By Geoff Simmons*
The Tax Working Group’s final report, due to be released on February 21, is likely to recommend a Capital Gains Tax (CGT).
There are three problems with our tax system, and a CGT solves none of them. Michael Cullen claims this is “last chance saloon”, but why settle for a half-baked policy that achieves little and could make some things worse? We can do better.
Here are the three problems with our tax system:
- It heavily favours speculation on housing over productive investment in business;
- The resulting speculation in housing and land is pushing up property prices; and
- The higher house prices (and rents) are increasing inequality.
Our tax system desperately needs reform, not to collect more revenue but to make sure that revenue is collected fairly and efficiently (i.e. any new revenue should be offset by income tax cuts). A CGT solves none of the problems above, and creates a bunch of new problems at the same time.
Our tax system favours speculation on housing
If you have money to invest, our current tax system tells you to put it into housing. This loophole has existed since Roger Douglas reformed the tax system in the 1980s, and we have seen house prices rise since then. Sure, supply is part of the problem, but again there is no real incentive to build on empty land under the current tax system. Better to sit on it and watch the price go up.
The Tax Working Group has acknowledged this in their work. No wonder then that housing makes up 55% of our assets as a country - a very high figure by international standards. The majority of that (42%) is in the “family home”.
People often ask why The Opportunities Party wants to tax their house. My response is why do we already tax bank accounts? And shares? And businesses? Returns on all these investments are taxed far more heavily than the family home, or rental properties. A CGT (excluding the family home) may bring rental properties in line with other investments, but it will also hit businesses. Compliance costs for businesses will rise, and there will be an incentive to not sell businesses and property to avoid paying the tax. The net result will be poorer economic performance and no greater incentive to invest in business than we have now.
In fact what we see in overseas jurisdictions with a CGT excluding the family home is the ‘mansion effect’; the rich have an even greater incentive to invest even more money in their family home. Watch that figure of 42% invested in family homes shoot up.
Speculation is pushing up prices
This tax loophole has undoubtedly pushed investors to favour speculating on housing and land rather than other assets. And in the face of constrained supply (land supply will always be constrained no matter what developers say) that has seen prices skyrocket over the last 30 years.
Higher land prices benefit nobody but the seller. They increase the cost of new housing, which is passed on through higher rents. They increase the fragility of our financial system as people have to take on more debt to get on the property ladder. All this for no discernible benefit - the land is the same as it ever was. Higher land prices crowd out other important investments, for example ensuring that our homes are warm and dry. Every further price rise from here simply casts a greater shadow over our economy which will take even longer to unravel.
The problem is that the horse has already bolted. A CGT will not reduce house prices from their current astronomical height. As we have seen overseas they will simply slow the pace of gain from here. In the recent Demographia Housing Affordability Survey the two countries that ranked just behind us in terms of unaffordability (Australia and the UK) had a CGT excluding the family home. That is hardly a lofty ambition.
Increasing inequality
The final problem this nasty chain of events has caused is increased inequality. Inequality and poverty shot up during the early 90’s, the outcome of the benefit cuts and Employment Contracts Act of the then National Government. Since then, income inequality hasn’t grown. New Zealand has actually done a pretty good job of sharing the benefits from growth.
So why are we seeing more millionaires and longer lines at the food banks?
The answer is nothing to do with incomes, it is to do with assets and particularly housing. The rich have gotten richer because of their investments in property. As house prices have risen, landlords have passed that higher cost onto tenants in the form of rising rents. The incomes of the poor have risen, but not as fast as their rents, so they are getting poorer. Since the 1990s housing has been the main driver of rising inequality and poverty.
Yes we need to deal with the housing supply bottlenecks. But that doesn’t mean we should be blind to the demand-side drivers of house prices.
We don’t need to tax capital gain. We need to kill off capital gain completely. Alongside working on housing supply this has to include reforming our tax system to remove the favouritism of housing over other investments. For the good of our society and our economy.
*Geoff Simmons is an economist and the leader of The Opportunities Party.
96 Comments
Geoff wants to tax recreational boats and other assets based on the imputed (imaginary) income that their owners are earning from them. And not just once - the boat is taxed year after year as long as the owner has it, until the amount of tax paid exceeds the value of the boat itself.
http://www.youtube.com/watch?v=G8VdMuAol2c&t=11m30s
TOP is a wasted vote and won’t get anywhere near 5%.
"The answer is nothing to do with incomes, it is to do with assets and particularly housing. The rich have gotten richer because of their investments in property. As house prices have risen, landlords have passed that higher cost onto tenants in the form of rising rents. The incomes of the poor have risen, but not as fast as their rents, so they are getting poorer. Since the 1990s housing has been the main driver of rising inequality and poverty."
I disagree ... The nature of our debt based Monetary system has been the driver..
In the mid 1980s' M3 was $85 billion..... now it is over $370 billion..
Unless u focus on the underlying causes..... you end fixing symptoms that result in significant unintended consequences..( higher order effects).
Land prices are largely a function of the effects of monetary inflation + locational value.... in my view... AND..NOT , so much, speculation..
You can only have speculation with a limited resource - so it can't be the additional money supply that causes the property price rises. The 'compact city' ideology is 100% the cause - as cities around the world without this haven't had price rises. But of course had have had the same increase in money supply.
The tragedy of the time is the low interest rates and easy credit SHOULD have resulted in a historically easy time to increase home ownership in NZ - especially for young first home buyers and lower paid workers. Instead the mainly left wing insistence on urban containment has meant the extra money has been converted to higher prices and therefore higher rents for people for people who didnt get in early enough.
Geoff's policies won't help much unless they let people build houses on the 99% of the land in Auckland which ISN'T built on. But people like Geoff usually support the compact city thinking as they generally live in some inner city house they bought for $100K and is now worth $1M because of these policies.
Hi David, I have a few thoughts on this -
1. The inequality caused by expensive property is the result primarily of insufficient supply. The best answer to this problem is to build more houses. Punishing property owners won’t get more houses built. In fact, it will have the opposite effect.
2. TOP’s radical wealth tax would introduce a fundamental disconnect between the requirement to pay and the ability to pay, given that the income being taxed is imaginary.
3. The wealth tax would be almost impossible to enforce.
4. The wealth tax would be totally out of proportion because over time the tax paid would exceed the value of the asset being taxed.
5. The wealth tax would apply to all assets, not just property. Taxing the imaginary income I’m earning from my boat won’t address the problem you’ve described above. The tax would presumably also apply to savings, even if those savings aren’t earning interest, which would disincentivise people putting away a nest egg for retirement.
6. Most people paid income tax on the money they used to purchase their home, so they aren’t getting off without paying tax.
7. A CGT would be a far fairer way to address the issue you’ve described above.
8. If CGT is political masochism, TOP’s wealth tax is political suicide.
9. The value of an asset changes over time, so the purchaser has no idea how much wealth tax they are signing up to in the future. One might purchase a house today and be able to afford to pay the tax on imaginary income earned, but by the time they retire the value of the house could be five times higher. Due to factors totally beyond their control, their wealth tax bill is now much higher, despite their actual income falling when they retire. They would be left unable to afford to live in the house that they worked their whole life to pay off.
" The value of an asset changes over time, so the purchaser has no idea how much wealth tax they are signing up to in the future. One might purchase a house today and be able to afford to pay the tax on imaginary income earned, but by the time they retire the value of the house could be five times higher."
The intent, and likely effect, of the deemed rate of return tax is that prices will rise much more slowly, precisely because as the price rises the tax burden increases.
Also your comment fails to address that the deemed rate of return tax will be used to fund a UBI.
That is the “intent”? Well I guess it’ll all be fine then, not sure what I was worried about. The road to hell is paved with good intentions.
Geoff has previously stated that UBI ($36B) would be funded by cutting all benefits ($21B), cutting “bureaucracy” ($2B), flat income tax ($5B), while only $8B would come from the “wealth tax”. Not quite sure why you’re throwing the largely unrelated policy of UBI into the mix, but OK.
Let us - just for the sake of the argument - accept that the poor ARE getting poorer and that paying higher rents to their landlords is indeed the cause of that.
This would not really call for tax on owner occupied / family home , would it ( no rent , excessive or otherwise is changing hands ) ? So why does Geoff want to tax it ? well .. he answered it himself in prior articles - taxing investment property alone would not bring nearly
enough revenue for his liking , sufficient to buy the enough votes.
He is simply trying to use the housing issue to promote his broad far left re distributive agenda.
So TOP will be taking in the same amount of revenue, but still (eventually) funding unconditional basic income to the tune of $36B?
For everyone to be receiving UBI (TOP’s long term goal), Gareth Morgan has said that he wants to “have a conversation about raising the level of tax”.
"As house prices have risen, landlords have passed that higher cost onto tenants in the form of rising rents."
But rents have not risen nearly as much as the capital values, as a result rental yields have fallen a long way. In the short term and many commenters also say in the long term, it is cheaper to rent
"The rich have gotten richer because of their investments in property"
Source for this platitude?
Most of the rich people I know have gotten rich via prudent investment, high risk entrepreneur activities, or having a reasonable income while spending beneath their means. I know more people that have lost hugely via property speculation than people that have gained hugely via property speculation. A large majority of property speculators would have had higher returns via investing in the share market in the past two decades than property speculation. I'm far from advocating for property investment, I see it as a high risk and moderate return investment at best. Stating that the rich are rich because of their property investments... now that is rich!
In detail, most rich people do own property, so have gotten richer due to property value inflation in the last couple of decades overall. This is typically a rather small aspect of their wealth increase. The middle income people that own homes have gotten richer as well, not to mention the less well off that own property. The suggestion that the primary enrichment for the very well off is via property, well, one needs to provide data to demonstrate this claim.
Beware unintended consequences. I see two of these as likely if CGT are introduced. Either the govt of the day has a vested interest in house values
rising as they need the tax take (tax neutral remember) so will discourage development or increase immigration etc to do keep demand high. Or the property investors hike rents in the absence of capital gain (many investment properties are break-even at best due to the expectation of tax free capital gain) requiring rental subsidies to rise etc.
Totally agree - Great summary David BUT .....
I think the ultra low interest rates post GFC of the past decade that have flowed through to mortgage interest rates have to be a part of the equation.
NZ borrowed at 2.17 % last week !
The long run US T30's is ~ 7 % illustrates the scale of the problem.
Savers in traditional TD's now paying 3.8 % for 5 years are after inflation and tax earning zero.
That's why housing is a no brainer !
Increasing interest rates to incentivise saving with a real after tax return would be a good start.
Easy answer. Just make any implied income applicable to housing. The brussel sprouts can therefore be exempt.
It's not all that groundbreaking actually. Other countries do it already eg: " Swiss residents pay taxes on their wealth, including the property they own. ."
Family member living in one Swiss canton was only paying 7.5% tax - but he was also paying the bank to hold his money as it was a cost to have money in the bank.
Swiss tax isn't simple
https://lenews.ch/2018/07/12/the-large-tax-differences-between-swiss-ca…
https://lenews.ch/2016/06/23/swiss-tax-redistribution-in-2017-winners-a…
Well said Kate !
We need a universal tax and one that is easy to implement.
A universal land tax with NO exemptions meets these constraints and incentivises productive investment.
We see Brexit where no thought was given to implementation.
NZ used to have a land tax - just another line on your council rate bill. .. Easy as !
True indeed. New Zealand used to have a land tax, and it was a key part in getting land out of the hands of land bankers and into the hands of average Kiwis. Now we've wound things back and we ask those who work for a living to bear the tax load, while not taxing unearned income.
And what happens? Prices have inflated massively, and instead of recycling that tax money through the economy we're shipping it offshore to the foreign owned banks.
Meanwhile, we have underinvestment in productive enterprise because it's so much easier to just plonk money in land for tax-free income. And too much of our economy is made up of value extraction.
Even simpler, why not just cap the value of property? Muldoon tried something similar in 1982 with his wage and price freezes. What could be more straightforward than that?
If you want to disincentivise something, tax it. During a housing crisis, when we want to build as many houses as possible, taxing property investment just doesn’t make sense to me. We need to build more houses, not punish property owners. Also, much of the land tax would just be passed on to tenants, not borne by investors.
A question for you, Kate - Whould the housing affordability crisis be alleviated or resolved by quadrupling council rates nationwide, in your opinion?
If you want to disincentivise something, tax it.
You can't disincentivise land holding. All land not in public title will be held/owned by someone or some entity. Sure, folks or entities holding title to unproductive or idle land will sell it - but there will always be a buyer at the right price.
Would the housing affordability crisis be alleviated or resolved by quadrupling council rates nationwide, in your opinion?
I'm not proposing any change to rates/rating mechanisms under the Local Government Act. I'm talking about central government taxation by way of a land tax. It would offset lower PAYE taxes, and likely lower business taxes. The kind of Central Government tax split (overall percent of tax take) that I'd find more equitable would be:
PAYE - 10%
BUSINESS - 20%
LAND - 40%
GST AND EXCISE- 30%
i.e., a major shift away from tax on labour and profit, in favour of tax on land and consumption.
Hi Kate,
I agree that all land will ultimately be held by some entity or individual at any given point in time. However, surely you agree that it is possible be disincentivise investment in property and property development?
I realise that you’re not proposing changes to rates, but my question was - Would the housing affordability crisis be alleviated or resolved by quadrupling council rates nationwide, in your opinion? I’d like to know your perspective on this. I ask because the effect on investment incentives would be very similar to a land tax.
BLSH, yes, a tax on land would see that it was put to its highest value use - hence investment/development would be incentivised..
But it's not a LG thing. Local government rates are set/determined based on a balanced budget (i.e., Local Authorities are not able by regulation to run budget surpluses or deficits) - and much of the rating components are fixed charges/user pays type of instruments - so quadrupling the land value component would no where near quadruple the overall rate for any particular property (aside from rural land, that is). Rural landholders don't pay for all the reticulated services (i.e., those fixed charge/user pay services, such as water, sewerage, flood protection, stormwater etc.).
All that said, if one introduced a land tax which served to say double or quadruple the tax component of a particular landholding, the actual incentive would be to develop, (i.e., make that land productive). So, yes, there would be massive investment incentivisation toward more density in the urban environment and more development of fringe/fallow land. Or, as economists say, a tax on land would see that it was put to its highest value use.
So, yes, under a land tax there would likely be positive benefit to both housing supply and affordability.
Because such a policy will harm farmers too much, unless you have a special rate for farmers, at which point you're introducing exemptions which distort the system, etc.
It sucks that farmers have such a hold on our political machinery and as a result we can't have policy that is best for the majority of NZ citizens, since a large minority are farmers or get their income from farm-related activity.
Not necessarily. Farmers are first and foremost salaried workers and business owners - so you lower the rate of personal and business/profit taxation. Most likely, we'd move back toward being a nation of smaller farms (i.e., there would be an increase in the number of farm owners through subdivision/sell off of larger/consolidated land holdings) - where the productivity (i.e., profitability) of the larger land holding did not compensate adequately for the land tax outgoings.
There might need to be some land tax deferment for forestry land and exemptions for native bush and wetlands (on rural landholdings).
A land tax would inevitably result in rents rising correspondingly. This would be okay as renters would be paying less income tax so could afford it. They would be no better off. Retired folk and those on benefits would suffer unless their benefits were raised too which would inevitably happen.
You make sense. Hopefully the Govt will continue to ignore good sense since I'm living on a retirement income in a rubbish house on a large Auckland section. Looking at my rates bill a large chunk is land value so it would not be difficult to adjust it higher. Add in your word 'simple' and then they would be taxing undeveloped land too which may kick land bankers into action. How would you cater for land that is a genuine farm or a recreational field?
If land is productive (i.e., either used for a business or for a private residence), land tax isn't a problem. Pensioners would also get a decrease in the taxation on their super (likely they would pay little to no income tax) - so should net out just fine on the standard 800m2 or smaller section.
Yes, large holdings of undeveloped and unproductive land gets squeezed - and hence we would see many land use changes.
Schools, hospitals, council/government owned recreational land (i.e., publicly owned land) would likely be untaxed.
There might need to be some land tax deferment for forestry land and exemptions for native bush and wetlands (on rural landholdings).
Not really, see above. Sure, "corporate" farmer/landholders might have to rethink things because presently they might be farming for the capital gains - whereas the tax switch would make productivity/profitability far more important (in fact increasing land values would be detrimental). Presently, there are tax advantages for some corporate land holders to make a loss on the business. Taxing land holdings gets rid of that perverse incentive.
We tax actual interest income generated by a bank account, not the bank balance itself.
Property investment has been built off the bank of duel wielding loss offsetting and tax-free capital gains. Both of these have now been legislated out of existence. I'm not sure these arguments are still valid?
Taxing people for owning a house via imputed rents will have a huge compliance & administration costs, which never seems to be part of this discussion either.
Rather than tax every single home owner for the crime of not renting, we'd be better off with meaningful reforms around land supply (which you acknowledge) and discussing why local government & central government are incapable of connecting greenfield areas with adequate transport options; e.g. the pathetic connections to North West & West Auckland.
The author says :
"This loophole has existed since Roger Douglas reformed the tax system in the 1980s, and we have seen house prices rise since then. Sure, supply is part of the problem, but again there is no real incentive to build on empty land under the current tax system. Better to sit on it and watch the price go up."
Niether Roger Douglas nor for that matter JK ever had any influence in Vancouver, Sydney, new york etc, etc, yet prices shot up since 1980's in these places as well (where they already had CGT in place). yet prices rocketed up. ITS THE DEMAND. The no. of jet planes over the years is predicted to treble not long from now. What will an economist say to that.
Empty land prices go up for the same reason--DEMAND, not because of a lack of CGT.
These economists should look back and see why house building was encouraged at any point in the past--so there is no resultant shortage of housing---exactly why Kiwibuild was born (although building by tax payer at the expense of an excessive risk by tax payer in another whole new subject). So get off your shades and let house building re commence without interference from theoretical economists.
Do you think cheap credit has anything to do with the demand side of the equestion? i.e. if people coudln't afford to buy 2, 3, 4... houses, do you think this might reduce demand and see prices fall? What are the components of demand and how do they change over time? I bet if there's some type of global shock and people catch the fear disease, demand will drop significantly - yet there are still the same number of humans on the planet and the same amount of land/houses? So how does demand really work if it changes based upon human emotion/confidence? Is it a simple topic?
In capitalism supply rushes to meet demand. We have demand but put obstacles in front of supply. Maybe instead of treating the developer as a usually foreign evil exploiter we approached them as being like Santa Claus and we made them welcome and helped them then supply would react quickly to demand. So instead of all charges for council approvals to be made two years after the building in first occupied; all delays of over 24 hours in processing council consents to be compensated immediately (if a developer is stopping workers and contractors while the council delays a project then the developer needs cash now to pay them).
I'm the proverbial fat kid myself (picture the freckled kid with glasses from the Far Side cartoon). I own a lifestyle property, and strongly advocate a CGT with no primary home exception. Placing loopholes in a CGT kinda neuters the concept IMO. Either do it right, or do not do it.
I could see the potential for delaying a CGT (on the primary home only) if one purchases an equivalent property within a short time period, where the capital gain from the first property gets shifted to the second property. I'm ambivalent about this as it would have annoying complicating details, but understand the possible need for it. Best to have a CGT with no exceptions.
The housing crisis is a political not a economic problem. The economic solutions are many -lots of different cities/countries have lots of different systems that work. The difficulty is finding the political support to move to one of those options (I doubt that TOP has found the political winning formula -taxing the imputed rent from the assets of boaties and gardeners doesn't seem like a popular call to me).
Check this video out from the 43 min mark. @trussliz UK Conservative junior Minister is a big fan of Tokyo urbanism as a post-Brexit/post-austerity remedy for housing woes and to gain political support from young voters. She specifically states the Conservative party needs to take on the vested interested of the NIMBY land owning interests -including in her own party! Truss stated most of increase in Piketty inequality is excessive inflation of housing wealth and that the UK needed to reform its land use policies.
https://youtu.be/j6KBW02veKM
I was a huge fan of Lange too.
But your statement is 100% wrong. They were a left government who came in and undertook the most neoliberal policies possible.
Rogernomics.
Sell everything off, fire everyone. Everyone does well (or badly) based on their own skillset and willingness to take risks etc.
One may or may not agree with these policies, but the 4th Labour government certainly didn't have a mandate to undertake them. They weren't elected on that basis at all.
Here is my take on Japanese urbanism and its application to NZ
1. The way Tokyo joins together trains and property development is brilliant.
http://www.ejrcf.or.jp/jrtr/jrtr08/pdf/history.pdf
2. Unmatchable in their efficiency, reliability and speed, Japanese trains represent the bleeding edge of innovative modern transport
https://www.spur.org/publications/urbanist-article/2018-10-30/falling-l…
3. An important aspect of rails success in Japan is their excellent service culture.
https://voakl.net/2018/10/29/guest-post-turning-passengers-into-shopper…
4. Public transport in Tokyo does not need to be subsidised because Japan does not spatially subsidise motor cars.
https://medium.com/land-buildings-identity-and-values/tokyo-does-not-su…
5. Even though Tokyo is the biggest city in the world it has surprisingly affordable housing.
https://medium.com/land-buildings-identity-and-values/what-is-the-secre…
6. Interest.co.nz published David Lupton thesis which gives the theoretical backing for why Tokyo works. David says we need appropriate charges for infrastructure and services so the choices people make do not impose financial burdens on others.
https://www.interest.co.nz/opinion/81705/david-lupton-says-we-need-appr…
7. These spatial economic ideas I amalgamated into a spatial economics paper.
https://medium.com/land-buildings-identity-and-values/successful-cities…
8. Interestingly, Japan copied Germany's land readjustment practices to make room for urban expansion.
https://andrewlainton.wordpress.com/2018/12/29/letwin-land-pooling-and-…
9. I believe land readjustment is one of the factors the new Kiwibuild boss should be aware of to make the scheme successful.
https://medium.com/@brendon_harre/good-state-builders-are-hard-to-find-…
Yes their planning rules are way more open than ours.
I realise the population of Tokyo might be going up a bit but their population is decreasing. They don't have the massive immigration we have.
And it's quite an old population I think.
They also had a huge property boom in the 90s which they never really recovered from.
Not sure if it's related, but the government is up to it's eyeballs in debt. Printing money like anything, buying up shares as fast as they can... so it's not all rosy over there.
Any capital gain from owning investment property is not unearned income.
It is not always that easy being a landlord with a property portfolio and gains are normally well deserved.
Renting a property in NZ is often less than owning in many places but obviously you don’t get the capital gain.
Capital Gain can be either realised or unrealised, depending on how it's accounted for. But however it is booked, it's still income; real or implied, and should be taxed - as all other income is supposed to be in New Zealand.
(NB: As I have previously said, I am in the small minority that believes Implied Rent should also be taxed. It's as much Income as Rent Received is to a landlord. Landlords should be crying out for 'equality' on this score, but they aren't. Why?)
"Capital Gain can be either realised or unrealised, depending on how it's accounted for."
No, it really cannot. You cannot pay a tax bill on an unrealised capital gain with the proceeds of a sale that hasn't taken place. That's not a matter of how something is 'accounted for', that's what an unrealised gain is.
Um, that's, however, precisely how the FIF regime works...but note the various exemptions, carve-outs etc. that apply. It's consultant territory, as will be any Unrealised CGT regime suggested by the TWG.
Them consultants, accountants, tax lawyers, Legal Eagles and other Birdz of Prey are gonna have a field day with an Unrealised CGT if that's what comes to pass. The rich get richerer.....
Geoff keeps banging the same old drum (as do those advocating a pure Land Tax) but neither have a snowflake's chance in Hades of getting voted in. So what, pray tell, assuming 'democracy' holds together, is the path from where we sit today, to the Sunny Uplands of Tax Equality?
... Crickets......
Conversely how many people providing rental accomodation is too many? Do we keep getting more and more people taking on interest only debt to displace first home buyers from the market so those FHBs can show their gratitude for a roof over their head by paying rent?
The French used property taxes to fund the Nepoleonic wars, where as the British used production taxes to fund the Nepoleonic wars. Ultimately to increase tax revenue the British put in place measures to increase production with the theoretical output of a factory being able to expand much more than a house and therefore produce much more tax revenue by contrast the French increased property taxes. In the end the French ran out of funds which cause the loss of the war.
In 1815, at the end of the Napoleonic Wars, British government debt reached a peak of £1 billion (that was more than 200% of GDP).
https://en.m.wikipedia.org/wiki/History_of_the_British_national_debt
At the end of the Napoleonic wars the question was who would enjoy the benefits of the peace. The land gentry class who controlled the political levers at the time or the productive members of the growing industrial economy? Eventually the industrial economy won.
https://medium.com/land-buildings-identity-and-values/housing-affordabi…
Some form of Capital Gain tax is required as in most countries of the world but as the choice is with people who have vested interest is hard as many have been enjoying tax free profit since ages.
Any concerns an be adddessed but tax on CG is needed and can exclude first family home and small business and it is this that is comming.
Land tax is the best wealth tax with estate taxes coming in a distant second.
Here's Milton Friedman talking about it. https://www.youtube.com/watch?v=yS7Jb58hcsc
No, not a new tax, but an inequitable one; and to my mind our over-reliance on it as a nation is also immoral. What I would propose (and what I understand the TWG is working to) is a tax switch - like the one John Key did in lowering the top rate of income tax (PAYE) and raising across the board consumption tax (GST).
Problem is, JK's government raised the wrong type of tax in that particular switch.
I don't find a land tax abhorrent. In thinking it thru, I came to the conclusion that private ownership of land is actually a... "govt granted licence". The land is a natural resource, which belongs to a "Nation". ( to future generations as much as this generation )
It requires the "Nation" to uphold the property rights of , socalled, private ownership of land.
This idea/point of view can be applied to all natural resources..eg. radiowave spectrum..etc
ALL tax can be viewed as a form of legalized theft... Commonsense suggests to me that we do need a certain level of govt. ( less is better ) and so, we do need a certain level of tax.
With PAYE,.. I have read somewhere that the first 3-4 mths of the year we are working for the Govt. ( tax), and then,after that, what we earn , is for ourselves..
if you wanted to be cynical, you might call this a form of slavery..??
Is this less or more abhorrent than a land tax.??
The three points in the start of the article are correct. High prices and rents then flows into all sectors as hidden inflation. Look at the strike action underway. If house prices and rents were half of what they were teachers and police salary's would be much more appropriate. Stupid rents and prices only serves the banks profits, and the speculators leveraging cheap cash to bet the farm on housing inflation. Not a left winger but this is the single biggest issue in NZ in my mind and needs fixing.
Hurry up with an asset reset. Banks take an almighty hit, and leverage junkies go to the wall.
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