. The concept of the family home may seem simple, but in reality it is difficult to define for a tax authority. Some 42% of New Zealand’s wealth is in owner occupied housing. Just watch that number go up if it stays tax exempt.
Secondly, capital gain is only one of the tax loopholes that encourages overinvestment in housing. The others are excessive use of write-offs and the tax loophole on imputed rental – the value that an owner-occupier gets by living in their own house rent free. The Tax Working Group shows that it is this last loophole that is the greatest. See the graph below? The lowest taxed investment – by a long way – is owner occupied housing. No wonder Kiwis have piled in, putting almost half our national wealth into our “family homes”.
Imposing a CGT won’t close the gap with other investments, so there will still be a strong tax incentive to invest in housing. Closing one loophole won’t prevent speculation so it won’t stop capital gain from happening; it will only tax that capital gain (sometimes).
Finally a capital gains tax is horrifically inefficient. The tax is levied on the sale of an asset, so it provides a strong disincentive to sell any asset – whether that be a business or a home. This comes at a cost - reducing the efficient working of the economy. In other words what is the best way to avoid a CGT? Don’t sell your asset. Ever.
What wealth taxes would work?
For a wealth tax to work it needs to be difficult to avoid and not result in double taxation (taxing assets that already pay sufficient tax). CGT fails at the first hurdle as it is levied only on sale of the asset and excludes the family home.
A land tax has been much discussed as an alternative. It is a simple tax, levied annually as a percentage of land value. This would stop price increases and is very difficult to avoid. The big advantage is that it encourages empty land to be developed in order to pay the tax. However, it suffers from double taxation – for example a farmer may be paying a high level of tax on their profit from working the land but she still gets stung with paying a land tax. This usually leads land tax proponents down the road of exemptions, which quickly gets much more complicated than it first seems. Meanwhile non-land assets like gold bars continue to pay zero tax.
TOP’s alternative is to ensure all assets pay a minimum level of tax. It too is paid annually and difficult to avoid. However the advantage over a land tax is it avoids double taxation while taxing any non-productive asset. In practice it will have the same benefits as a land tax – stopping capital gain and encouraging empty land to be built on. It will work out just as simple as a land tax but has the advantage of taxing all investments equally. This will ensure that we start investing in businesses that create jobs and exports – stuff that can make us richer – instead of putting all our money into housing.
TOP doesn’t want to just tax capital gain in our housing market, we want to stop it completely. If we manage to do so for 15-20 years, houses may just about become affordable again.
*Geoff Simmons is an economist and The Opportunity Party's leader.
168 Comments
Yes, if its a means to stop the Left's aspirations to turn us more socialist then it's a cold rat that I'm willing to chew on. All will depend on the vote trend closer to the election and the number of items Winstone knocks back. The more he frustrates the Left, the more likely I am to vote for him.
So where do pensioners find the money each year to pay this new tax on the house they live in? How about the COL learn to live within their means and actually REDUCE taxes so more money goes round. This socialist nonsense of taxing all into poverty is appalling and will lose them the next election. BTW TOP is all about envy, should partner up with "I hate rich pricks" Cullen.
Ricardo99,
Good for you. Don't let ignorance get in the way of a rant. Just for information TOP and the COL have nothing to do with each other.
"More money to go around". That is code for give the rich more and wait for the trickle-down effect-a long discredited economic policy. You should travel to Northern Europe and find out just how these wealthy countries manage-and they have higher taxes than little old NZ.
If a fraction of the effort put into finding new ways to raise more revenue to waste was applied to reducing Govt costs and getting better value for tax dollars there would be no problem. If a flat tax is proposed then the low/no payers are the first to target - Google/Amazon/Maori Tribes - Tainui & Charities that are really commercial business's - Sanitarium etc is the way to go and if Govt waste and better value for spending is achieved a large tax reduction becomes a sinch.
You are assuming its possible to do better, where its easy to put up tax in comparison.
Interesting you think that such efficiency isnt even being done. From my historic perspective I've never worked in a public organisation that didnt want to be more efficient and effective.
Let's look at this in context of TOPs overall tax policy. Which was to introduce this tax with an offset in terms of reducing income tax. They've not quantified this in terms of what the income tax would look like, but nonetheless re-examine how much income tax you pay now and consider this further.
The idea was hit up the upper end of asset owners who escape a significant amount of taxation. I'm all for it personally so #letsdothis , because Labour lack any gumption for real reform
If you put your savings anywhere else like a deposit account you would pay tax on it so all that happens is this levels and then can lower the playing field level of tax .
TOP voters? 80% of PAYEs who would pay less income tax as they cop paying for tax other dodge right now. That should be all renters if nothing else as it would put $ks in their wallet.
PS The rates is a charge for services which is different again to income tax.
You haven't read the policy. Its not a land tax expanded to other asset classes. Its about an implied rate of return.
As I understand It:
If you have land worth $1m, they will assume a certain minimum rate of return (say 5% to keep numbers easy)
$1m x 5% = $50k. If the farm generates taxable income in excess of that $50k, then nothing changes. If the farm doesn't generate $50k of taxable income, then it will be taxed at the $50k of income level. So if the business is an actual real productive business, and not just a vehicle for capital gains on the property, there is no difference.
Possibly. But without the rampant speculation land prices should stabilise so it should be much easier to get a fair valuation.
Shares, bond commodities and other liquid openly traded instruments are constantly revalued by the market, so it only become illiquid niche items that could pose a problem.
Agree, that would be a great idea. Companies don't need to be able to buy land in order to be productive, so it's not going to put off investment in productive business. And 75% of corporate tax is born by employees in the form of lower salaries anyway.
It would discourage unproductive investment and encourage productive investment.
I can't help thinking that we are looking at this through a wonky telescope from the wrong end. The objective is to redistribute gains made by exploiting the loopholes in a system that is designed to destroy capital and transfer ownership of assets held by savers resident in New Zealand to overseas creditors via the banking system. So my instinct is to protect the few loopholes that exist from the destructive forces that relentlessly turn everyone into debt serfs with no hope of escape. I want to live in a society of free men and women.
While I disagree with some of Powerdown's ideas I strongly object to a scheme that seeks to rob him of his house and home and livelihood.
Where to begin?
I wrote this earlier whilst chatting to Andrew:
Yes, it is as if someone had a cunning plan to substitute debt for all capital in the hands of those outside the inner circle. Banking functions by using interest to transfer equity from borrowers as a group to creditors as a group. In its current form it has evolved into a subtle fraud based on watering the milk. We save dollars into a giant vat but when a loan a drawn from the vat it is very carefully replaced with exactly the same amount of water. The regulators go to great lengths to make sure this watering is done accurately, thereby enabling the fraud.
Shouldn't our objective be to create capital not to destroy it? We have inherited what we enjoy today from our ancestors, and yet here we are desperately living high on the hog on borrowed money whilst we burn through our inheritance. The purchasing power of our currency has declined by 82% since the RBNZ became independent from the politicians, yet here we are argueing over a distraction. The asset price gains are an illusion, as there is no gain in value. It is entirely the result of devalueing the currency. The NZD has lost 82% of its purchasing power since 1992. QV have a statistically reliable index of house prices that shows how the price of a house has changed over the years whilst its real value has not, it is the measurement that has changed as if with a stretchy tape measure:
https://www.interest.co.nz/charts/real-estate/qv-house-price-index
QV house price index at 460 in 1992, now at 2553. Are you using a different series or are my sums wrong? I make that an 82% devaluation.
Note, the exact value doesn't affect the argument, that the real value is unchanged, it is still a house, not five houses if they were like livestock.
I may have misunderstood your argument but the currency has lost only 40% of its purchasing power, not 82%. If your suggestion is the house is the same house, thats also not correct. The house has a location and that location has changed in value. Its access to amenities, work opportunities, schooling and so forth. The value of the house has risen at a rate approximately in line with GDP growth and that is roughly what you would expect.
Spot on, he equates value with price, when they are totally different things. Price is a measurement of value. The thing with a measurement system is it needs to be independent of the observer and constant across time and space. It is no accident that it was Newton who designed the monetary system that came to underpin the British Empire and allow the industrial revolution and the creation of the modern world via the careful allocation of capital (saved effort, a form of potential energy if you will). He understood measurement. His monetary system stopped the King from coin clipping and established a constant basis for trade. So people in far flung lands could exchange their goods for something of known and dependable value, coinage of gold or silver.
As the British Empire collapsed the world lost the largest free trade zone the world has ever known, and it lost a reliable system for the measurement of value.
I have been meaning to check out whether that was before or after he created the British Gold Standard, methinks it was probably before. It would seem a good reason to learn about shareholder dilution and ponzi schemes. He gave us Physics, Calculus (which he thought was probably a fudge, but it seemed to work) and a monetary system that enabled the modern world. Apparently he enjoyed a good hanging when the recipient was a counterfeiter. Hangings were major public events at the time and box seats were in high demand. The South Sea Company might have something to do with that.
Experience is the biggest asset anyone can possess, does he propose to continuously tax someone’s on the deemed value of an experience (holiday?) they had 5 years ago? Why keep taxing housing every year but not the value / improvement in your mental wellbeing that is generated by experience?
Sorry Geoff, but this is why I didn't vote for TOP! It might be because I'm stupid, but I fail to see where " the tax loophole on imputed rental – the value that an owner-occupier gets by living in their own house rent free " comes from. A simple mortgage repayment calculation shows that a $1m property will incur interest of $898K over 30 years, so the full cost of the property is $1.9M. Tax has already been paid on the repayments, so at the top tax rate the owner has already paid around $620k in tax, meaning the property actually cost over $2.6M. You want to tax them even more based on the fact that once they own it they are effectively living rent free - I think they have paid their dues already!
A thought experiment:
You and I own identical properties. We can each live in them and pay only rates, maintenance, etc.
We decide that we would actually prefer to swap, for some arbitrary reason. The houses are still of equal value. To be above board, we work out market rent, which is equal because the houses are the same, and pay each other rent. But it's not just that we swap the money -- now we have to pay tax on the income...
There are actually two solutions to your problem, one is TOPS garbage policy and the other is the very sensible realization that you should tax profit and that means you subtract the rent you pay from your income before calculating tax.
In this case both rent and imputed rent are fully deductible.
The current situation is also turning the middle class in to serfs. Imputed rent turns the middle class in to serfs by attaching a servicing cost to the occupation of land. In effect everyone leases land from the central authority, just like serfs.
The answer to bad policies is not more bad policies. The middle class is been tricked in to turning the lower middle against the upper middle.
The core solution to the problem is taxation of 'profit'. Your income is not profit, you should have a hefty standard deduction. capital gain is profit. Business profit is profit. Tax at a flat rate, above a hefty standard deduction, tax capital gain and tax business profit all at the same flat rate. Set that rate at the level you need to fund government and let the hand take care of the rest.
Wealth inequality will begin to close, inflation will run a bit hot for a while, but gently raising rates will shift property from investors to first home buyers as prices stall, real incomes rise and saving deposits becomes easier.
*. In effect everyone leases land from the central authority, just like serfs.*
As I said somewhere else. Try not paying your rates and see how long you stay on your land. Land already has a servicing cost, the TOP policy just relates it to the value of the property a bit better.
*The answer to bad policies is not more bad policies.*
Ironic. Since that seems to be exactly what you are promoting.
* Your income is not profit, you should have a hefty standard deduction. capital gain is profit. Business profit is profit.*
But my income is a profit.. its the cash profit derived from renting my time to somebody to perform some function they value. How you do differentiate between an engineer working as an employee. ie earning a PAYE taxed "income", and the same engineer doing the same work as the director of a limited liability company who is invoicing as a business. They really are the same thing, except for tax purposes. A guy that turns up and drives a computer and generates plans etc, and goes home and receives remuneration for it. Except you are saying the PAYE guys income is not profit, but the independant contractors is?
Your claim of rates is just more proof of my point, you shouldn't pay for a rate you should pay for the services.
Your income is not profit, your income needs to cover costs the same as any business. These costs are estimated in whats called a standard deduction. Income above the standard deduction is profit and then taxed. Consider the example of a low income person, if he can barley pay his way you clearly can not tax him as he would then starve.
Not usre how the changeover would happen, but the idea is that income tax drops to keep total tax take the same.
And I haven't seen it spelled out in the TOP policy, but it seems to me if a new buyer coughs up the deposit for a house, and is paying interest to the bank for it, they would be able to claim that interest expense back against the implied rent.
Otherwise they would be paying rent on both the full value of the house, which they really only own 20% of, and rent (interest) on the money they borrowed to purchase the house.
Edit, or the implied rent would be calculated on their equity in the property, not the full value. Either way, it offsets the interest cost somewhat.
Thank goodness we have some sensible people on the Tax Working Group .
There are so many things wrong with a Capital Gains Tax its amazing .
Quite apart from it being a resentment tax, it is always introduced by left leaning champagne socialists to appease their voters , its also a form of tax that will destroy older peoples savings making them more reliant on the state for everything .
The overriding principle of any tax is if you want less of something , then tax it .
Do we really want less property investment ?
Fewer providers of houses to let ?
Then you need to consider what happens to the supply of housing rental stock if you have no private -sector providers ................ the State has to house everyone who cannot afford to own a home . I cannot do so .
The next issue is what the State does with the tax .
We all know the State spends the money it confiscates from you a lot less carefully than you would spend it if you could keep it .
The examples are endless , everything from handouts to extravagant and wasteful expenditure on jet fuel to fly one person to a conference .
@kiwimm............ Landlords / speculators / investors / slumlords / ........... eternally hated for centuries , even by the Bard himself had unpleasant things to say about landlords .
The fact is the buyers at auctions bidding high prices are simply a function of the market .
And secondhand house prices are simply a reflection of the costs to build new houses .
It takes an economist to come up with a concept that best rewards people that save nothing...
An asset tax will have a few interesting and not very desirable effects. One is that it rewards people that do not save anything but rather spend everything they make. I'm very much uncertain that I want to see the long term results of this when the population gets older and they have little saved up for their "golden years". Another is that the wealthier portion of the population are quite likely to move on to greener pastures so as to preserve their accumulated assets. The highest productivity people are the most likely to be departing. I'm unsure about the benefits that will accrue from having more of the right side of the bell curve departing the country.
The bottom line is that it is much better to implement a fully inclusive CGT than any asset tax. I know for certain that if an asset tax gets imposed, I'll be one of the ones departing as I have spent my life building my assets so that I have a sufficient nest egg to use for the rest of my life. Why should I be paying more tax on money that has already been taxed when I earned it. I already get a stealth tax due to the governments mandate for around 2% inflation per year. I most certainly will not allow my savings to get an additional asset tax imposed upon it. Moral hazard indeed. I strongly dislike anything that pushes people to become even more irresponsible savers. NZ already is rather piss-poor at saving in general, TOP should be ashamed to be advocating rules that will further reduce the savings rate.
In what manner does this justify the asset tax proposed by TOP?
When one purchases overseas shares or Kiwisaver, one is investing for the future, and one should expect to pay some tax on the capital gains that one receives. When one purchases a family home, I very much hope that one is not investing, but instead purchasing a place to call home.
Imputed rent is a silly idea. It is rather amusing to see what would be the outcome if one applied the concept to all aspects of society instead of just housing.
My point is you are already paying an asset tax on your investments that you saved so hard for with your after-tax money but you are not jumping up and down complaining. This TOP proposal would actually level the playing field across asset types.
It also wouldn't encourage people to spend everything in the same way that tax on savings accounts does not stop people saving, tax on income does not stop people earning and GST does not stop people spending. There may be some shifting to minimise tax but less so than the distortions you see today due to the level playing field.
This is a very good point that needs to be considered, while TOPS tax policies is supposed to even things out with the reduced income tax, once you retire or your income declines you will no longer benefit from the reduced income taxes but still be taxed on your capital. That would be a huge incentive to sell up and move to another country when you retired or as your capital increased.
I think another likely side effect would be NZers investing their capital oversea's where it was free from the tax. Eg, borrow money in NZ against family home to gain maximum tax advantage, buy rental in Australia where it wouldn't be effected by the new tax regime?
I also think the policy punishes people with low debt, such as people who've paid off the mortgage who would be an incentive to borrow money to purchase an income producing asset or suffer the tax consequences. While that might look good from an economists perspective as its growth in productive assets, its wouldn't be NZ capital being put to work but NZers indebted further to foreign interests.
If you retired overseas now, you would not pay NZ tax either. The TOP tax changes will mean your Super pays out more due to lower income tax. Retirees also have the ability to defer the tax until death so it won't impact your daily life. It then becomes the equivalent of a CGT (that you professed a like for above) on sale of the property to your children.
Imputed Rent? No way! That will be the day to leave NZ for good.
We worked hard to build our small house. That income was taxed. While we were saving for the build, all interest was taxed. The house itself came with a large amount of GST on materials and labour. There were no tax rebates while we had the mortgage. Then there are the rates: I don't mind paying rates - we get a good service from the Council. But another tax on the house and equity? No way!
It looks like TOP wants a new system in NZ - no private gain (leading to no private assets!), Universal Basic Income, etc. Sound a lot like communism to me.
This is why a capital gains/removal of income exemptions is required although the application is challenging.
You worked hard to build your small house and that is great, you deserve the benefit that comes from having a home.
How hard did you work to earn the capital gain? Why shouldn't those that contributed to it have a return as well?
Supply up, demand down, productivity down. Want to see how productivity will get worse in NZ? Keep going in this manner.
I lost some respect for you after our rather lengthy discussion about EVs, where you had rather adamantly defended them. A couple days later, you made a comment in response to another person calling EVs rubbish. This kinda suggests argumentative trolling instead of someone that is actually trying to discuss/explore/learn.
I said that current EVs are currently rubbish value for money. but they are improving. That is very different from saying the underlying idea and technology of EVs is rubbish.
Likewise, I lost respect for you when you keep insisting that EV batteries will not last, and you specious argument about warranty periods.
Your claim that warranty periods aligning with your prediction of battery life is a load of crap. Current ICE drivetrain warranties are typically up to 100k kms and 10 years, but that in no way aligns with the actual reasonable life of an ICE drivetrain with basic servicing. Most people i know drive cars to double that distance before they start to worry about them getting unreliable.
And the point being that the warranty period isn't set to when you can expect a huge number of failures to start, but at a point that you expect very few failures, other wise the car manufacturer will be losing money hand over fist replacing a huge number of batteries under warranty.
Again. getting back to the point that the only ones with data one how the new battery chemistries will last in EV service are the battery manufacturers and the car manufacturers, but somehow you and that random driveby guy have decided that they will only last 160k kms. When asked for how you came to that magic number you presented no data relevant to current battery tech tested in EV automobile service applications.
I would look at your crowd sourced data for some edification.
Why is it that so many batteries were replaced before 60k miles?
It will be interesting to see how the long term battery life does work out in the future. The current reality is that the majority of users are limiting their EV range via limiting the charge and discharge level so as to improve their battery life. If this is what is required, then the advertised range should be decremented to match the current operational usage that results in the longer life of the battery. If one drive an EV, and utilizes the full capability, including fully charging, and sometimes even fully discharging, then the data suggests rather strongly that the battery life will be compromised, and may even be compromised to a level that is significantly lower than the warranty period.
*Why is it that so many batteries were replaced before 60k miles?*
Poor pack manufacturing mostly. Internal connections failing seems to be the most common I read about on the forums, and yes, no doubt there were a few that suffered abnormal battery degradation, but, they were replaced under warranty. Tesla was/is not an experienced manufacturer, and EV battery manufacturing is a young art. Like all first generation products there are bugs to be ironed out and process parameters that need optimizing. As an engineer you should be well aware of this.
My claim regarding the longevity of EV batteries still stands. At least for people that drive EV similarly to how they drive ICE vehicles. When the advice is to never leave an EV fully charged for longer than 2 hours, and that best practice to obtain reasonable battery longevity is to charge to a maximum of 80% and not discharge to a low level, well, I consider that the listed range isn't really the operational range. As to the idea that the battery is still considered "good" when it has lost a third of its capacity, well, this isn't that great either. Particularly when EV range is already a bit on the low side. The majority of EVs on the road do have exclusions in their warranty regarding the gradual degradation of the battery. Yes, the majority of manufacturers, not so. But, by numbers, yes.
My comment about warranty periods was accurate. I noted that the warranty claim aligns with normal expected number of rated cycles for lithium batteries. One can improve upon this via doing things like not fully charging your EV, not fully discharging your EV, and NEVER leaving it fully charged or fully discharged for any meaningful length of time. That is the quickest path to a replacement battery.
So now rather than directly addressing the battery life issue, you are moving the goalposts and imposing nonsensical conditions on it. The battery life is rubbish.. if you abuse it and operate it in the not recommended way.. heres a hint, so are ICE engine lives. Take it straight to redline for cold every morning and see how long that engine lasts.
Evs are a different technology, the way they need to be operated is different, but not necessarily inferior.
So again, where is your evidence that operated in the recommended manner they will not last more than 160k kms or whatever number you are claiming now.
Talk about goal post movement... you are moving much of the pitch.
Rational discussion appears to be wasted on you, I bring forward data and you talk at cross purposes or make statements about what I've said that do not match what I have said.
Enough, you have your views, I have mine. You think you have data behind your views, I think similarly and have attempted to show my data in an appropriate manner. You seem fond of using rubbish as a description. It appears that I think similarly in some regards.
Good day to you.
Ugh, Just in case anyone is actually interested in what a realistic EV battery life expectancy when used in a more normal manner is. (set the charge limiter to 80% and charge daily ie, park the car and plug in)
I'll use a Tesla model 3 is an example, since i'm somewhat familiar with the specs, and I could find some real world energy use data.
Battery (Short range model) is going to be 50kWh capacity, so if charged to 80% you have an effective capacity of 40kWh.
A conservative energy/kilometer figure is 175Wh/km (150Wh/km seems common in real world [1]), meaning every cycle (80% soc to 0%) would get you about 230km, which is more than enough for most peoples daily driving.
And testing data [2] on some random lithium ion battery (not sure if its used in any EVs) shows that with 80%- 0% cycling, even current batteries can be expected to last 3000 cycles before they degrade to 70% capacity. (refer to the line with (EES) on it.
So roughly speaking, 228km x 3000 cycles = 684,000kms. To be fair we need to deduct a bit off that number to account for the degradation, so if we subtract 20% of that, we still end up with over half a million kms. And that is assuming you charge to 80% and run the battery flat every cycle, which is not likely to be the case.
If your normal driving is closer to 100kms per day, then you could charge to 70%, and not discharge below 20%, and then you could expect 6000 cycles (very bottom line on the graph).
50kwh x 50% used (70% start SOC-20% end SOC) = 25kWh / 175Wh/km = 142 km per cycle x 6000 cycles = 852k kms. again, take off 20 or 30% because by the end of that the battery has degraded to 70% capacity and its still looking like 600k kms.
Regardless of how you look at it, there is a pretty good chance an EV with a decent battery pack should last at least 300k kms if you actually don't go out of your way to kill the battery. Oh, and 3000 cycles, if you assume 6 days a week is about 9.5 years.
And yes, if you have a road trip planned you can charge to 100% to skip a charging stop on the trip if thats going to help, but it might have a minor effect on your battery life. If you need to do longer distances regularly it would be worth considering getting an EV with a bigger battery pack.
[1] = https://teslamotorsclub.com/tmc/threads/model-3-wh-km.125793/page-4 (ignore the guys talking about model S cars, they use less efficient motors and are whales of a car)
[2] = https://pushevs.com/2018/04/27/battery-charging-full-versus-partial/
80% to 0%... good luck with that! Discharging to 0% is worse than charging to 100% in terms of battery longevity, especially if you let the battery sit for any length of time at 0% charge. BTW, when you drive somewhere when you know you will be needing 80% of your range capability, do you start with 80% of your fuel tank, or 100% of your fuel tank? Assuming that one will arrive at 0% is a fools errand, rather stupid. That is exactly how to kill your battery, as it has a very real potential to arrive at 0% prior to arrival at the destination, which has the very real result that the battery is likely to remain at 0% for a non-trivial period of time while one attempts to get a tow to a charge station. Note the challenges with getting a tow with an EV, as noted in the link I provided a while ago...
I especially like the finboi link of "pushevs", as well as the caution about looking at only the stuff that suits your position but not looking at any other comments on your link.
Interesting edit Pragmatist... (ref: two comments above)
BTW, have you considered the difference between the capability of a single battery cell, and an integrated battery that is used in an EV? the current typical EV uses about 100 battery cells in each string. Unfortunately, the total capability of a battery string is limited by the capability of the weakest battery in the string (for the non-engineers, I define "string" as being the batteries that are in series so as to produce the voltage that operates the drive motor on an electric vehicle (EV)). Your single cell capability evaluation... how does that evaluation work out in terms of more than one sample? What is the scatter in the result? If one percent of the battery cells have a 10% reduction in capacity, well... how does that work out in a 100 cell battery string? It is highly amusing in my view that you extrapolate from a single cell battery endurance test to an integrated EV battery endurance without any evaluation of the difference between a single cell and an integrated battery.
You just dont give up with the FUD do you. Or is it an ego thing, can't handle someone questioning your authority on Li-ion batteries?
Tesla model 3 battery is made of bricks, each brick being 31cells (46 in the long range pack) in parallel. Then the bricks are placed into strings. So no, a single weak cell doesn't really have a huge effect, its only 1/31th of a brick, and will mostly go unnoticed except under maximum current draw events and if you get down to the last few percent of usable capacity.
As for the edit, the only thing I changed was the comment about the model s in the footnotes, i changed it from motors/inverters to just motors, as on further reflection I don't think the inverter is significantly different, the big difference is the switch from AC induction motors in the model S and X Tesla cars to permanent magnet AC motors which are more efficient under typical EV load conditions (IPSM type if my memory serves me right.) in the model 3. Sorry, no big gotcha there.
A quick review of the battery cycling # vs charging is rather interesting. The way to get 3000 cycles before degrading to 70% capacity is to assume that one only charges to 85% capacity (between 4.05 and 4.1V per cell as per your fanboi weblink dataset). Note carefully that the 70% capacity is multiplied by the degraded 85% capacity, resulting in a final capacity of 59.5% of the initial battery total capacity. Yes, significantly derating the battery allows for one to claim increased longevity, and even a slightly higher total mile capability. But, this is requires derating the battery capability significantly. One can find numerous links about this phenomenon via consulting the google oracle.
If you put a deemed rate of all assets then money will naturally flow to areas of return greater than the deemed value. This means more money for productive businesses and less for unproductive housing speculation. So, your economy based on selling houses to each other will shrink while the real economy grows which will make NZ more prosperous.
In other words, providing an incentive for people to search for ever increasing rates of return. Unfortunately, this doesn't stop housing speculation. It just makes for more lemmings searching to get in on the ground floor of the next bubble.
Agreed, speculating via unproductive assets isn't something that should be encouraged. A wealth tax unfortunately doesn't do this, and may instead provide incentives to do that which it is trying to prevent. All it takes is a bit of gains in property then people will be clamoring to put their money so as to keep ahead. Where have we seen this before?
If you want to focus on productive asset investment, reduce taxation on the returns from a productive asset, and increase taxation on returns from unproductive assets. In other words, reduce tax on company profits (aka dividends), and impose a CGT without any exceptions.
You know cars have become much cheaper over my lifetime. There was no need to introduce a wealth tax to achieve this.
Also if bread was in short supply -like it was in the Soviet Union -the solution was not a special 'wealth' tax on bread.
P.S would cars and bread be taxed by Geoff? What if bread and car prices started to inflate would a wealth tax apply?
And we would need a vegetable tax on those naughty people who don't pay tax on the imputed value of the veggies they grow and consume. It's only fair, apparently. A breadmaker tax on people who make their own bread, and as for those who do their own cooking and cleaning, well there is an imputed untaxed benefit there too. Is there something conceptually not quite right here I wonder. Home brewers...
I have a keep it simple approach to urbanism i.e. if a city has a shortage of bread, no one thinks a good response is to tax bread production.
Previously I have asked why does local government tax house production in the middle of a housing crisis? Why not reduce taxes and make it easier to build homes? https://medium.com/land-buildings-identity-and-values/why-tax-house-bui…
Someone should ask Geoff the same question.
TOP really annoy me. They self proclaim to all and sundry that they are soooo progressive and soooo evidence based. Yet their big idea for solving the housing crisis has never been tried anywhere i.e it has zero evidence basis -it is wholly based on the 'I reckon's' of one wealthy rich guy -how progressive is that?
The economists who have standing in the fields of urbanism and spatial economics -such Edward Glaeser -all point to supply restrictions as the most important factor that causes housing crises. There are other minor factors -which does include speculative demand -that some sort of land/property tax would help -but it is not the whole story.
Yet the self proclaimed progressive and evidence based party -TOP do not have any policies to deal with housing supply constraints. They provide no heavy lifting leadership/public advocacy in this area.
NZ for instance desperately needs an important public figure to say that density in cities is a good not a bad thing and that our planning restrictions against density have probably done more harm than good.
https://medium.com/land-buildings-identity-and-values/destigmatising-de…
Unfortunately that leadership and clarity will not come from TOP it seems.
There is a tiny bit of sanity slowly creeping in though. Even the Auckland City Planners recent publicity article right here on interest.co actually mentioned a natural onion ring structure where more valuable locations become higher density. Of course they still want to Control it and slow it down and make sure they get to approve everything, but it was a surprising admission for them to make. Can't have any of that messy evolution going on though, it's so wasteful and inefficient, and they don't get to decide.
Agreed, i always laugh when they claim evidence based. Evidence based on what? Its mostly ideological arguments passed of as facts/evidence. Its just as easy for others to produce "evidence" for counter arguments sake. Eg. UBI has not been proven to be successful, it's been trialed in some countries and the results are mixed and not conclusive
So we are envious that a property investor pays no tax on the bulk of their income while we pay lots of tax on our PAYE income? I'm not sure that is the correct definition of envy.
If someone comes in and steals your TV, does that make you envious of them for having that TV? Or just pissed off?
"Yes, there are taxes I like. For example, the gasoline tax, which pays for highways. You have a user tax. The property tax is one of the least bad taxes, because it's levied on something that cannot be produced — that part that is levied on the land. So some taxes are worse than others, but all taxes are bad." - Milton Friedman
A tax on income is bad because it disincentivises the earning of income, thus disincentivising productive activity.
From the city boundary there is spare land as far as the eye can see. Its unutilised. Why? Because even if you wanted to make an investment and build a house(s) the council says no. They decide when the land can be utilised and it is "made" at that point in time. It's made by installing drainage and services, so Milton Friedman is wrong. Nz has no shortage of land that can be turned into housing, and doing so dampens demand. If this had been done sooner in Auckland the meteoric price increases may not have happened and neither would the debate about CGT. Anyway those gains have happened and are in the past. Hypocritical how the previous TOP leader didn't offer to pay cgt on his gm kiwisaver capital gain and his trademe capital gain millions. Come to think of it he also avoids income tax and is proud of it. He is a w...r
Actually we invest in high yield positive rental returns. The opposite of the big-mouth and boastful gm who hides wealth in low yield capital growth property. He boasts of not paying income tax, that would have to be some serious property tax losses. That's what I call a w...r. Ring fencing will help straighten him out hahah
Inside Money: Why NZ Post paid $58m for Gareth Morgan - NZ Herald
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10…
Plus Gareths trademe shares which I recall was another 50 million.
He would have grown his wealth since then, he should have declared taxable income of at least 10 million per year. I can imagine not wanting to pay 3 million income tax but let's face it Gareth Morgan has more than he ever needs.
I know I shouldn’t feed the troll and he’s one of the must get the last word in types but here goes...
He pays income tax at the same rate as everyone else - all income he makes is taxed at the same rates as you or me. I am not apologising for this. He likely makes more income than you go and pays more income tax.
He also makes the bulk of his earnings via capital gains which he pays no tax on (again, you or I could do the same as per tax law). I also don’t apologise for this.
The simple fix to all these problems is to tax profit and to define profit as any gain above costs. Thus it taxes income above some standard deduction, capital above the purchase price and business profit. Given no one has ever figured out the right balance, id suggest its best to treat it all as the same thing and the invisible hand will handle it from there.
It's only stupid in that it resembles your own stupid argument, that taxes are based on envy. That's the point - glad it was recognised.
If you're not planning on drawing a pension because you believe in standing on your own two feet in your old age, kudos to you. That is something to respect!
I thought you were going to give us a break from your stupid comments The Boy. I suppose you cannot help yourself as you are so angry about the new government, the upcoming rental changes, the upcoming taxation changes and the ever slowing down Christchurch prices. Someone like you who is so obsessed about money and assets and so unsympathetic about the less fortunate should take a break and calm down. The sun always comes up the next day.
Gordon, we are taking a break. Off to Trump territory and The Rockies for a few weeks.
Of course I am pissed about this government and why wouldn’t any intelligent person be?
They are blatantly incompetent and it is coming out every day.
As for the rental changes, it hasn’t and won’t affect us at all, otherwise why have I purchased another property?
I rather like the idea of a Sumptuary Tax. It means, basically, that people with flash clothes, cars, watches, handbags, houses, boats and other Signals of Stature, get socked with a New Tax. Of course, defining 'flash', 'excessive', 'luxurious' et al will be rather.....subjective. But at long as it's done by People on My Side, it'll be fine...
Bit like valuing 'assets', mayhap?
Even better a Debtor Tax, that debts incur an additional tax of say 3% per annum. Seems a perfectly reasonable way of nudging people to save more. There must be something wrong though.
Of course, banking is the least taxed activity of them all. Goods and services tax doesn't apply to their services because they are special, that's only for the productive cattle classes down on the debt farm
Love the concept of 'imputed value' as Mr Simmons proposes for housing. It should be extended - why should I be able to use my car for free when others have to rent one. Same goes for my golf clubs, fishing rod, camera. Not sure about the girlfriend, though... As regards, housing and its excessive cost, why do we give tax breaks such as negative gearing, ability to offset costs against other income etc for investors? Property investment as regards existing homes works because it reduces the supply of homes available for purchase thus forcing up prices. So people who just want to live in one pay the speculator's margin, assuming they can afford the inflated price. It's like buying up all the bread at a supermarket and selling it for twice the price at a stall outside. Simplistic argument but the truth.
TOP’s wealth tax sounds like a real piece of work. I’m sure the folks putting money away to purchase their first home will love having their savings taxed. Same goes for hard working kiwis putting in the effort to save for retirement. Not like this country has a personal savings problem already. What a great way to disincentivise success and financial discipline.
Want to buy a bicycle - you’ll have to pay bicycle rent to the government because reasons. Sounds fair.
Paying tax on an asset’s imaginary income means there is a fundamental disconnect between the requirement to pay and ability to pay. And unlike income tax, you don’t pay just once - you get taxed year after year, again and again on the same bloody bicycle.
Not to mention the fact that it would be exceedingly difficult to apply and enforce.
The time for a capital gains tax has been and gone, they made out like bandits thank you.. I like this wealth tax idea.. if it was a fairer way to spread taxes in a more even manner then I am all for looking at it. Add a financial tax and charge GST on house sales and rent and you have my vote.
TOP needs to:
1) Address all the issues raised above in it's FAQ's on its website & in putting forward the policy to the public
2) Also address the criticism's levelled at wealth taxes, e.g. https://en.wikipedia.org/wiki/Wealth_tax
if TOP is ever going to have a chance of the public broadly understanding and supporting the approach.
Apply notional income tax rate to all property. Make it a high rate to incentivise landlords to get out of the market and let buyer occupiers in. Also tax land (zoned or proposed for building) holders as if they are earning the same rate as an occupied building on the site.
Ring fencing of tax losses on investment property is coming and it will be interesting to say the least. In combination with lower immigration (yes it is happening albeit slowly!) and potential increased regulation and landlord costs in the rental market there could be more than a couple of Mom and Pop investors decide to get out
I find the idea that if we tax non-productive assets then people will start to pour their monies into "productive businesses" extremely unconvincing. New Zealand economy does not offer attractive investment prospects. NZ is primarily an excellent agribusiness country who has already maxed investment in this sector. What other business opportunities are out there that will require significant investment? ironically, construction industry specially for building high-density large residential projects.
Money flows into property as it offers best return for the risks involved. If there where any other alternatives the flow would have reversed.
All I could think about reading this is "this guy is literally the Sheriff of Nottingham". Can't believe you'd actually consider something like taxing people for living in their own homes because they somehow get value because they don't pay rent.
So what, home owners then pay rent (over and above existing taxation/rates etc) to the Government?
Tax everyone, for everything, even things they already own - it's surely equitable, but it's about as popular as slavery.
And as one commenter above put it, this would in effect be medieval serfdom writ large - no one would actually own anything, it's all "rented" from the government dependent on the payment of taxes.
Whatever you guys at TOP are smoking, seriously get some help - this site and it's readers are reasonably well informed and intelligent - and if you get this reaction here - I can't imagine what would happen if Stuff or Herald actually ran this story - or perhaps I could - it might end with a guillotine.
To address the concern of different tax treatment for renters vs owners, the alternative of taxing owners (that is complicated and is unfair for those home owners who make average income) is to give tax credits for rents paid to renters. This is much easier to administer (there will be no arbitrary property values determined, no need to wait for the asset to sell, no complicated accounting issues (i.e. treatment of loans and interest expenses, capital expenditure vs expenses etc) and directly off-set the unequal tax treatment of home-ownership vs rent.
No,that is about the daftest idea yet. That just feeds into the rentier classes pockets. As soon as they learn their tenants are getting credits they will jack up rents to claim the majority of those credits, which will be paid for out of the pockets of wage and salary earners, just like accommodation supplements.
Tax credits apply against tax paid against income, so it wont apply to people who already received more money from government than they paid in taxes. This actually incentives working as it rewards high earners (or people without children) who paid more in taxes VS receiving handouts from government.
you say that landlords will get every last dollar of this. If this is true, then it is a reflection on the market dynamics for housing, not the policy being stupid. Only fierce competition between renters enables that kind of power to landlords to drive up rent. That is what is silly, not my proposal. And that perceived imbalance between supply for rental properties and demand for it is not affected by this proposal.
This will address the tax treatment of home ownership VS renting. So the solution applies if you agree that there is something to address here. The argument is that home-owners benefit from paying no tax on living in their own homes. If you agree with that, that difference is already funded by net tax payers, so it is already being paid by wage and salary earners who pay more taxes than government subsidies (e.g. WFF tax credits).
You're wrong on every level.
Tax credits apply against tax paid income, so it won't apply to people who receive more money from the govt than they paid in taxes"
I suggest you look at how WFF tax credits work. They absolutely do get paid out at levels higher than the tax paid by a low income earner with 3 kids, resulting in effectively negative income tax.
You say that landlords will get every last dollar of this. If this is true, then it is a reflection on the market dynamics for housing, not the policy being stupid. Only fierce competition between renters enables that kind of power to landlords to drive up rent. That is what is silly, not my proposal. And that perceived imbalance between supply for rental properties and demand for it is not affected by this proposal.
So how does your proposal improve things? It still results in capital gains on property being untaxed, therefore tax advantaged, and encourages rent seeking activity. It is this rent seeking activity that pushes up house prices to the point that renters can't escape to ownership, so it removes the flow of people moving from renting to owning that would limit the rent rises. The untaxed income from these housing investments being leveraged to buy more property to seek more rent drives the market dynamics!
This will address the tax treatment of home ownership VS renting. So the solution applies if you agree that there is something to address here. The argument is that home-owners benefit from paying no tax on living in their own homes. If you agree with that, that difference is already funded by net tax payers, so it is already being paid by wage and salary earners who pay more taxes than government subsidies (e.g. WFF tax credits).
And under your proposal homeowners still pay no tax on unearned income, (capital gains), so you haven't addressed the problem at all, you've actually just made it worse.
Well, with all due respect, it is you who lack an adequate level of understanding of the issue at hand. A WFF is a social welfare policy, not a taxing policy. Its objective is to help lower earning income people with children.
A tax system wants to achieve neutrality, so people's decision will not change solely because there is a difference in how something is taxed. At present, home ownership is preferentially taxed because homeowners do not pay income tax on deemed rental income where renters do. So the taxing structure is not neutral. That has nothing to do with capital gain. That is a separate matter. My proposal directly addresses preferential tax treatment of home ownership vs renting. Offsetting this with calculating deemed tax income for homeowners is much more difficult and expensive and inaccurate. My proposal addresses THIS problem.
Taxing of capital gains is a different story. At the moment capital gain is not taxed in NZ. E.g. you wont pay tax if you sell your company to someone else. So there is no preferential tax treatment for property vs other forms of capital gains from a tax perspective. And my proposal is not about that at all.
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