By Eric Frykberg
A group of prosperous people have penned an open letter to the Government saying they would like to pay more tax.
They say that would help fund better social services for the population of New Zealand as whole. They add it would help sustain the infrastructure that was essential for them to build their businesses in the first place.
Signatories include the rich lister Phillip Mills, who runs the fitness company, Les Mills, which was established by his Olympic athlete father.
Other businessmen to sign up include the IT and special effects man Ian Taylor and Malcolm Rands, who established the Ecostore company that produces renewable household and personal products.
Another signatory is the wealthy businessman turned Government critic, Rob Campbell. Also on the list is the actor Robyn Malcolm. The champion squash player and former race relations conciliator Susan Devoy is also on the list, which runs to 97 people.
The open letter has been released in the wake of findings by the Inland Revenue Department that 311 wealthy individuals and their families or trusts were paying about half the tax rate of most New Zealanders.
But the campaign was launched earlier, last November, by two non-government organisations, Tax Justice Aotearoa and Oxfam. It was intended to complement an international programme, Millionaires for Humanity, which was begun in Denmark.
In their open letter, the signatories said they're frustrated by how much, or rather how little, tax they pay.
"We want to pay more," they wrote.
"As people leading financially comfortable lives, we might be expected to be anti-tax. But we recognise tax as a shared contribution to our collective success.
"It funds everything from the teachers who give our children a great start, to the DOC rangers who look after our environment, through to the health care professionals on whom we all rely.
"Looking after each other is the mark of a civilised society, and tax is one way to pay for that."
The open letter went on to cite child poverty and the cost it imposes on the tax system. It also stressed the role of tax in creating infrastructure which commerce depends on. (The full list of signatories is here).
"Some of us have built businesses from scratch and celebrate profit when it serves the public good. But we know that in our working lives, we have benefited from the infrastructure paid for by the taxes of past generations.
"We want the roads, the hospitals, the schools. We want to pay that forward, to replenish the collective pool of resources from which we have drawn."
The campaign authors stress they are campaigning on principle, not for particular tax reforms. Although they have sympathy for a capital gains tax, they are nor fighting for that specifically, nor for any other so-called progressive tax, such as a wealth tax, an inheritance tax or a transactions tax.
'Those who are worth more should pay more'
Mills is one signatory who quite likes capital gains tax but his main motivation is ethics, not detail.
"Does anyone in this country really want to have a massive wealth gap, with children living in poverty?
"I think if one part of society is worse of then we are all worse off."
Mills, who is 68, said too many years were focused on cutting taxes, and he personally was happy when the top tax rates were higher than they are now. He is a rich lister who confirms published estimates of his wealth at $250 million dollars, and thinks his tax rate should be higher than it is.
"Those who are worth more should pay more."
Another businessman to support this argument is the 68-year-old Rands.
"I often say to some of my other rich list friends, 'Boy, I would love to be paying $2 million a year in tax, because imagine how much money that would mean I am making.'
"I actually see it as a privilege and service to New Zealand to be paying tax, so I don't see it as a burden, I see it as a contribution."
Asked how much money he was paying now, Rands said it was exactly his share, it was just how much money the Government said he should pay.
"What I should pay, I do pay. I have investments on which I pay tax and I still do work."
Rands will not say how much money he earns, but he was "definitely" in the 39 cents in the dollar tax bracket, which means he earns more than $180,000 a year.
Like Mills, Rands says he is not proposing any particular tax reform, he is just supporting the principle of a fairer tax system.
Diana Crossan, a former high level public servant and ex-Retirement Commissioner, is a spokesperson for the campaign is. She said the New Zealand tax system doesn't collect enough money.
"We collect in our taxes somewhere around 32% of GDP and in European countries, Germany for example, it is 38%, the Netherlands 40%.
"We just don't pay the same amount of taxes as they do in other countries and we expect to have the same health system, and the same roads, the same clear rivers, the same housing and so on."
Seymour & Robertson weigh in
Many politicians are expected to support this argument, but the Act leader David Seymour is not one of them.
"It has always been such a lame, humble brag, 'I'm so rich I want to pay more tax'," he said.
"You know what, if they want to help other people, they could very happily put their own hand in their own pockets right now. Just because they are wealthy does not mean they know more about (tax) policies.
"It does mean they have got the ability to help others should they choose. The fact that they are not doing that and trying to make a statement about how rich they are tells you a little bit about them quite frankly."
However the finance minister Grant Robertson had a different view. Without commenting directly on the open letter, he made clear his support for a tax system with integrity, and he opened the door to reforms.
"Tax revenue is vital to ensuring we can provide the services that we all need," he said.
"I support a tax system which is fair to all New Zealanders. There is always room for improvement to make that a reality. As the Prime Minister has already said, there will be no major tax changes in the budget. All parties, including Labour, will have the chance to take their tax policies into the election."
163 Comments
Are the people who say these things leading by example, and gifting their wealth. They can do that right now, there's no need to wait for the political process.
If Mills has wealth of 250million he can easily divest 90 percent of that and still be very comfortable.
Lets see Phillip Mills (and others) put his money where his mouth is and show us how much he gave away to those less fortunate, last financial year
Totally agree - he is welcome to donate to the government. The rest of us who dont want to waste money on promoting Te Reo and Communications advisors should be welcome to not donate.
If he really wanted to make a difference he should donate to effective charitys - but he doesnt, he wants to make a political statement virtue signaling about what a kind person he is.
While I understand and sympathise with the sentiment HW2, I disagree with this entirely. The underlying issue that both major parties have so far indicated they have no intention of fixing is NZ's tax structure across the board. The fact that there is no tax free threshold at the bottom, that bracket creep has been occurring for years, that the government has a clear attitude that it doesn't want wages in NZ to climb, thus keeping down living standards. In addition for decades now successive governments have been creating a new class system of political and privileged elites, where people who have risen to the top of organisations and the political system are clearly entitled to large pay packets without the commensurate obligations, while economic policies increasingly rob the lower and middle working classes of the ability to have choices and build a life style. This is the modern shape of democracy and far too many of a gullible public are only too quick to buy into it, even many contributors to this site.
I agree, and have done so for many years, but at no point has there ever been enough support for the changes needed, and the problem with a social contract is that it's not binding. The wealthy are under no obligation to contribute.
On the one hand, the open letter smells of the wealthy trying to divert with the same old "we would pay more if we could" trope. If they wanted to pay more tax, they could give themselves a salary in the millions and pay 39% PAYE on it instead of leveraging the fine print in corporate, trust and charity tax laws.
On the other hand, they have publicly pointed a finger and said "it's broken", admitting that they take advantage of it, and at least adding to the conversation about tax reform. But those conversations have happened before and nothing was done. Because at the end of the day, 100 wealthy people won't change it.
Even 3 million Kiwis can't change it, as there isn't a political party saying it would make those changes. Labour had the chance, but enough of their own party members were against the idea, along with opposition parties, that it was a no-go from the beginning. Still didn't stop them spending millions on a working group, did it?
I think the problem is that the anti-tax lobby is doing a great job of convincing the middle class that tax reform means they will pay more tax. It doesn't need to be that way. An employee on $200,000 has an effective tax rate of 30.1%. If they were earning $2,000,000, they'd be paying an effective tax of 38.1%. But they don't because employees don't earn 7 figure salaries.
As was shown by that report, those that do have 7 / 8 / 9 figure incomes pay a much lower effective rate. Yes, of course it is still more tax, at a $ value, than what the $200k employee pays, but if the high-rollers paid their full 38.1%, you could make the bottom tax bracket 0%, subtract 5% off all the other tax brackets (even if that meant multi-millionaires pay an effective 33% instead), and still get more tax revenue per annum to finance schools, hospitals, and emergency services, as well as making serious in-roads into climate threats and failing infrastructure.
IRD know where the "income" is coming from that isn't taxed appropriately. All the parties have that information. I would vote for the party that will do something about it... but there have been too many broken promises to believe any of them.
Pretty much agree with you there. Your vague reference to the Labour led tax working group; the biggest problem I saw with it was that it was at best a clumsy, ideologically driven, perspective to put more money in the politicians hands with out addressing the real issues. Predetermined to fail right there.
And - they wrote land value tax (LVT) considerations as being out of scope. So, the cleanest, most efficient means of taxation wasn't even able to be considered by that working group if I recall correctly.
I agree - the above post is excellent. Sums it up very nicely.
Not too serious. A lot of the time my comments on here are facetious or tongue in cheek.
I agree with income splitting, would be very easy to implement with a tax code & linking of IRD accounts/codes. A family household uses roughly the same Government services whether both parents work to earn a combined $200k, or 1 works to earn $200k and the other stays at home.
By having children he is subsidizing all those who haven't, once all the people not having children retire who do you think will do the work. If we all manage to have a billion dollars in the bank, and no next generation to do the work then all that money is useless. I am sure those zeros and ones will be very tasty.
Sure you get some tax breaks, and benefits like "free" schooling for your children, but if you are earning a reasonable income they are costing you way more than you get.
Having children is a lifestyle choice that enables the survival of the human race. Sure you might think its not worth keeping but then I hope you where against COVID vaccines too. Or speed limits or hospitals, why bother if you want the human race to die out.
Exactly. Also raising a family is a laudable contribution to society & humanity as a whole and also helps keep the economy going in the future!!
This should be made much much easier (financially and otherwise) than it is.
Otherwise we'll have to rely on immigration to keep the demographic decline in check, tax revenue flowing and deal with skill shortages.
I'm in the same boat - my salary is high vs the NZ average but we have only 1 income, a young family and a large mortgage. In Germany you are taxed on your household income which supports a family whereby one parent isn't in formal employment so they can manage the children and home when they are young. Here we have a Jacinda inspired one size fits all top tax rate on earnings over $180k which might simplistically mean targeting 'rich' people but is actually a blunt and ignorant vote grabber policy.
''and we expect to have the same health system, and the same roads, the same clear rivers, the same housing and so on."
What really aggravates me is the inefficient way in which taxes are spent - approx $50b on welfare - vs $20b on health and $17b on education. Paying more tax = lazy government spending on more welfare (just spent $2b in handouts for what result?) = paying poor people to be poor and supporting superannuants who aren't means tested when receiving their monthly government payment.
https://www.treasury.govt.nz/information-and-services/financial-managem…
And the government was handing out cost of living allowance payments in some of these situations too, e.g. household income high off only one income. vs a combined household income which might be less but off of two incomes.
What do they actually do when they sit down to figure out a better tax/benefit system?
Is that even a standing item on their weekly stand up meetings?
I mean it's hard for me to feel like you should pay less tax when you are in the top 5% of income earners in NZ, which allows you to live in a presumably large house and raise a family on a single income. So you have it pretty good compared to people I know earning a combined income of 2/3rds of yours raising 2 kids in a 2 bedroom house.
Even having said that, I think all income taxes (including yours) SHOULD decrease and the lost revenue be replaced with a land value tax or a CGT (the latter being the much worse option). That would make the tax system much fairer in my view.
A tax switch to a land tax (urban land plus any other land containing accomaodation with an allocated 800m2 surround (standard section size) included rural, religious and other tax entities with accomodation. Together with a good tax free threshold ($25,000 which makes us competitive with aussie), reduced GST rate, reduce income tax rates across the board, less welfare payments to offset tax free threshold and income assessment as per NZ Super.
But we have to start somewhere, so look at the TOP policies.
Did you not know the top 5% of income earners work many magnitudes harder than the bottom 20%? That alone should entitle them to pay far less tax.
The top 5% will also have you know that those people you refer to earning 2/3rds? They're probably not net tax payers, getting all sorts of tax credits. Just don't discuss about why they get tax credits to begin with, especially with the top 5% that own rental properties.
With all due respect, that's a silly argument HW2. The sort of thing you hear in the States. It's not about individuals making sporadic gifts to whatever charity or Government floats their boat. If NZ is to thrive as a nation, we need tax reform, this is one part of the picture that should be considered. A government can't structure their books based on how much Phillip Mills gave to charity.
They also can't do basic administrative tasks like index tax brackets. Are they suddenly going to actually be competent enough to design a new tax system from the ground up?
Also, I think you're probably being optimistic if you think Governments would set tax policy according to actual need. There is just never going to be enough tax money. The tax take has exploded and we still have worsening education, health and pharmaceutical access in this country. How much more tax would it take before accept that it's the actual decision-making of spending money at a governmental level that is the actual problem?
It's two different arguments though. One is how revenue is raised, one is how revenue is spent. They are both of equal importance.
And we can only cut so much spending before we end up getting worse results. At a certain level, we do need to keep spending on certain things in order to continue being a developed economy. You can't tax your way to prosperity but you also can't budget your way out of poverty a balance has to be met.
The problem is the more money one has the more its wasted. Money can help sure, but to a point, if you look at the this government there solution is to throw money at things and hope it gets better. All I see this extra money doing right now is causing extra waste, and there are an army of people like consultants ready to take it. Look at the cost of most projects and see how much bureaucracy costs relative to actually doing the work to see how bad it actually is.
You need to address the massive inefficiencies before you increase the supply of money, necessity is the mother of invention. If it doesn't become necessary nobody will actually reduce the waste.
Exactly. What's old, tired and boring is David Seymour's view - straight out of the neoliberal playbook. To my mind, it is an embarrassment that so many children in NZ are reliant on charity for their breakfast. A fiscally healthy, secure government can confidently develop social and economic initiatives that benefit everyone. Same as a healthy, secure family.
No Kate what is old and tired and boring is the view that increasing the tax take will solve the problems. The significant increase in tax take over the last 5 years (or use 20 if you want) has not been matched with an improvement in social equity - in fact I would argue that the opposite has occurred.
So perhaps the answers are not related to taxation at all but service delivery or maybe who is getting a share of the tax take as it appears that a fair chunk comes back to people who dont need it
And David is correct in that people who have money can assist without paying tax or bragging about it - Mark Dunajtschik and Dorothy Spotswood come to mind
and I will have a neoliberal playbook over a socialist/communist one every day of the week
So you make everyone in the public sector redundant, complete a full restructure with very clear KPI's set in place by legislation.
Remember, it's not the political party that fritters away the money. They can only direct funding to various departments. It's how that money is spent and how value is realized that becomes an issue, and it's our well entrenched unelected departments that have no clue.
Whenever you increase the amount of money paid to poor people with children, you increase the number of poor people having children. Witness the explosion in the number of people on the Single Parents Benefit since 2017 - from 60,686 to 73,575 which is a 21% increase.
Meanwhile there has been a 44% increase in the minimum wage over that period, so why dont you ask why all those beneficiaries havent gotten off the couch and gotten jobs so they can afford to feed their kids breakfast? I guarantee the answer is not "because rich people dont pay enough tax".
K.W. what you fail to consider in respect of the 21% increase that you claim has occurred fails to take into account the statistics regarding the increase in marriage/defacto partnerships over that time. The increase, if indeed it is what you claim (a link to verify the stat would have been useful to cement the credibility in the statement) is highly unlikely to be cause by benefit rate increases incentivizing women to have more children. The Single Parent Benefit affords a miserable lifestyle for both the single parents and their children, particularly if there is no spousal/partner support.
And the legislation is such that when the youngest child turns 5 years - the single parent is work-tested and expected to return to work. I can also guarantee very few single parents spend much, if any, time on the couch.
And I can also guarantee that most parents unable to afford healthy breakfasts for their children every morning are likely working. Thus is the reality of supporting a family on a minimum wage - ever though it may have increased, 44% of that period. It is still pay-check-to-paycheck subsistence living.
Your ignorance is astounding.
HW2,
There is sadly, an unpleasant streak of selfishness running through this country which you epitomize.
Why are happy for this country to be an outlier on taxing capital? I advised many clients on CGT and Inheritance Tax(IT) in the UK over many years and while not one said they enjoyed paying these taxes, they accepted them as part of a fair tax system. My own view is that we should implement an IT tax. This would take effect on the second death of a couple, have a reasonable tax free element and be complemented by a lifetime gift(inter vivos) tax regime.
Why should families who have never owned investment properties or contributed to the worsening state of housing opportunities suddenly be dragged into an inheritance net because the government failed to implement a CGT at numerous points in the last twenty years?
It's not like the government isn't hundreds of millions on things like mergers of polytechs and media outlets as well as propping up private corporate media as well - so they can't exactly plead poor to the extent that we start taxing Kiwis for dying - especially given how bad access to healthcare is getting in NZ.
Inheritance is income, other income is taxed.
Not sure why those lucky enough to have rich parents should avoid paying tax on their income (after having already enjoyed all the other advantages having rich parents provides). I suggest e.g. the first $100k of inheritance should be tax free though.
Good morning linklater
I hope you are doing well now my friend with your health challenge
You may not think so but I am probably one of the least selfish here on the forum. And I put my raging success partly down to having a generous approach.
I know you have shares in mfb and rental properties at the Mount so you are obviously doing very well yourself and I'm very pleased for you. All the best.
"If Mills has wealth of 250million he can easily divest 90 percent of that and still be very comfortable."
of the 250 million, most them are in form of the company, I presume, and you are saying he should gift 90 percent of Les Mills to tax man. Oh well, what does the tax man need the company for?
They talked about fairness, which means that the greedy selfish ones should not get away with paying a lower percentage of tax than e.g. a minimum wage worker. Good on them for wanting to pay their fair share of tax. Now which political parties are brave enough to change the tax system.
Yep, as an ex-accountant I've never heard of anyone getting audited and prosecuted for declaring fake income then paying tax on it.
There are also thousands of charities who basically fill in the gaps where government spending (pre-neoliberalism) used to go. I'm sure any of one these charities would love some regular income in the form of Mill's "extra tax." And if they are worried about infrastructure, for a start schools and hospitals take donations. Even offer to build your own.
The other issue I have is that many of these rich listers maintain their wealth by reinvesting in various ways, often in a manner that perpetuates the underlying inequalities they purport to want to address. They way I see it, they still rely on the status quo of property bubbles and dividend paying mono/duo/oli- gopolies for maintaining their wealth.
Unrelated, but is Susan Devoy really in the same class as the 'ultra welathy' ??
Nothing.
However, if the system that got us into this level of inequality isn't fixed, then you just end up back in the same position after they've donated every cent they have.
This is why I'll vote TOP, it's the only party remotely trying to fix the system as a whole to make things fairer.
Haha, Act and National would double down on the clownery. I wish this weren't true but based on their policies they are worse. They are pandering to the people who get triggered by "woke" but their policies show they would make the situation even worse i.e. reverse the good housing policies that Labour have put in place that are finally having an impact and sorting out our housing market. Instead they want to move back to the situation that got us here in the first place.
It's a trade off isn't... game theory suggests the best strategy is to minimise worst case scenario... for me that's an further entrenchment (perhaps beyond redemption) of apartheid...
Lets face it, both National or Labour will not substantively fix the economic issues we in without having big kahuna's and a leader who is a political savant that has the full package of wisdom, vision, charisma and persuasiveness in spades! Therefore pigs will fly!
National and Act don't seem to think that there is a structural problem with our tax system, in much the same way that Labor cannot admit our health and education systems are in crisis. A total lack of innovative ideas from the current parties in parliament.
Didn't Act recently advocate for a flat tax rate?
I was thinking of it more as an academic exercise. IE Here is a group of people wanting to change taxation (pay more), Have they heard of TOP? If so, have they voted TOP? If not, why not (what else is more important)? I think it would be fascinating to hear their answers and reaching out to them is something TOP officials might consider - might even be a candidate or two in the list. Maybe interest.co.nz could do likewise in the form of a more generic survey eg which party do you think has the best tax policy etc.
As for the wasted vote remark, I think once I managed to vote for a party that made it into Government, so I guess I've been wasting votes my whole life. I don't see it like that though, I cannot think of anything worse than voting for a party that didn't best match what I'd like to happen (taking into consideration any past performance of doing what they say into account). Not voting TOP (or other minor party) due to worrying about wasting your vote seems like giving up without trying to me or just following the crowd. I think for myself and vote accordingly.
NZ should implement a comprehensive land value tax on all urban property as a tax switch that funds a decrease in income taxes for those on the bottom bracket. Retired folk can opt to defer this tax on their primary residence until they pass away or sell the property. The advantage of this policy is it is not an envy tax - it does not tax success. In fact all the evidence is it helps bring under-utilised land into use.
We use to understand this point but unfortunately in recent decades it was forgotten. For instance a NZ professor of economic history Harry Bedford wrote in 1908 "Wherever rating on unimproved land has been tried in New Zealand, it has invariably been the means of bringing vacant land upon the market" - in his book 'Political Fingerposts'. Politically Bedford was a progressive liberal and after the Liberal Party fractured he went on to join the Labour Party. He unfortunately died young as a result of drowning. Note both Labour and National have founding ideological roots taken from NZ's Liberal party.
I challenge you all to go to the TOP website, www.top.org.nz, and read the policy and the statements by Raf Manji. It took me a while to get my head around it all so I am sure many of you will see the logic much quicker than me.
I wouldn't worry too much about inherited wealth. I saw some research a couple of years ago that indicated 80% of all inherited wealth is frittered away within three generations. Sure a small number of individuals are born lucky, but the core problem is a lot bigger than that.
Don't look at if from an envy perspective - what one person has versus another. Look at it from a democracy perspective and the opportunities that everyone has to participate. The current structure is depriving, disenfranchising the lower and middle classes.
Sure its , if you didn't have to do the work then your parents or the grandparents did the work. Don't be stupid mate, you didn't just randomly come into money, someone else did the hard work for you. We have generations of people on welfare that are not getting anywhere, I wonder why ?
So we agree that the wealth someone has has no direct correlation to their personal effort.
Some people got wealthy because others got their wealth for them.
I assume then that your OK if people vote in a government that takes a proportion of the wealth of those that are hoarding a disproportionate amount and redistribute it to cover the debt we need to pay back.
I'll restate my statement so there is no confusion
Personal effort is not directly correlated to personal wealth.
You can put in a huge effort over your lifetime and not be wealthy and you can also put very little effort in and be wealthy.
Yep Murray, a study of wealth in the UK concluded that only about 30% of the most wealthy people in the UK had wealth because of inheritance. Once the rainmaker goes, the wealth follows, either through bad decisions|investment, or through being split multiple times among family.
Luck is the key.
Lucky to be born - in a decent country, with decent parents, with wealthy parents, with good health, with good looks, with a large successful wider family, with good work ethics, with sound mental health, with resilience, with higher intelligence, with great character ....and on it goes.
Luck pays the role that the successful do not like to acknowledge.
Try and tell me how you succeeded without the luck of these gifts?
I think you're being a little unfair there rastus.
Multiple news articles over the years have shown quite young people (20's) that own several houses (or more) from raw determination and hard work. As far as I can see they only ever got help, such as a deposit gift or loan from their parents, for the first one. All the other houses they accumulated by themselves - so don't you try and take away from their accomplishment of getting ahead in an ever-decreasing interest rate environment please!
Henry you need to read Churchill on land value tax to understand that land monopolists put nothing of value in so deserve nothing out. Your "nothing in nothing out' comment is BS.
https://www.landvaluetax.org/history/winston-churchill-said-it-all-bett…
You can absolutely gain wealth without effort. Once you have a certain amount of wealth you can hire financial advisors that will manage that wealth for you so it grows. Most of my neighbours do this for a living. There is no effort required by the wealthy person.
Wealth is not directly correlated to effort. For some it actually is though. My partner earns a high salary but she works 12 hour days and most weekends on Saturday and Sunday too. Work only stops for dinner at ~9pm with chill time in front of the TV or a walk, but then it's back to the computer. A few years ago she left work at 5pm for some reason and one of the senior partners jokingly (but seriously) asked her if she was taking a half day. Sometimes I think she's on the edge of burn out. If you want to demotivate someone like that then tax the bejesus out of them.
My mate owns a house in Queenstown, single income earns about $80k.
his house is worth about 950k, the land is rated at 320k, with tops proposal he would save about $4000 a year in income tax, whilst the LVT would be $2400. $1600 a year in tax savings for him. Almost all working people would be better off. Let people keep more of what they earn. Stop rewarding mindless speculation.
E46, speculation is generally not mindless. If you are talking about residential|investment property in NZ, it was a no brainer. Interest rates historically low, credit easy to get and demand outstripping supply. All caused by various central and local Government policies.
Mindless from a policy level, it's hard to deny borrowing money from overseas to buy houses off each other wasn't the most sustainable way forward for the country. I'm not critiquing people's individual choices, but how government policy has incentivized that over other more productive investments.
Don't be so melodramatic. Efforts made over time to provide a home. LOL. You mean going to work like 95% of the working age population do?
Anyway, the policy should be tax neutral i.e. revenue gained from LVT offsets against income tax. Great! So the hard working people you refer to have the option of working 80 hours a week and not being taxed so much into oblivion for it.
People's land value going up because of the development of community around them has nothing to do with the effort they themselves made, and everything to do with the effort of everyone else around them. And yet they benefit from it via increased land values, and thus are 'wealthy'.
This wouldn't be so much of an issue, but for one thing - they can leverage this unearned wealth to compete with other's earned wealth for the acquisition of more land. Those who earned their purchase paid tax on it, and those who held community-value-increased land currently don't.
Add to that the ability for those who currently own to rent-seek from others who need the finite resource as a basic need, and you'll find many haven't even paid for their 'wealth' themselves either - it's the result of an exploitative system that takes from those who don't have, to give to those that do. And when those who don't have are asked for more than they can give, the government then distorts the picture further by giving of their taxes, via them as proxy, to those who own the land!
I disagree with the removal of interest deductibility [I've long been asking various MPs to implement a 2% CV/year rent cap] - but in the face of a government unwilling to take the necessary steps to make the tax system fairer, I guess it's a start, even if in the wrong direction.
PS. A CGT won't stop people acquiring land, whereas an LVT or (as I've elsewhere proposed) returning all land to leasehold incentivises people to 'use it or lose it'. There's plenty of land available here and abroad for everyone - but our current neo-capitalist systems are designed to reward greed, and the last 3 decades of tax policy and, dare I say it, fudged metrics, have been designed to reward the greed of those who hold land.
This wouldn't be so much of an issue, but for one thing - they can leverage this unearned wealth to compete with other's earned wealth for the acquisition of more land. Those who earned their purchase paid tax on it, and those who held community-value-increased land currently don't.
This is a credit creation issue, not a tax problem. The default response to everything in this country is to somehow tax something new. Example: I live on a postage-stamp sized section on the edge of what used to be rural Auckland, in a development. The land price is 80% of my property's value. The people who have allowed such a ridiculous state affairs to transpire cannot be entrusted to fix it or allowed to profit from their own extreme failure. The solution is better government, not an ever-expanding tax net.
Yes, I totally agree with the credit-creation issue.
The problem as you say is, the ever expanding tax net. No one wants a new tax for nothing - and I wouldn't put on a LVT (or leasehold) without significant reduction in income taxes. (I favour an FTT in place of all other taxes).
Insanity is sometimes defined as doing the same thing over and over, expecting different results. So why do people keep voting for pretty much any of our incumbent pollies, given their consistent inability to deliver on anything meaningful, whilst taking larger and larger cuts of most people's incomes?
Also, by the by, "the land price is 80% of my property's value" - you determined that value when you agreed to pay that much for it. No one forced you to. Perhaps you would've thought it had a different value if there was a different tax system in place?
Also, by the by, "the land price is 80% of my property's value" - you determined that value when you agreed to pay that much for it. No one forced you to. Perhaps you would've thought it had a different value if there was a different tax system in place?
No, the arbitrary allocation of land and infrastructure at a council and central government level did that. This is what people who advance this kind of tax don't get. The individual at a single level cannot influence this - the reality is you either cop it and live in Auckland, or don't, and move away from friends and family.
Stop fetishising state failure like individuals have the power to do something about it. They don't. Giving the people who got us into this mess a blank cheque to profit from it will ensure it never changes.
It seems weird that your section is on the edge of Auckland, is postage stamp sized, yet there is little of built value on it because 80% of the property value is land.
In a normal urban residential property market the land value is usually around a third of the property value. When it gets much higher than that it is signal to build something more valuable - maybe more floorspace, or more units, or converting some or all of it to a commercial space etc.
Note under the land value tax scenario adding value to land (the actual productive part) is not taxed - only land is taxed. Because the land is fixed this doesn't distort the economic incentives which is why economists like it.
"People's land value going up because of the development of community around them has nothing to do with the effort they themselves made, and everything to do with the effort of everyone else around them. And yet they benefit from it via increased land values, and thus are 'wealthy'." Are they really? Should they decide to sell that property to move, all the properties have changed in value, so their 'relative wealth' may have actually shrunk.
an example if you will; a person in Auckland bought a house in the late 80's say for around $90 - $100k, they mortgaged it by borrowing $80 - $90K. they lived in it until 2020 - 30 years. In that time they paid of all their mortgage, and their house appreciated in value to be worth say $800K, which they were lucky enough to sell it at. To move up to a better quality property though, they have to fork out over a $mil, meaning their mortgage will now be at least $200K because the whole market has moved. Yes they have the option to move away from town, but family and career options are all bout where they live. But now instead of being in their 20's they are in their 50s and while their incomes have moved from $40k - 50K to $80 - $100k, their mortgage is more than double what it used to be. Their relative wealth as therefore declined.
They're worse off because they only have 80% equity in a house that's 25% 'better' vs 100% equity in the prior house? And yet they now have a house that's 25% better? Their wealth hasn't changed, as the debt is offset by the increased asset price (unless of course, prices start to drop...).
Yes, they've made future cashflow less efficient by choosing to allocate a portion of that to future interest payments. Over time, that will make them relatively less wealthy than anyone not paying interest. But that is a choice they made (the cash outflow) and of no bearing to the actual value of the land.
"actual value of the land"? And what is that exactly and who determines it? It's not just about the interest they are having to pay, it is the TOTAL debt they owe. While you're busy ranting about wealth gained without effort, individual property value doesn't come into this as the whole market moves with it and for almost everyone relative wealth decreases because everything is so much more expensive, while incomes have not moved to the same degree. Small minds might drool over QV property valuations, but they are really meaningless, as converting them into reality can produce a vastly different result. Using them as a base to measure someone else's 'wealth' is just BS jealousy.
Seymours response this morning nails it
“The fact that they are wealthy doesn’t mean they know more about policies. It does mean that they have got the ability to put the hand in their own pocket and help others should they choose. The fact they are not doing that and trying to make a statement about how rich they are tells you a little bit about them frankly.”
Wow, a group of individuals that have done really well thanks to the system that we all support in one way or another admit they have done disproportionately well compared to others. They agree that maybe this system should be changed even if it means they will be disadvantaged and the parties of the rich and powerful immediately jump to demonise them.
Says it all really. Anyone who thinks Act and National are there for the average New Zealander should pay very close attention to their statements on this. They will try to morph it into an envy tax or something similar and imply that it's about taxing middle income and slightly above middle income. It isn't.
Exactly.
Seymour:
I'm a rich prick and my job depends on doing the bidding of rich pricks so if any of these rich pricks get out of line and start feeling guilty about being a rich prick my other rich prick sponsors demand I call them out as rich pricks but at the same time somehow not call out my rich prick sponsors as rich pricks.
That's fine though because I have no moral compass and the intellectual heft of a barn door so this is easy for me.
Wow I thought that was the first time in a while that Seymour has gone off script. To imply that everyone that signed this doesn't help out others is frankly disgusting. Also not the point. In saying that maybe he didn't go off script and this resonates with his supporters...
So your solution is for the generous citizens to voluntarily pay more than the selfish who are in exactly the same position? Sorry but society will not work that way. And I strongly suspect that if you look at all of these signatories they have gifted significantly more than their peers, so to call them virtue signaling twats shows more about yourself than it does them (thought you might like your hero Seymour's words being used back at you)
No, my position is for twats not to virtue signal they they are "willing". When they actually CAN. And I am acutely aware that they have likely been philanthropists. But making a claim that they give "more" than other wealthy people is nonsense. Campbell and Devoy for instance, have "wealth" that is pocket change.
What am I proposing? I'm proposing that instead of publicly (tacky) virtue signalling, these twats make voluntary payments to the IRD if they feel that they are not paying enough. Anyone can do it at any time. And the IRD have been accepting voluntary payments since forever.
Come on Labour! Be brave for once. Take the plunge. Implement a Capital Gains Tax now. Before it is too late to save your run up to the election. Make the family home that is occupied by the family exempt to make the CGT more palatable for the homeowner. You can do it! Carpe Diem!
That's the point - even the most anti-tax of liberal economists, said LVT was the "least worst" - and that reason being it is the most efficient (most easily assessed) and effective (unable to be avoided).
Which is why it is so hard to get across a political line.
I'm beginning to thin the entire perspective of taxation needs to change. The Government persists in telling us they have to tax to spend when that is patently not true. and many of the public, including contributors here hold on to that old myth. There is a poor grasp of 'deficit' spending and how it would have to be structured, that could completely change the taxation picture. The down side is have politicians realise the truth and run amok.
My concern with LVT is how do you pay for it when you are retired, or is it assumed that the family home is exempt?
Finding the money for the ever increasing council rates is hard enough for many.
Same thing with taxing unrealised capitol gains, many would only have the money to pay the tax once realised. Also are those unralised capitol gains also going to be taxed again when they are realised?
That's exactly the fly in the ointment. There are some fundamental assumptions that underlie a LVT that are unpleasant, such as if you own property then you must be rich. It has been understood for years that people can be asset rich but cash poor. I suspect that the proponents of an LVT mostly come from a socialist bent, and I tend to become automatically suspicious there. It is a failing I know. A LVT could well make people homeless. All consequences should be considered not just the intended ones. I have suggested in recent days that an LVT may be an additional barrier to ordinary people owning property, and in my view that is a highly undesirable outcome.
Make the family home that is occupied by the family exempt
Sure, then the farm is listed as the "family home" of one parent, the apartment in town is listed as the "family home" of the other parent, the beach house is listed as the "family home" of the child...
Your KiwiSaver would be captured, any other investments to improve your retirement would be captured, the forest partnership you entered to help with the environment is captured, those people that bought a Tesla and sold it for more than they paid would be captured...
So all the things that I was advised and encouraged to do over the last 40 years would suddenly be hit with more tax. Then you'd have to have the conversation about capital losses, those businesses that go into receivership worth nothing, maybe some shares that you bought and have to sell after they've gone down (quite a lot recently), what happens to those capital losses...?
CGT sounds good to the simple folk...
CGT is implemented well in every single other OECD country and most other countries. I lived in Australia for a long time and it's just part of life and they've worked out all the quirks so we don't need to, we should just copy them and be done with it - simple as that!
Or give your party vote Te Pati Maori in October for all those who want a more equal society. Capital Gains Tax plus a 2% tax on unoccupied hoises. Plus the whanau home is exempt. Heck even my pakeha brother in law is giving his party vote to Te Pati Maori. Amazing times we live in. That IRD report really confirmed his suspicions. Te Pati Maori sticks up for all poor people and the working classes. Not just Maori.
https://www.nzherald.co.nz/kahu/john-tamihere-tax-the-rich-will-be-a-te…
What utter clap trap virtue signalling nonsense. All of these people could have been making voluntary payments to the IRD. Yet obviously, none have. Drivel. Wanna-be do-gooders who could do good, but don't.
And on Crossan, what she doesn't tell you is that in the Netherlands people earning over 38k cop 37% and over 68k almost 50%. Germany over 63k 42% and up. Good luck with having NZ median income taxed at those rates.
We could adopt tax rates because other countries have them, or reform our tax net to match others just because everyone else jumps off a bridge.
We could do that literally overnight.
But the government services we should get in return would never match what other countries see in return. That needs to be resolved before we allow rich listers to start using their heft to lobby for even more political change, in a country that can't even get the basics right.
Agnostium thinks that these are "Wow, a group of individuals that have done really well thanks to the system"
Perhaps it was more than "the system" - some have inherited wealth, some were just lucky, some have a skill set that others dont and many on the list started with very little like lots of New Zealanders who work hard to get ahead.
Their open letter looks like virtue signaling and got the predictable responses from all sides defending a position which really looks like " if the rich pay more tax the poor will be better off and social equity will improve". An unlikely association.
Personally I think we should be debating what services we want the Crown to provide before we then decide how we can pay for it. Currently the Crown provides a lot of services back to people like those on the list who dont need assistance and who can and should provide for themselves as they have clearly been successful at doing so already
"Perhaps it was more than "the system" - some have inherited wealth, some were just lucky, some have a skill set that others dont and many on the list started with very little like lots of New Zealanders who work hard to get ahead."
All of the above examples you mention are thanks to the system. We live in a society that is based on a social contract. That contract is breaking down because a tiny few are disproportionately taking more than their fair share of the wealth we have and are trying to embed rules that mean that they increasingly take a bigger share. Not just in NZ but on a global scale.
It's no good inheriting wealth, being lucky or having a skill set that other's don't if you live in a society where those things don't matter and anyone can come and take your shit. What stops random people coming to take your shit is the social contract.
Can you appreciate how the system is key? This is what the signatories are asking to be fixed.
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