New Zealand must shift the burden of taxation from the working population to landowners if it is serious about tackling poverty and the housing crisis, says Raf Manji, leader of The Opportunities Party (TOP).
At its AGM in Wellington, TOP announced a tightly focused package of reform proposals centred around a tax switch from income to land.
TOP’s policy proposals are deliberately focused on tackling what Manji describes as the two most urgent and toxic problems in our society: entrenched poverty and access to affordable housing. This policy is part of a phased-in approach to a universal basic income, which still remains a long-term goal.
Rebalancing - The Tax Switch
It includes a new tax-free threshold of $15,000, shifting tax thresholds to deliver a $6.35 billion boost to incomes, as well as a $900 million boost to income support for our most vulnerable. This would be funded by a small annual tax on the value of residential land, raising $6.75 - 7.5b annually, making the policy fiscally neutral.
Manji says the package is designed to “rebalance the economy” and reverse social and economic trends which risk becoming further entrenched:
“Aspects of our society are rapidly becoming unrecognisable, and unacceptable, to most New Zealanders and will require a radically different political solution.”
“The evidence of the last two decades shows us that the formulaic policy responses from governments of the left and right – whether it be benefit reforms or tax cuts – have not worked.”
“Without a fundamental rebalancing of the way revenue is gathered and income distributed in this country, the problems of unaffordable housing and poverty will not be solved.”
Punitive and discriminatory policies for beneficiaries must go
Alongside the tax switch, The Opportunities Party is proposing a one-off debt cancellation for beneficiaries, who are labouring under a $2b debt burden from the Ministry of Social Development, and the removal of discriminatory and punitive benefit regime which still penalises people based on their relationship status and disincentivises part-time work.
“People are caught in a vortex of unaffordable living and are unable to progress with this huge burden of debt around their necks. Meanwhile, the government has overseen a huge upwards transfer of wealth due to their Covid-19 policies.”
Time to pull all the levers
Affordable housing was also a focus, with a $3b Community Housing Development Fund announced. Manji noted: “Community Housing Associations are best placed to deliver not just warm, healthy homes but safe and supportive communities. Government should support them to get on and do their job, work with the philanthropic and private sector and build the homes that are desperately needed.”
Alongside this major funding boost, TOP announced a range of proposals to rein in speculation, increase land supply and incentivise councils to speed up consenting processes. Manji noted: “We have to pull all the levers available to us, with the clear goal of increasing the supply of affordable housing, as well as reducing rents and house prices.”
The Opportunities Party is committed to challenging the status quo
Manji said since taking over as Leader of The Opportunities Party earlier this year he had been continually surprised and motivated by the number of people, from across the political spectrum, who had expressed support for the type of reforms TOP is proposing:
“Many young people in particular are finding it hard to relate to the old red / blue political narrative. They don’t see either providing the fresh and bold thinking we need to survive and thrive as a society in the face of the multiple challenges confronting us globally.”
With an eye to next year’s election, Manji also announced that he would be standing in Ilam, as he did in 2017, when he came second to Gerry Brownlee, achieving 23% of the vote. He felt he had a good chance to win the seat, noting: “It was unfinished business. It was also an opportunity to put Christchurch back on the map and dispel the issue of the ‘wasted vote’.” Acknowledging the 5% threshold was a high barrier to overcome, Manji said: “If we win Ilam, every single vote will count, so that will be our focus, and the team is ready to go.”
Manji paid tribute to the passionate core of TOP supporters who were committed to challenging the status quo thinking of the mainstream political parties.
He said, however, the mainstream parties have proved they lack the political courage to take these issues on – TOP’s mission is to promote open discussion and a change to the status quo.
New Zealand has a proud history of adopting bold and innovative positions on the international stage – most recently our Prime Minister speaking at the UN on the challenges of climate change, nuclear proliferation and disinformation, where she stated: “We have the means; we just need the collective will.”
TOP agrees and argues we must apply that same belief to our domestic challenges. The status quo must go.
*This article is a statement issued by The Opportunities Party (TOP). It was first published, with more detail, here.
100 Comments
Under the TOP plan, a tax-free threshold of $15,000 would be introduced, following by a big tax cuts for middle income earners who would only paid 20% tax in income earned between $15,001 and $80,000. A new 35% rate would apply for income earned between $80,001 to $180,000, while the current 39% tax rate on earning over $180,000, introduced by Labour in 2020 would remain.
the 15k threshold is a no brainer, the amount of paperwork many small business have to do to employ causals to work a few hours or fruit pick is not sensible especially because at the end of the year most get a tax refund. most other OECD counties already do this but for some reason here in NZ we want paper delivery schoolkids to pay tax
I think you grossly underestimate what struggle street is although $1900 ($16,000 net) is just the unemployment benefit single person living alone. $43,000 ($35,857.30 net) is minimum wage at 40 hours a week you are still struggling, especially when you consider the extra expenses that you incur since you are no longer poor, like getting to work $80 per week $4,000 cloths for work, rent can go from 1/4 of your income $100 per week in a state house that you will not be evicted from to $500 per week that's an extra $20,000 dollars a year after tax. You start loosing benefits like community services cards, maybe have to pay for childcare. So what exactly are you working for? At least on the unemployment benefit your time is your own. Seriously I think if you are single income earning $100,000 renting and have 3-4 children you would be just about breaking even since you your rent is likely to be $700 per week $36000 since your gross income is $74,690.00 leaving you $38,000 to per year to support 4-6 people (if you have a partner) or between 6500 (125 per week) to 9700 (186) per person, foods probably about $100 per person.
That's the problem with numbers they give a rough guide but too often they hide the real picture.
Land Tax redresses the imbalance between productive income tax ( individuals & businesses ) and unproductive asset taxes ... wealth , if you will ..
... I'd go further than TOP , and gradually scrap WFF ... and accomodation supplements ... put the money saved directly back into the hands of the productive sector with personal income tax cuts , and a cut on company tax ...
How does giving me a tax cut on my income tax but than taxing me the same (actually a little bit more) on my house rebalance anything? It's just a whole new system to collect the what is functionally the same amount of revenue.
If they were serious about this driving best economic return, they'd apply it to the conversation estate.
It would likely be fairly neutral for you - you're not the target.
Likely to be beneficial for those who don't own property and work for a living (giving them a better chance of doing so) and strongly negative for those with multiple properties, especially those who don't work for a living.
The rebalance is discouraging people from hoarding property and towards productive work. Don't worry, you are not the one whose behaviour TOP are trying to change.
Sure, but this is simple and also targets those who just own more home than they need. Extra incentive to downsize and free up that valuable resource after the kids have left (not forcing, just incentivising). Or perhaps to take on lodgers and help with housing supply that way.
There are other ways, sure. I've thought a deemed return tax on second+ properties would be great, similar to the FiF scheme. If you own more than one property, the excess are taxed as if you made a 5% return (so you pay tax on ~1-2% of the value depending on your income). More targeted, but harder to enforce (can you just put the second property in your wife's name, the third in your cousin's name etc?)
I'm certainly open to other ideas if you have a cunning plan.
I would gladly support a deemed rate of return, aggressive stamp duties, CGTs, you name it, on second homes. We manage the 1st/2nd home distinction for the Brightline Test, we could manage it for this too. I'd charge them in multiples for each additional home as well.
But the problem I'm seeing with this is that it doesn't let you suddenly designate people's equity as future government income and I suspect that's the real reason TOP keep advancing this policy, even for people who own one single home and if they didn't, they'd be renting.
I see pros and cons. TOP's proposal would be very hard to avoid and impact on the 'too big a house' as well as the 'too many houses' aspect. Downside as you say, it's an extra form for many tax payers (which homes do you own, what is your % interest, what is the rates value etc). Generally I find NZ very good for simple tax forms and returns.
Stamp duty - sure, but it doesn't have an on-going effect. It may act to slightly discourage that initial rental property purchase but 1 year down the line that's all forgotten. No impact on current rental owners, probably no impact on inherited properties?
CGT - again, no effect on current owners. Maybe even less likely to sell as they are tax-averse. Potentially avoidable and complex (speaking as someone who recently had to wade through a UK capital gains tax return). No effect on the 'too big a house' crowd, same with stamp duty it it only applies on second+ homes.
How would the CGT have no effect on current owners? Proposals in NZ have been based on a snapshot of values at a 'V-Day' and then gains from that point on would be taken as the gain for a CGT if there hadn't been a purchase after that point in time.
Don't forget the 'Too big a house' owners already have a big incentive to sell: the demand for the land under their house.
I mean it doesn't change anything straight away. Sure, they will likely pay tax on sale but there is nothing encouraging them to sell the second home. Quite the opposite, in fact. And yes, as you say we wouldn't tax historic gains so pretty soft on historic owners. This causes more complexity - for my UK return I had to figure out how much my house was worth in 2015, at which point I'd owned it for years.
That was part of the reason the CGT used the 'line in the sand' to create a value at a certain point instead of exempting all homes bought prior to this. It was part of a bid to head off concerns about the 'lock in effect' which isn't that strong anyway, but it does resolve issues like yours where you have a historic purchase and capital work done since which is in theory part of the 'cost'.
The mistake we made here is the Working Group got greedy and ended up arguing that we should be taxing all capital gains at the same rate, which of course means money would have found its way to the fastest return (which would still have been property over Kiwisaver, Shares, etc). If we'd just stuck to property then we probably would have been able to get it past the electorate but someone decided to rule it out as long as they were leader, regardless of whether we needed or not.
So rather than just revisit that, and accept that we stuffed it up, we're now in a situation where every single home owner in the country is going to get taxed on land. It's madness.
I guess we do 'manage' with respect to the Brightline Test. However, I would prefer to avoid all the associated admin and investigation with no one able to fall through the cracks by accidently ticking the incorrect box.
It's 'complicated' because you're dragging a whole bunch of people with no tax obligations outside PAYE into a net in a bid to somehow correct the behaviour of a group of people that they don't belong to. Allow me to make this easy for you to understand then: I object to it because it sucks. Is that simple enough for you?
Sounds good but what will likely happen, is the people who own the homes will just transfer that burden onto the renters. The problem is fundamentally the people with the power have the flexibility to change so the new system suits them.
I think we need a fundamental shift if in the way we think in society, a move away from charging as much as I possibly can for something to charging a reasonable amount for something. The people who overcharge should be looked down upon not revered for being good business people.
How is this hard to understand? Its a shift from Income based taxation to wealth based taxation (well Asset ownership) to help show the dramatic and rising in inequality in NZ.
Resulting in:
Less taxation, for those with income but no home ownership (about half of NZ)
Negligible change, for normal families who work and own 1 home
Increase in tax for those who own many houses
Folks sitting on 2+ houses, to which they likely pay no or little capital tax on this huge wealth gain, can and should contribute more to taxes NZ.
It's not hard to understand, it's inherently pointless.
Folks sitting on 2+ houses, to which they likely pay no or little capital tax on this huge wealth gain, can and should contribute more to taxes NZ.
I agree. Target them directly, rather than giving with one hand and taking with another for everyone else. Then the problem of dragging every single owner occupier into the tax system for owning their own home disappears, and renters still get the benefit.
As a home owner and a worker it gets my vote. It also has the advantage adding lever's to pull. The last few decades accomodation cost have outstripped wage grow with no inflation. Wages try to catch up inflation. We need a link between workers incomes and living costs. This is a step in the right direction. Only the lazy will complain about such a well thought out policy.
Agree Gummy - we do need to get rid of WFF and AS. TOP are also proposing changes to welfare abatements, as I understand it, which as they currently operate dis-incentivise people from seeking/taking on part-time work. So, that in addition to the $15K tax free threshold, are two first hurdles to cross toward getting rid of the welfare subsidies of WFF and AS..
I'm doubtful about UBI since it has never been tried successfully and I'm fairly sure that when I was young, single, shy and lacking in confidence I would have just lived a minimal life without working. We do need stick and carrot to get us working. However a generous universal child benefit is a great idea. It works. It would solve child poverty and tidy much of the mess of current benefits and it would stop mother's refusing to admit the fathers existence to obtain more benefit.
Seems like a sensible argument. Maybe we need to think more broadly about what universal benefits would build the sort of social cohesion NZ needs? For instance, I would quite like a universal activity card for all teenagers and young adults. This concept worked amazing well in Iceland to tackle issues like binge drinking and mental health issues. I think it could work well in NZ and many other countries. Ireland is considering it as a measure to help children adjust post covid.
https://www.irishtimes.com/life-and-style/health-family/parenting/game-…
Currently the first $14k is taxed at 10.5% regardless of what the total income is, so that's $1,470 that everyone is better off by as a starting point. Our household is lucky enough to have pretty good incomes with a nice property (with associated huge mortgage!) and we would actually be better off by about $4k per year under the land tax policy. If you look into the whole deal its actually pretty good and better than anything else on offer.
I expressed my view on governments stealing from private property rights elsewhere on Interest today so won't repeat that.
However who really believes that once such a tax is in place that it won't ever be increased ? It will wipe out people's lifetime efforts and wise choices made to provide family homes = "wealth" in all these socialist envy party thieves eyes. It may be applied at different rates on race or household income lines (noting also that Maori land is already excluded).
To then handout peoples hard earned money to people who can't be bothered to get out of bed.
This tax isn't new it's been done before. It's only opponents are people like you who have made a living of Tennant's. We have reached a point where enough people care enough to redress this imbalance. Home ownership never used to be this hard. Investors need to look elsewhere, homes will be homes not incomes for a few.
" It's only opponents are people like you who have made a living of Tennant's" - the proposed tax is not targeted to hit just the landlords you seem to hate so much . Every owner occupier in Auckland will be robbed to in order to pay a bribe to the target electorate.
A new charge for holding land (possibly with an empty house on it) will at least encourage owners to review if it makes sense for them to continue to hold, develop or rent it out in the case of an empty house. Freeing up land can mean making more use of whatever is already available but sitting idle. If they don't do anything, then at least the new land tax will be reducing the tax required on those working and paying tax within NZ (overseas based owners who are not tax residents would effectively end up subsidising NZ based tax residents).
Regardless of what you think of this policy, TOP's existence gives voters a real alternative to the same-old policies from National or Labour. New Zealand has known for a long time that the tax system is unhealthily tilted in favour of property speculation and away from productive enterprise. TOP's policy is a step towards fixing this in a way that the mainstream parties don't have the guts to do. Bravo.
Of course I'm biased as a non-homeowner, but renters are a group that make up an increasing proportion of New Zealanders.
Our parliament would be stronger with greater diversity if more minor parties could get in ... TOP needs the 5 % party vote threshold to be lowered ....
... the flip side to that , of course ... is that the likes of Colin Craig would've slithered into a Beehive seat ... grrrrrrr ....
It would be better if the threshold was lower. I think that if polls showed TOP getting near 5% then more would vote for them to get them over the line, instead of what they feel is wasting their vote. At this time my vote is going to be against National's property policies and if I can do that through TOP I would.
Do you really think that the new tax your landlord will have to pay will not result in higher rent for you ?
"the rent is limited by the ability to pay" - I hear the usual commenters shout . Let us grant that - the proposed tax switch is meant to increase that ability.
If Landlord A raises the rent then landlord B has an opportunity to build another rental unit on their land and undercut Landlord A. Or maybe Tenant A paying extra rent will incentivise them to buy a new home from a building firm. Landlord B or Tenant A will pay no extra tax because the tax is on land not buildings. There will be plenty of opportunity to build because of the various upzoning initiatives - Auckland's unitary plan, NPS-UD, MDRS.... and the effect of the land tax itself.
The best thing that will address property speculation, is a fall in house prices, hopefully that will happen, and the current fall is not just a blip, everything else is just window dressing.
There are plenty of industries that collect money for doing nothing, housing is not special. Society has the problem that people owning stuff are compensated far more than people doing stuff. Why is Vodaphone changing their name? Oh right 35 million dollars per year for naming rights, somebody must be working hard providing that service.
The reward system is out of wack, and focusing on just housing is far to narrow.
I struggle to see how a significant land tax on owner occupiers can be the answer to anything. You will end up with a cohort of people that bought their only home with tax paid earnings paying all over again. And many without the cash income to pay it.
The problem has not been people owning one home, it is speculators looking for capital gains on additional properties. The tax rules already exist to tax these realised gains, it just needs the IRD to pull their finger out and tax them. Put the burden on the vendor to show that there was never any intention to make a capital gain....they couldn't because of course the intention WAS there. That makes it taxable.
Thinking about it some more, I think TOPs policy could actually have the unintended consequence of increasing house prices.
The income tax cuts mean there is a greater take home pay to be levered up into the ability to borrow and pay more for a house. And the land tax at 0.75% pa is small enough to be ignored when the market is increasing by much more than that. So people could be sorely disappointed in the outcome.
The land tax would replace current the bright line test, not apply to rural, Māori and conservation land and could be deferred for superannuitants.
Only a guess but rural (if included in a land tax) would need to be set at a different rate to urban, but the other thing is agriculture has enough cost/regulatory input pressures at the moment as it is. And my understanding of Māori land as registered under Māori land title is in collective ownership and much of it is not in production as the focus of its use being to preserve culture (e.g., marae) and/or to regenerate natural character (e.g., Te Urewera).
There are mechanisms to look at these landholdings more individually in future (for example when we owned a rural property, a small part of the holding was considered in residential use for business/tax purposes). It's detail that could be worked on in refining such a policy in future.
The important aspect of the land tax proposal is just that - finally a land tax proposal!
While you can find some merit in an asset tax, you run into the practical problem of collecting tax where the cash to pay it might not exist. Enforcement gets messy. It is much more pragmatic and politically acceptable to impose a tax on some form of cash flow...ie clip the ticket.
Not racist just simply practicable. It would be the same for govt/council owned land where there are multiple stakeholders, it just gets simply too hard to enforce. Instead of just making a childish statement try opening your eyes and understand why it would be exempt
I consider myself to be a home owner - not a land owner. And most home owners house would be on lass than the 1/4 acre our parents had.
Tell me how I am to make a cash payment from with TOP taxing the value of the land my house sits on?
TOP forget that there is no cash generated until the property sells.
Tell me how I am to make a cash payment from with TOP taxing the value of the land my house sits on?
TOP forget that there is no cash generated until the property sells.
One usually makes payments of that sort with that stuff they call "money". I assume you have some of that stuff coming in, otherwise you would be dead of starvation and the payment of the tax would no longer be a problem. You could probably met the necessary payments from the income tax reductions that TOP is proposing.
Incidentally TOP has no power to tax anybody. Any taxing that has to be done will be done will be done by the IRD.
"You could probably met the necessary payments from the income tax reductions that TOP is proposing."
If you have the income to benefit from the deductions. If you don't, the government is going to make you take out a reverse mortgage against your house.
It's a stupidly convoluted policy that might work if land prices were already at a sane point. But even in retiree paradises like Whangaparaoa you're going to be hitting people with an extra $5K net of expense (based on a quick back of envelope calc for my grandparent's house), so instead of accepting that maybe that's an indefensible outcome, the answer is "Well we'll make people load up the debt against their equity" at which point apparently all the problems just magically disappear.
This isn't a piece of capital that you get some enduring benefit from. It's purely funding the operational and political concerns of government. That's a poor reason to dream up a new way to dip into people's pockets given the incredibly shitty value we get for what we already pay.
Re: The Opportunities Party is proposing a one-off debt cancellation for beneficiaries, who are labouring under a $2b debt burden from the Ministry of Social Development,
Anyone know what this is?
I voted for TOP last time and may well do so again, but I don't like unexplained giveaways.
https://www.1news.co.nz/2022/06/10/beneficiaries-owe-record-21b-to-govt-as-cost-of-living-soars/
"If you get a food grant then you don't have to pay that back, but everything else if you require support with rent, bills arrears, if your babies need uniforms, stationary, help with car repairs, all of that becomes debt for you," she said.
The repayments are set at the discretion of MSD staff.
https://www.rnz.co.nz/news/te-manu-korihi/457626/maori-beneficiaries-fa…
A lot of the loans were/are used to pay moving expenses, including the upfront rental fees (an additional weeks rent) that became illegal to charge under the Lab government.
I don't see why this needs to be tied to the LVT. I fully support this. The realistic collection on these funds is going be a dismal amount across a huge period of time that will be worth basically nothing by the time it's actually collected and has an ongoing admin cost to employers and the government. It should be written off as a matter of course instead of being a prop to justify dipping into home owner's pockets because it's not worth anything. The actual cost of doing so is realistically nil.
The necessity for a shape-shift in New Zealand tax policy is a given, but TOP is hardly 'revolutionary'. If they really care about people on struggle street they should leave progressive income tax alone for now and concentrate on reducing (REgressive) GST and replacing the shortfall with a fiscally neutral 'land tax' on ALL land (not just residential).
I've just reached pension age and I see my tax bill TREBLING under TOP's proposal. Forget "pensioner deferral", that's just a sad sop.
As for their final destination.... UBI..... give me a break!
I think that if land tax is to be applied to all residential properties, private residences included, then rental income from residential properties should be tax free, and without any deductions for expenses against that income. This would mean that private residences and rental residences were being taxed on the same basis, and landlords might be able to charge a lower rent in order to gain the income they require. It would also obviate uncertainties about whether particular expenses should or should not be deducted for tax purposes.
The switch from taxing income to taxing land is desirable since it would encourage a more efficient use of land: e.g. through the construction of higher density housing, or encouraging persons who are able to to do so, to move to areas where land was less expensive.
Some additional information under this link - particularly see bullet points under affordable housing;
https://www.top.org.nz/the_status_quo_must_go
including:
- GST on new builds back to Council
- Higher deposits for investment property
- Allow interest deductibility for current rentals and new builds
...most recently our Prime Minister speaking at the UN on the challenges of climate change, nuclear proliferation and disinformation, where she stated: “We have the means; we just need the collective will.”
TOP agrees...
So they are OK with Jacinda and her mates continuing to decide what is true and shutting down anyone who challenges their narrative?
I'm amazed people are so happy to give away their right to freedom of speech and therefore thought.
Hard pass.
Who is going to define what mis or disinformation is? The people who want this power are those most likely to abuse it.
What will you do when you disagree with them? Once they have this power it will be too late to dissent.
People should be taught critical thinking skills, not told what to believe by politicians, they're about as trustworthy as used car salesmen and real estate agents.
To undermine free speech is to undermine democracy itself.
There has always been a distinction between fiction and non-fiction in terms of narrative/story-telling. There is no intention to 'ban' fiction. It just needs to be filed appropriately on the library shelves. Take the Alex Jones/Infowars disinformation campaign regarding the Sandy Hook shootings - he made a ton of money at the expense of others. This is I think a perfect example of the type of disinformation referred to above.
Why start by taxing something big like property? Surely it would be easier to start with a deemed rate of return in smaller things like consuming your own garden produce meaning that you skip all taxes including gst on that produce, or cycling enabling you to get places without paying any transport related taxes (fuel tax or gst on public transport fares) ?
Because they don't want to discourage gardening or cycling. They want to discourage people from owning too many houses.
Of course they have already tried it out on something smaller - foreign share ownership (excluding most Aussie shares). The FiF scheme has been running for years - the idea was to discourage Kiwis from investing overseas and to put their money to use here. Sadly it mostly flowed into property because Kiwis mostly lack imagination.
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