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The first 100 days of tax policy bode well for National’s supporters while others might be worried, Lisa Marriott & Jonathan Barrett say

Public Policy / opinion
The first 100 days of tax policy bode well for National’s supporters while others might be worried, Lisa Marriott & Jonathan Barrett say
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The coalition agreements between National, ACT and NZ First mean some of National’s pre-election tax policy has not survived. Hagen Hopkins/Getty Images.

By Lisa Marriott & Jonathan Barrett*

Ahead of the 2023 election, it was clear there was not a lot in National’s tax policies to benefit the least well off. Nothing has happened over the first 100 days of government to change this assessment.

From a progressive perspective, it is clear New Zealand has elected an austerity government. The National-ACT-NZ First coalition is prepared to impose swingeing cuts in the public service and curtail welfare to meet its promises of income tax relief for some.

We won’t know what the tax cuts will be until the Budget on May 30. But early indicators are they will be squarely aimed at National’s voting base.

What did (and didn’t) survive negotiations

The foreign buyer’s tax proposal did not survive coalition negotiations with NZ First. We have also heard little more about taxing offshore gambling. Perhaps the government has realised this is easier said than done.

Cost recovery from immigrants was another proposed revenue source. Strictly speaking, this wasn’t a new idea. A review of immigration fees and levies commissioned by the Labour government in 2022 identified several ways to increase the price of some immigration services, many of which have been implemented. All is quiet on this policy as well.

Another component of National’s tax proposals was removing the depreciation allowance on commercial property. This was an unusual idea for National and we suspect it will not become law.

The phased-in return of mortgage interest deductibility for residential rental property owners is included in the National-ACT coalition agreement. However, the provisions are more generous than those originally proposed by National and are now retrospective, with a 60% reduction in 2023-24, 80% in 2024-25 and 100% in 2025-26.

This will reduce government revenue and potentially result in tax refunds for residential rental property owners in 2023-24, who will be allowed a 60% interest deduction, rather than 50% under the existing legislation. The announcement in December 2023 that the bright-line test will be reduced to two years from July 1 2024 will further reduce tax revenue.

The Clean Car Standard was an initiative of the previous government to address vehicle emissions. Research suggested households that would benefit the most from vehicle and fuel efficiency standards were low-income ones. Despite strong support, the clean car discount scheme was repealed in December 2023 as well.

The scheme provided rebates for zero- or low-emission vehicles, and additional fees for high-emission vehicles. New Zealand was already late to the party when this policy was introduced in April 2022.

In 2022, electric and hybrid vehicles accounted for around one-third of all new car registrations, which increased to 41% in 2023 (26.5% hybrid and 14.5% electric). Sales of electric vehicles in December 2023 (before the removal of the discount) were nearly 14 times higher than those in January 2024.

Electric or hybrid vehicle owners will also start paying road user charges from April 1, 2024. While the government campaigned on no new taxes, extending the tax base does not appear to qualify as a new tax.

Likewise, the recently announced increase in car registration fees to fund a massive road-building programme is not being considered a tax increase by the government.

The government has also announced fuel tax increases – scheduled to start in 2027. National ministers have responded to criticism by saying the eventual tax increase will not be in this political term.

The Budget should provide clarity

The Taxation Principles Reporting Act 2023 mandated reporting based on specified principles. While there is never full consensus on what good tax principles are, this act would (or should) have resulted in greater transparency on at least some tax measures. However, it was repealed in December 2023.

To reiterate, until the Budget, we won’t gain a full understanding of the government’s tax objectives.

Action taken in the first 100 days of the government has given us a reduction in tax transparency, beneficial tax treatment for residential landlords, reduced incentives for consumption of low-emission vehicles, some clear areas where expenditure will be slashed, but little clarity on how tax cuts will be funded.

While we can’t yet know the full details of tax policy, the expenditure side indicates the poor and the environment will be worst affected, while residential rental property owners will benefit.The Conversation


*Lisa Marriott, Professor of Taxation, Te Herenga Waka — Victoria University of Wellington and Jonathan Barrett, Associate Professor in Commercial Law and Taxation, Te Herenga Waka — Victoria University of Wellington.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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89 Comments

I give the coalition 6 months. 12 months on the outside. 

As each coalition partners starts to measure the huge anger that they have evoked in their bases they will want to distance themselves from key policies of the other partners...  leading to division, and ulimately collapse.

i dont know anyone who is happy with them - even mum and dad landlords arent keen on smoking, environmental damage from development without due process and encouraging climate change via fossil fuels. Its like the 3 parties wanted power so badly they lost perspective and each accepted all the evil and stone age policies of the others..

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"i dont know anyone who is happy with them"

I'm happy with them OSE, very happy.  So there you go, now you know at least 1 person who is happy with the government's performance.

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+1 that makes 2

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+ 1 = 3.

Except the smoking ban turn around, that is just wrong but the labour government got almost everything else wrong. 

Continuing under them we would have been likely to experiencing NZ's economical ruin.

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+ 1 (apart from the interest deductibility, which is promoting parasitic speculation in residential housing)

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+1 for me.

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You are never going to make everyone happy, not in 2024 anyway.

What I will say is National are way lighter in talent than I was expecting. Not only that, Winston has far more presence and looks more statesmanlike than Luxon. National never bothered to understand the national accounts and made commitments they simply cannot keep as a result. Willis looks and sounds way out of her depth and seems incapable of answering a question. I can see her getting reshuffled to another portfolio.

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Very happy if you are in the tobacco, oil or real estate industry.

 

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3 parties wanted power so badly they lost perspective and each accepted all the evil and stone age policies of the others

Excellent Smithers

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I thought he was talking about Labour Greens and TPM 

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1 hour of reading every morning would have fixed this

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I think Willis could do with an hour of maths a day. 

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She needs some coaching on how to read a prefu.

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Did anyone see her Excel sheet in the end? Maybe she got some formulas or lookups wrong. They were $250m out on the depcn impact.

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I wonder if it can be obtained via OIA request?  Probably a mess of circular references and a bunch of nested IF statements.  

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Lol, you think they are that clever. It will be a few values that got entered when the cat walked across her keyboard.

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no different to Jacinda hanging out to go with Peters in 2017.Seems all parties have the they " wanted power so badly they lost perspective.....

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+1

I am happy, but that does not mean I 100% agree with all their policies.

Finally a party that is bold enough to tackle the major issues facing New Zealanders.

Not perfect but they have a huge job to clean up the mess the Labour party left behind.

 

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Yes the mess of lunches is school was dreadfull - and all those dirty EV;s driving around yukes!

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Everyone I talk too and some of them didn't even vote for any of the three parties are happy with them and impressed with them

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OSE, you obviously read and accept too much of what the left leaning media spouts to get an accurate view of what middle NZ thinks of this government.  They will be around for at least two terms, unlike some of the media outlets it would seem.

Speaking of the media (particularly TV and print); I believe that the bulk of New Zealand's media are just far too obsessed with NZ politics and, in particular, their totally blinkered attacks against right wing parties.  The election result showed that the bulk of New Zealand voters do not go along with this anti-right wing bias at this time and probably would prefer their news to be free of a political focus altogether.  The result of this left wing political media crusade which has little support outside those left wing die-hards, is that the silent majority simply turn off from "the news" whilst the businesses that provide advertising revenue do the same.  Ergo, the outlets are struggling to survive and in my opinion it is a demise of their own making.  TVNZ, GIVE US NEWS, NOT POLITICS! 

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Couple of issues: 1) New Zealand doesn't really have a right wing per se, just different favourites for welfare, and 2) there are plenty of folk out there who believe the media here lean right and were very mean to their favourite politicians too.

Point two can be a matter of perceptions of bias being inversely proportional to depth of engagement with content. And subject to confirmation bias too.

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Virtually every poll has the coalition winning.

Labour is down to almost its lowest EVER.

Many polls show the coalition gaining support.

This is fanciful sorry.

"even mum and dad landlords arent keen on smoking" - so what?  Don't smoke then.  Young people don't smoke anyway, they vape which is a different issue.

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Hmmm, I wonder what ratio of positive comments will be made on this thread?  Probably the same to any other topic. 20% at best ?

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Are your comments always positive...?

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Certainly not always positive, but I would guess largely over 50%, I would hope 80%, but maybe I'm fooling myself.

I just find it tiring, that no matter the subject, the vast majority of comments is always negative and extremely critical, as if the commenters believe they would do so much better.

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To be fair I suspect a few commenters would do quite a bit better in many areas.

At least until they got corrupted by the visage of power.

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The report says landlords win and the poor and the environment loses, and you think people should look on the positive side that the landlords win? Otherwise the posters are just nasty negative people? Landlords by definition do not need help from the government, they are already wealthy. Helping poor people and protecting the environment are core to what governments are there for, as the market doesn't fill those needs.

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The  report might say that .. but you need to be brain damaged to believe it . 

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I'm inclined to give more weight to the opinions of University professors talking in their area of expertise than some random commenter on an unmoderated chat forum.

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I'm inclined to ignore the article due to their obvious anti government bias & political affiliation - clearly demonstrated in the first 2 paragraphs.

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Every writer has their own biases.  I can't see anything in the first two paragraphs that is obviously incorrect or false...

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I'm inclined to ignore the article

Is that not a reflection of you rather than the content of the article?

Ahead of the 2023 election, it was clear there was not a lot in National’s tax policies to benefit the least well off. Nothing has happened over the first 100 days of government to change this assessment.

From a progressive perspective, it is clear New Zealand has elected an austerity government. The National-ACT-NZ First coalition is prepared to impose swingeing cuts in the public service and curtail welfare to meet its promises of income tax relief for some.

Which part is anti government bias and political affiliation?

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Then you need to meet more University professors, I have been on Industry liaison committees at two Universities, and while generally nice people they are pretty clueless.

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Is this one of those negative posters Yvil?

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I like the new Governments approach to crime and education. I'm not keen on the tax changes, environmental roll-back, removal of free school lunches or the return of smoking for youngsters. At least they no longer give Tesla discounts to millionaires' wives. 

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Thank goodness for my miniscule tax break. I'm going to use it as a long term investment plan by buying shares in privately run prisons.

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You like them cutting 7% of the education budget, after campaigning that they wouldn't do that?

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Yep, shows agility and a mission focus.  This government has people in it who understand what it is to implement change, thank goodness!

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Cutting the education budget by 7% "shows agility and a mission focus". At that point language is losing meaning and straying into the land of mantras.

It brings to mind Orwell's essay Politics and the English Language.

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60% for 2023 -2024 has been walked back on Sunday???

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Who are the Beneficiaries...

The heart of the question, really.

Cuts to services to fund tax cuts for property speculators and tobacco/polluters while working Kiwis disproportionately carry the tax load. And wanting to remove school lunches for the poorer to help fund them.

All while also deliberately reducing transparency in taxation.

Morally, those look a bit disappointing. Especially when MPs involved benefit so much personally.

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Working kiwis, and your mum and dad landlord are the same person. Whether you include them as "property speculators" or not.

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Not really... the proportion of working kiwis having to rent from ma and pa landlords/investors is growing.

Take it further though and we are all the same person - I am you, you are me - so why have we created such massive inequities between each other?

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Because morality improves things amirite???

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Yes, moral conduct from politicians results in better societies for more people than does corrupt conduct.

That the concept causes such consternation at critiques of entitlement mentality points the way to much that's gone wrong in our society.

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Im thinking media should avoid them like the plague ....lol . Why give airtime to the crew thats putting your fellow man on the chopping block...lol.  Landlords have a tiny burnt offering that wont amount too much in a stagnant/declining market . I have yet to see anything significant that will lead us all to the promised land...lol 

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I noticed that the first 20 minutes of last night's 6pm News was given over to the repeal of the anti-smoking legislation.  One expert after another saying how many people will die as a result.  It was a lot of prime time tv given to what would normally be a 60 second story.  And I thought to myself "the media is not very happy with the new government ".

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Because they are losing their subsidized tax payer funded wages. And that they need to change their business model like every other business/employer has had to do since Rodger Douglas took away farmers subsidies back in the 80s

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Journalists should keep their nose out of probable corruption of the government, and tell us the sports news huh?

The minister of health sure knows how to support the tobacco industry who are on their knees.

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Yes there has been no change there, but my question is why you bother with that drivel in the first place?  There is a world of actual news out there if you know where to look.

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With the NACTF keeping all the tax changes secret - so that only insiders ... and their chosen friends & supporters ... know anything about them, they run the risk of corruption sneaking in. Not impressed. 

I'd prefer a steady set of announcements as previous governments have done.

Why isn't the NACTF doing this? Probably because they were completely unprepared to govern and their policies, as we already know, were 'half-baked'.

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I wonder if half the issue is that the three parties are struggling to agree with each other enough to form a budget?

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I prefer some actual change rather than announcements, but that's just me (and the majority of voters).

As regards corruption... https://www.scoop.co.nz/stories/PO2007/S00275/dodgy-as-hell-tender-quot…

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Actually, would be nice for kiwi to get some of the profit from the huge spend.

Nah just kidding the mega Cos can have it.

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I got my accounts on Saturday. I have to pay an extra $4500 terminal tax. The idea that these clowns get to hand it out to their friends is rather depressing.

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Lol mine is literally six figures. And next year will go up due to the trust rate change.  Think how I feel.  I got no tax relief, and claim no benefits - ever

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lonewolf you must be calling this in from the BTC rocket that is currently heading to the moon, can't you give us a little charity?  Spare a coin (BTC) brother??

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"Luxon says he has not seen updated costs for the reinstatement of interest deductibility.

He says the Finance or Revenue minister will be the ones to ask about that."

Good grief, he doesn't even know which minister is responsible??? 

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The tax changes benefit the rich - those with capital.

ACT & National are waging class warfare which will further extend inequality and the neoliberalism lite system we run.

The NZ tax system is not fair.  It's biased towards property investment over other forms of investment, there is no comprehensive capital gains tax, no wealth tax for the very rich, and no inheritance tax.

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"...no wealth tax for the very rich, and no inheritance tax."

What's unfair about that?

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An inheritance is income or a capital gain for the recipient and should be taxed.

Also, it is not earnt. An inheritance depends solely on luck in terms of who your parents are.

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Seriously?

It would make more sense to choose your parents wisely 

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Inheritance tax is great - I'd love to pay more tax after I'm dead and less when I'm alive. 

Plus it moves us one small step closer to equality of opportunity (don't worry rich parents - your children still get the enormous head start from expensive education, tutors, and a stable home life, they can look after themselves).

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Yes, we wouldn't want people to strive to build a legacy for their families comrade!

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The problems of a broken system arent fixed though poorly conceived laws and taxes. The system needs to be planned and implemented in context. Second and third order effects need consideration.

Adding a tax because of a populist perception of someone getting money for jam helps no one.

Arguably feeding tax to a system too broken to properly spend it further compounds the problem.

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Indeed. Which is why all income should be taxed equally.  
But at much lower levels. 

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"Adding a tax because of a populist perception of someone getting money for jam helps no one."

Estate Duty is still on the books, the rate was reduced to zero in 1993. The Key government removed Gift Duty in 2011. Both enjoyed broad political support and it was widely regarded as obvious that a significant part of every large estate ought to go to the state.

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I agree Kiwi Overseas (name checks out) the NZ tax system is not fair at all. 9% of NZ Taxpayers pay 42% of the net tax.  Completely unfair.

https://www.treasury.govt.nz/information-and-services/financial-managem…

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Actually they pay 16% of the tax, 42% of the personal tax which is 42% of the total tax . You mentioned net but the preface says it excludes WFF.

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Yes, we tax working Kiwis far too much and beneficiaries of property policy far too little, incentivising value-takers more than value-makers.

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I'm happy about the property changes, which are simply reversals to how the result of the world works. Happy about he removal of the Maori health authority (I got called up for a surgery after 2 years waiting the week it was announced) and the push for improving education standards, particularly more consistency at primary school level. There are a lot of primary classrooms where maths either isn't taught, or it's taught at a bare minimum, because the teachers don't like maths so avoid it. Also happy about some of the changes for building: such as materials approved in Oz being approved here etc. Happy about gas exploration because we don't generate enough electricity, while being annoyed because climate change is not a woke conspiracy. 

I'm annoyed at the smoking ban change, that the RUC isn't simply a blanket cost on all cars, and all of this needling around the treaty. I believe in climate change so I'm annoyed an incentive to go electric has been removed, but I'm not sure if it was the best way to incentivise. While being generally pleased at intensification, I am displeased that it's blanket "all at once everywhere" and I think more nuanced zoning around public transport corridors would be better. You can raise taxes on those properties as they are worth more and while there will be some hand-wringing, they will find themselves in the hands of people who will turn 1 house into 8 and the proximity to rail reduces the need for more than one carpark.

I'm unclear if 3 waters was a good idea. It seems like it might have been but Labour added co-governance and then completely lost control of the dialogue. 

I think Labour went about tax reform backwards. If they had allowed for inflation adjustments to their GCT back when they came into office it would have gone through and by now it would be baked in. Cullen let ideology take over, which set the tone for the following 6 years, sadly. Everything else after was a workaround. 

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The government has increased allocations for the landlord tax deductions by $800 million, from $2.1 billion to $2.9b.

Incompetent idiots can't read a prefu or do simple addition. Naturally its everyone's fault but their own.

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Most of that is a pretty good summation of my own views: thank-you.

My big remaining question is who will the innovation, transparency and ability to learn come from to remedy, or even try to remedy, where we find ourselves. I don't see anything really new from anyone.

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Easy to forget that the Left is determined to bring in a wealth tax at some point, which will deter investment in NZ and cause many of those who currently pay the most in tax to go offshore.  This is already happening in California, where those who pay the most in income tax are leaving in the thousands for low-tax states. California can only pay for social services by borrowing at an unsustainable rate.  Whatever shortcomings the current government in NZ may have, they are way better qualified to manage the economy than a green/Labour coalition.

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California is a woke hellhole, managed by utterly incompetent, ideologically motivated clowns.

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The tax change has made my property portfolio cash flow positive. I am sure I am not the only one in that boat.

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Yay. And I get to pay less tax too ... for producing absolutely nothing more, nor less. That's a good thing?

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We're drifting down the income curve as a country and have to live within our means while we try and build a diverse economy, but there's no real innovation here that says we can do either of those things without making life worse for a lot of people.

Been voting for who I dislike least since forever.

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Poor analysis. David Seymour has already stated the 60% interest deduction  for 31/3/24 will not happen. Labour's 50% deduction will remain. The reductions in interest deductibility have severely impacted the supply of rental houses as rental homes have been sold to happy FHBs, but causing rapid rent rises. Cause and effect.

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by the same token, investors compete with FHB for the lower priced housing using the advantage of deductions to offset personal income, and leverage,  thus turning those FHB into renters. i have no problem if they were adding to the supply of housing ie new builds but they are not instead they are reducing the stock available to FHB and competing with them to drive up prices.

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I see several errors in the article. Tax refunds for residential landlords? Have they not heard about ring fencing. It is still not possible to off set losses on residential investments against other income so sorry still not tax refund. The losses have be carried forward till some time in the future when rents increase enough to make a profit. Depreciation on commercial properties was an unfair illogical tax introduced by an earlier National government. Land never depreciates but commercial building structures sure do. 

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I don't know if it's a straight up error, but this statement seems to go against all logic:

"The Clean Car Standard was an initiative of the previous government to address vehicle emissions. Research suggested households that would benefit the most from vehicle and fuel efficiency standards were low-income ones. Despite strong support, the clean car discount scheme was repealed in December 2023 as well."

The clean car discount benefited people buying brand new electric vehicles (mainly Tesla's). I don't think many low-income individuals would have been buying EVs. I would count myself as quite well off, but even I couldn't afford a $70,000 brand new Tesla.

The link in the article goes to a page that says "Requested page not found"...

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I think the point is that revenue can be off-set against the interest expenses, further reducing the profit.  In my view this is an appropriate tax change but really should have been accompanied by the introduction of a Capital Gains Tax.

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Depending on how their accounts are set some will have paid provisional at the higher rate. Therefore refund. Note I cbf to check actual dates.

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Should be no surprise that tax savings will go to those working, or generating tax from assets created from working and paying tax

Operative word... working.

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If only. Instead they're being handed to value-takers, speculators on exisiting assets.

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Wtf.

Ok sarcasm.

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