Budget 2024 will be something of a stop-gap budget designed to halt the growth in government spending under Labour, and deliver a few key campaign promises.
It is in future budgets that Finance Minister Nicola Willis will do most of the longer-term work reshaping the state and its finances.
Speaking at the National Party’s regional conference in Christchurch earlier this month, Willis said she wouldn’t be able to deliver on all her goals in just one budget.
“We’re going to need six, nine, 12 years to fulfil the potential of this economy,” she said.
Her plan is to gradually bring core Crown spending back to roughly 30% of gross domestic product and get core Crown debt below 40%, while also improving core services.
Treasury has forecast spending would be at 33.4% in the year ending June 2024 and core Crown debt would be at 43.5%, with both numbers already set to decline in following years.
But if Willis and her party hope to serve for those four consecutive terms, there will be other issues it will have to tackle — despite not particularly wanting to.
One of these issues is tax reform. While considered to be politically toxic, officials have been asking for it forever and have recently reiterated this despite the Coalition’s unreceptive ears.
First it was the IMF who said reform should be a priority. It suggested introducing capital and land value taxes, lowering the corporate tax rate, and indexing income brackets.
This would make tax revenues more equitable and boost productivity, it said.
A visit from the OECD’s chief economist then echoed that advice. Capital gains on shares and the family home should be taxed but money sitting in pension funds should not be taxed.
Closer to home, Treasury has at least twice advised the new finance minister that a capital gains tax could be key to relieving the fiscal pressure carried by working New Zealanders.
In its first briefing it said fiscal drag had helped the country meet increasing costs but it had also made the tax system less progressive and increased reliance on income taxes.
Its “first best advice” was to begin work on a comprehensive capital gains tax that could help manage differences in corporate and income taxes, while spreading public costs more evenly.
Devil you know
Willis does not seem interested in following this advice but she may be missing a trick.
She has an opportunity to get ahead of her political rivals and design a tax reform package, focused on productivity and lower income taxes, that suits those on the centre-right.
If she doesn’t, it looks increasingly likely that left-leaning parties will bring in a wealth tax the next time the electoral cycle swings in their favour.
All three members of the left bloc, Labour, the Greens, and Te Pāti Māori, sketched out a wealth tax proposal in 2023 and two of them took it all the way to the election.
While taxes on capital have traditionally been vote-losing propositions, that may not always be the case.
More New Zealanders are becoming anxious that society is being permanently divided into two separated classes: those who own property and those who do not.
Kiwi children born to parents who did not have the opportunity to buy cheap assets at the end of the twentieth century often find themselves unable to buy a home and join the first class.
While they don’t get to share so much in the wealth of the nation, they are expected to contribute a growing share of their income to its maintenance.
This is not a politically sustainable arrangement. Bill English, a former Prime Minister and Finance Minister, said so himself late last year.
If the incoming government was not able to make progress on housing affordability, then New Zealand would “certainly” end up with a capital gains and wealth tax.
“Because the people shut out of the market are not going to tolerate another round of house price growth where they're locked out,” English said.
Housing Minister Chris Bishop is undoubtedly pushing in the right direction on housing policy, but his colleagues’ tax policies are pushing back — at least in terms of purchase prices.
A redesign of the tax system seems inevitable at some stage. Parties on the right-hand side of politics ought to decide whether they want to be holding the pen when it happens.
138 Comments
Ultimately we need to incent and reward working. Especially for the middle class. Current settings are crushing the middle class by not allowing enough reward to survive and flourish. The impact is that important future middle class tax payers are increasingly exiting stage West.
Land tax is the way due to its simplicity and difficulty in being avoided.
I’m currently funding education and healthcare. The former I haven’t used in 36yrs and the latter in 10yrs. I also fund accomodation and unemployment. I support free education, compulsory health insurance and superannuation contributions (much larger than currently).
Let’s tax the rich because successive Governments policies have made housing unaffordable. Yuk. How about politicians acknowledge the screw up and remedy the problem.
The current super system will break soon Fiddling with it like raising the eligibility age a couple of years won't help.
Sadly nz-it-worker there is no fancy way to make it painless
Phase in a muscular KiwiSaver over say 30 years, and wind out of National Super.
Yes it will cost you, and hurt. But it's practical.
Paying 10% of what? Remember in the early days often only 1 parent would work. Now we have it so that only 1 person is guaranteed an income, (even if it is below destitution levels and cannot afford housing & food) so we always will have much of the population without any income at all. Your simplistic view of society has left out over 40% of the population. So when they reach the age of 65 what then genius. 10% of nothing is still nothing.
An annual land tax, as TOP, The Opportunities Party, has advocated, would be the sensible way to go. But when did governments ever do anything sensible?
Even more sensible would be if the two main parties, National and Labour, jointly worked out a long term taxation plan that inevitably would be either capital gains tax or land tax, with maybe inheritance and gift tax thrown in.
This three-yearly undoing of everything the previous government enacted, under pressure from minor parties on the wings, is no way to run a country.
We already have a de facto land tax - local council rates which will suffer from increasing unemployment, inflation and high mortagage rates. The problem with any tax based on assets that produce no income is ability to pay and whilst CGT does not suffer this,the effect of exchanging residences and paying CGT on even the inflation adjusted profit may result in forced downgrading and a reluctance for people to move say for employment creating stagnation in the market and staff issues for companies expanding or replaceing leavers. The only non distorting way is improved productivity producing more profit and taxes.
The problem with any tax based on assets that produce no income is ability to pay...
That's exactly why an LVT is so good. If you have land (i.e. an asset) that you aren't getting a return for, then you need to give it to someone who can. That increases the productivity land use equation over time, forces land owners to be productive about their land use.
"She has an opportunity to get ahead of her political rivals and design a tax reform package, focused on productivity and lower income taxes, that suits those on the centre-right. "
"If the incoming government was not able to make progress on housing affordability, then New Zealand would “certainly” end up with a capital gains and wealth tax. "
2 different, important & probably mostly incompatible political philosophies: one directed at increasing the size of the economic pie & the increased benefits, the other at enviously & endlessly squabbling over the division.
NZ homeownership rates have decreased since the 1990s peak (74%) to around 65% today (similar to UK, Oz, US, Canada). Across 2 decades of both National & Labour led Govts who have overseen the ongoing deterioration of NZ economic performance. Join the dots.
It is both amusing and saddening that you could read your critique as being targeted at either National or Labour. Regardless, we should encourage more critical thinking across all ideologies and be willing to understand where opposing viewpoints have upside. If you ever begin to believe that your political opposition are maliciously motivated in their primary goal, you've most likely lost critical thinking / reasoning and have become radicalised.
SKF
Do you not give any chance to the fact he could also be sufficiently ignorant enough to believe it is true. It is the simplest solution. (Not just Hanlon's razor but Occam's razor as well)
Given the state of NZ education and that we literally have much of the population believing in creation myths and that vaccines will edit their DNA it is not a leap to realize a great many fools exist in NZ. Our greatest child abusers are in the churches & cultural orgs and yet worried parents encourage their kids to go to the church and avoid the teachers & volunteers in mental health support who teach wellbeing, what consent means and mutual respect of other people... go figure. We created generations of childhood ignorance and trauma and you expect a better result in our politicians...
Given our policy staff, who require no science, mathematics or legal knowledge & skills, and our political staff, who require no science, legal, financial, or management skills (relying mainly on popularity), it is highly likely they could be ignorant to their own stupidity and lack of reasoning. After all they are the types who quote poorly sourced stats without looking into the origins and assumptions as if the mere belief is enough to make it so. This is across all political parties and exists in most of our govt depts. That instead of upholding and investing into better skills and tangible effects they are far more likely to be hung up in meaningless busywork that retain the status quo. Growing in ever increasing bureaucracies & consultancies filled with the same skill-less policy makers. All equally qualified in writing reckons that we now can get AI to auto generate for us, but lacking critical population & industry knowledge. When the AI generators now make up much of the new policy staff submissions in their training it does not take a genius to see where we are heading; where the AI chat bots assert they are completely truthful ends while being more fictitious then harry potter.
... budget designed to halt the growth in government spending under Labour
Want to bet? My money is on higher spending and increased debt levels through the next three years - noting that some of the spending / debt will be hidden in off-books PPP deals (gigantic BNPL arrangements).
I know I bore people regularly with this inconvenient truth, but our economy relies on govt deficit spending + private sector debt growth of at least 6% of GDP per year. This credit injection finances increases in private savings, economic 'growth', and our current account deficit.
Govt can only limit deficit spending if private debt gets back to booming or our exports suddenly leap up in value. Neither of these things will happen through 2024. So Govt will be forced into involuntarily spending. Just watch the numbers.
Am inclined to agree but see a couple of confounding factors at play....Willis' apparent mentor (Richardson) and another round (the final?) of near zero interest rates.
If the second occurs (everyone is waiting on the Fed) then the ideologues may find room for further fiscal austerity.
Or they can continue to cripple the economy, let the NZD tank, rely on further inflation with the RBNZ doing what it always does, implement more cost cutting, tanking the NZD further and all stuff we import simply becomes so expensive we cease to have a balance of payments problem.
Problem solved. ;-) ... We'll be the new Cuba !!!
Lol, I am going to spend a few years in Europe I think. I've seen enough to know that we are slipping into a proper mess.
Talking of RBNZ, I saw a great graph the other day. Our wholesale sector racks up $150bn of sales - that's over a third of our GDP. If RBNZ's heroic inflation taming was actually working as advertised, would our wholesale sector be (a) trimming margins, or (b) making out like bandits? You guessed it!
Lol, in your rush to tell us all about your love of Ann Rand, don’t confuse “public sector” with “govt spending”.
As a small country with many natural monopolies NZ will always have a high % of GDP (economic activity) via government. Without it, big glorious private sector entities like Fletchers would have no work.
Something says we can't continue with the debt growth though. We must have a better way of money flowing and not rely on credit creation.
Debt growth, asset inflation and the demand for evermore returns on the same is the driver behind it all.
We were warned about rent extraction and now we have a FIRE sector in hyper rent extraction mode.
I do not see this or any government capable of dealing with this via ill thought out policy or redistribution thinking.
As for the people - ignorance is bliss. They will happily consume the mis and disinformation, the political and media narrative.
It could be suggested that just by being on this site one has a little more intelligence, awareness and critical thinking skills than the average person, and we've been discussing the issues for how long now, with no visible impact or change.
And the most popular, most commented articles are still property prices and the housing "market". Which suggests that most here are still just as captured.
A wealth tax would destroy any incentive to work and save to start a small business, which is our biggest employer. Anybody with any capital to invest would simply leave and take their money overseas. NZ could become more equal, and much poorer.
During the last election, all the talk about a wealth tax had consequences. People I know who had invested in NZ took their money and left to live overseas. I knew people in the U.S. who wanted to immigrate and invest here, but when they heard about a possible wealth tax, they invested elsewhere--not NZ.
No, it’s actually unworkable and will destroy any start up culture we have. Look at this common scenario: A business is founded and is ‘valued’ at say $10mil, the valuation of the business is defined by the investor market and the transaction that gave the founder $1mil of capital for 10% of their business. The founder is now worth $9mil (on paper) but is expected to pay a wealth tax, say 2%. That’s $180k the founder now needs to draw from the business annually to pay tax. Without using any of the raised capital for anything useful yet. Effectively the investor has paid the government $1mil in tax over 5 years for little gain or opportunity to grow the business. Of course the investors will know this and therefore never invest in the first place.
That $180k drawn to pay tax is probably considered an income too, so at a 39% top rate won’t be nearly enough to pay the wealth tax.
Wealth taxes are what were proposed by the left parties, not me.
CGT is more workable. But i think debt still needs to be factored in. If i borrow $1,000,000 for a house and pay CGT on the gains as well as paying my expenses of interest, I’m actually losing a lot. If interest on debt for an asset is deductible, that’d work. Same as how a property investor can deduct interest on their income
I dunno. Maybe forwarding 15 years worth of average income for an existing average house is a bad idea. Maybe allowing thousands and thousands of people to do so simultaneously causes financial instability.
Allowing interest deduction for non performing assets encourages more borrowing for less productivity.
If you do the maths with average interest rates and average gains you end up paying some tax. So in total it’s a capital gain that you can apply on all property, not exempting the family home and evening the playing field between investors who already can deduct and occupiers who currently cannot.
it also taxes the haves more who may not need to borrow, and the have nots less who need to borrow.
Edit: oh i see, you’re thinking they can deduct from their income today? No i mean that interest should be ring fenced and deductible from the capital gain only at the time of the gain.
Yes you're correct the Wealth Tax is completely unworkable, which is why it would of never been implemented. It is beyond embarrassing the left bloc tried to run with this. I'm assuming the smarter politician in at least labour knew it would never happen, which means they were promoting a policy they'd never put in place to the absolute economic illiterate.
My personal belief is that the Right Bloc needs to front foot tax reform as suggested in this article, if the Greens have any say in tax reform, god help us... National should look to bring in a flat capital gains tax of say 5%-10%, which applies to all capital gains (excl. Kiwisaver), simple system like GST and at the same time index income tax brackets to inflation.
By doing this it completely takes the wind out of left campaigning on introducing a Capital Gains Tax, which if the left bloc did it would probably treat gains as income, so enjoy paying back 39% because your investment paid off....
I think thrre is merit in this goverment rationalising the tax system to include all types of earning, but not at the cost of increasing distortions. They should put a CGT on all asset growth, including houses and kiwisaver, taxable at point of sale or death, and deduct inflation from the taxable amount.
Otherwise you get distortions such as advantaging Kiwisaver investment over self managed direct investment in shares and business, over-investment in the house tax shelter, and inflation making a nonsense of fair assessment of CG Taxable earnings.
Wealth taxes are not hard to understand, they are a very basic concept. The problem is the implementation of it and the resource required to maintain it. New Zealand is not a wealthy country by international standards, a wealth tax in a small, isolated, very young country at the bottom of the world would be madness as many tax experts have suggested.
However, if you think I've still misinterpreted what a Wealth Tax is, feel free to explain it to me.
Switzerland has a very low rate of home ownership (<50%). Renting is the norm. PWC have a great summary on their ‘Wealth tax.’ It is surprisingly low and for me would be marginally more than my current rates bill. This includes the Federal and Canton component. The above disprove your suggestion that wealth taxes would address house pricing. Wealth taxes are envy taxes first implemented post WWI to help balance the books.
I'm in favour of Capital Gains taxes and hadn't actually thought about Wealth taxes much but just felt like they must be similar. Your point here around the mechanics of it has changed my opinion. While I think there could be ways to address this negative incentive structure, I don't think it's worth the effort to finesse when you have a superior option in CGT.
SKF
Scarcely any thought as to implementation and management of a wealth tax. It must rely and pivot on value. Who decides and audits the value especially if it is unrealised. If for instance a share portfolio at say $2 mill is included in the overall assessment, what happens if two years hence and/or another GFC its value is only $1mill, can the tax paid be clawed back? The whole concept opens the door to a bureaucratic nightmare and valuers, accountant’s and lawyers engaged in argy bargy end over end.
Correction a wealth tax actually stimulates more investment into smaller businesses and innovative initiatives. Why become an angel investor when you can otherwise sit on the houses of those with great business ideas and acumen, stagnating their growth as they struggle to have enough assets themselves to start a company, fail to find investment funding and instead see their idea sold overseas.
By choosing not to invest in business and instead pouring investment solely into houses and financial instruments our small business development in NZ has pretty much hit a stall as it requires much greater personal capital, thus entrenching old stigmas of the past. Those who can afford or have networked benefits can start but those with poorer access to capital can never reach the same goals. It is no wonder NZ productivity is going backwards. There is not even the same investment appetite to grow businesses either.
Investment in business is the incentive to work and save to start a small business. Investment in business is also the incentive to grow a business and seek to innovate and improve productivity. Not investment in houses which represents a stagnating influence on the economy and productivity as a whole.
Interesting times.
Things don't change until they do. There are a large number of young families who despite having good incomes can't buy their first home or can't afford to upgrade. Lots of people stuck in 2 bedroom homes with 2 kids looking enviously at the 70yo lady across the road in by herself in a 4 bedroom property going I will never be able to afford that.......Sure these people own their own home but they will never be able to climb the ladder the way the baby boomers did. They are stuck on the bottom rung. A CGT or wealth tax which is used to lower income tax rates will benefit them. Climbing to the second rung will be acheivable.
I think Luxon and Willis will be the last "moderate" government of the era. Our next government will be Labour, Greens and TPM. A wealth tax will be implemented. The irony is I feel this wealth tax will see lower income tax rates. This will make the masses financially better off and the Left cohort will surge in popularity to 55-60%. The era of the property specvestor will come to an end.
You're quite right, life is all about choices. As a society/electorate, we can make the choice to implement policy that will help make housing more affordable for Kiwis. Putting one's feet up and saying "it's tough" isn't good enough - the fact that things are tough for people who, heaven forbid, want to have children, is an outcome of past policy decisions, which we can address with future policy decisions (enabling housing growth, fixing the broken tax system, etc).
Too bad, it is what it is you are not going to change it, you have to adapt to the current system and change as well as be prepared to compromise and sacrifice. Just because you want to have kids doesn't mean you are entitled to a 4 bedroom house, that's your choice if you simply do not earn enough and have kids you probably end up renting, that's just the way it is and that's never changed. The world is getting a tougher and tougher place to live in, its called overpopulation and its only going to get worse from here.
We are still a long way from that in New Zealand. People here don't know what living hard really is, try living in a country that has no social welfare system for starters. Kiwis need to start appreciating what they have instead of watching social media all day looking at unachievable lifestyles, you will be far happier.
I'm not sure it's entitlement, more shock, surprise and frustration. Maybe it is.
When people grew up and their parents could afford a four bedroom house in a reasonable suburb on one middle range income maybe its to be expected they're a little disappointed when it's very hard on two incomes now.
To quote of my friends recently she said I'll be loading myself up with a million dollars of debt for my place in the shore (fairly average four beddy) - hell I didn't even think when I was younger I'd ever own a place worth a million, never mind a mortgage of one million...
You cannot compare a house built in the 1970's to one built now for starters, they were just an uninsulated box with single glazing. If they built houses back then to the same standards they would have cost twice as much, everything you look at was cheaper back then right down to the manual lift garage door to the lovely shower curtains, you cannot even start to compare. Most people would run screaming if they built a house the same these days.
Citation needed. My understanding of the progression of material science since the 70’s would suggest that some modern building standards weee nigh on unachievable in the 70. Specialist technicians and materials would have been required which would have driven up the price hundreds of times not double.
It is however quite easy to compare the cost of a house built and bought in the seventies to the cost of a house built in the 70s and bought now though.
Plus if you you've spent any time in the rest of the western world, I think you would probably still think of NZ houses as uninsulated boxes..
The choices argument is poor logic that has a certain level of naive appeal. It also feels like it is rooted in fear that someone would take from your mother, which is an honourable thing for you to defend. We can be patriotic and care about our country, pushing to change public policy because it would benefit the country is a good thing so long as it isn't taken to absolute power in a central authority.
I grew up in public housing to a solo mother on the benefit. Today I am a founder and homeowner. A lot of my experience has been heavily based on luck. I'm not sure that I would end up successful if I grew up today even with the same amount of luck. The pressures on the average person today are unreasonable, and this is because the playing field is uneven, the burden is on the average person far more than it ought to be, and the public benefits of society are crumbling under inefficiency or underfunding or some other root cause.
We only need to look at history to learn that great and prosperous societies can be made, they are not a thing of chance
SKF
Much luck comes from choices made, choices that work are considered good luck other badluck but without making a choice and working at it there is no luck at all. At times in my life I thought if I didn't get some "bad luck" I wouldn't have any luck at all. The reality is some choices work out some dont the key is keep trying.
I broadly agree that being lucky in itself is not sufficient to succeed, however I can't see how I make my way out of the economic stress on my family unit if I were to do it all again. We barely scraped by as it was and even had to go to food banks a few times - the old stale chips were awful in retrospect but kids surprisingly enjoy MSG + cardboard. I think I would have kept the same drive, but it's far more likely that I would have turned to more illegal enterprise as that is what was successful around the spaces I grew up in. You seize the opportunities available to you, and without the level of social mobility and welfare state I had I don't think I would have had the same kinds of opportunities that allowed me to become a productive member of society.
SKF
I doubt your mother has earned it unless you mean by birthing you she earned it. Because of the vast pay discrepancies of the time as well as her lack of employment which in your eyes, with your logic, means she does not deserve any access to housing at all.
Using your logic she has not earned a cent of that home unless birthing you was such a traumatic harmful experience she deserves significant ongoing compensation of over 100,000 times what is normally provided to those who suffered severe medical trauma, mispractice and forced imprisonment & torture. Is she in this category?
A few basic questions the general population need to consider. Firstly, Why do you need to own a house. Next, why do you need to upgrade. Then, why do you need more bedrooms for 2 kids?
I'm a baby boomer. Same and only house for the last 50 years. Four kids, three bedrooms.
I have worked in the tax space for 50 years. Since Muldoon. At the time, I saw the tax simplification of the 80’s Rogernomics as wonderful. Now, just a pity that actually there wasn’t a credible plan other than change. No safety net for the people who didn’t benefit. Lesson: we need a shared vision of society, then snap a suitable tax system in place to facilitate the vision.
this week I attended a webinar by ird for my professional body on the new tax laws on the Platform Economy. Aka Airbnb. I felt very depressed at the poor quality of law that has been created. I thought of the AML rules, also not fit for purpose. Then I thought about the way that the RBNZ has so comprehensively failed, the way that NZTA is not fit for purpose.
when I compare the last 50 years economic performance of Singapore to NZ, why is it that we elect populist politicians who have short term goals?
how do we fix it?
"why is it that we elect populist politicians who have short term goals"
Need a sufficient number of voters choosing to focus on the long term good of the country (each voter will have their own definition of that) rather than focusing on "what can you do for me?" in each election cycle.
What may be good in the long term may be unattractive and painful in the short term (e.g cut government spending)
Politicians need to win popularity contests.
Ironically in that time we had 25% of the population being treated worse then animals, imprisoned, tortured and abused because of their birth to go to being just excluded from much of society & excluded from much of the participation and benefits of NZ communities, to have over 50% denied equitable education & employment opportunities so they die before retirement. When NZs track record is still being ignorant to how much the system is rigged from the start for many people then we really need to start with an admission. We need a true recognition of why societies, and political parties of all stripes fail those most vulnerable. Why we often ignore much of the population suffering without the equal access to living needs, opportunities and financial income that we give a significant amount as benefits to the wealthiest with the most opportunities and luck in health. Why do we focus on image divide rather then the true socioeconomic one that is greater then all other inequity combined.
The tax system & policies are always designed to fail society as you cannot ignore 25% of the population and leave their living needs out when you go to write the policies.
No system is fair or just when that many people just don't deserve to exist in in policy makers eyes and do not deserve even 1% of a seat at the table. Kiwisaver is an excellent example of policy makers being completely clueless to more then 25% of the population, then acting surprised when large % of even those 75% that can have kiwisaver are on permanent contributions holidays. It does not take a genius to see why Kiwisaver is a system designed by the wealthiest to entrench their position and deny access to much of the population to the benefits handed out like candy to those in such a managed investment.
Also given the inequity those excluded & vulnerable are also not the ones leaving en masse from NZ (they are stuck in NZ). However the lack of support for the 25% means NZ is a greater risk to anyone who could at anytime fall into that category. Given the effects on extended families it is the most able of those families who choose to leave but they are leaving behind many who would benefit more from a change of scenery from NZ.
Lee was a benevolent dictator who looked long term and shut down opposition, though listened to them first. We basically need the same but our democracy is broken, littered with populism driven by poor education and short terms where little can be accomplished. If only we had a decent leader who could take the reins and tell us the honest truth "I am going to change things, it will be bad in the short term, but long term we will be way better off". There's simply no way the population would elect them (see TOP party).
Just in case you're comment comes from ignorance rather that racism here's a link you may learn from.
https://www.nzherald.co.nz/the-country/news/ahuwhenua-awards-aotearoas-…
A universal LVT doesn't come with the same problems a wealth tax would. Businesses/wealth may pack up and move out of NZ due to a wealth tax as others have mentioned. Land cannot be cost effectively moved to another country.
A comprehensive capital gains tax may work but only if it's universal and paid annually, if you can avoid it by not selling for 30 years, then it really isn't much of a disincentive and even less so when you only have to move into the house for a few years to avoid it completely (aka Australia). The revenue received is harder to predict and therefore any income tax relief harder to predict.
It seems pretty simple to me.
if you want to lower the value of land, raise rates. If you want to reduce speculation on gains for property, tax property gains. If you want to discourage land banking, increase rates on undeveloped land in highly developed areas with an exemption period of 5 years to encourage new development immediately.
adding a comprehensive wealth tax is like killing a cockroach with dynamite. Who knows what the collateral damage might be. Start ups? International investment? Wealth flight to Australia?
targeting land and property with tax is only about 1/3 of the solution though. Reducing the cost of development is another 1/3. And rebalancing lending so that property isn’t greatly advantaged compared to other investments and doesn’t allow for an endless loop of borrowing and price increases is the other.
The world is at a watershed, citizenes are unhappy and are showing their discontent - Farmer protest across Europe and the assasination attempts on the Pms in Hungary and Slovakia, afundamental issue is Population increase, religous/political division and invasion by economic migrants, I doubt a solution will emerge that doesn't involve a war/civil unrest of the violent variety.
Why will this take "six, nine, 12 years"?
Why don't they do what every government effecting real change has ever done? i.e. Throw onto the statutes a half decent set of new taxes while reducing existing taxes - and then tinker with the mix until they're working better?
As they say - quite rightly - perfection is the enemy of progress. And NZ needs progress like never before!
Kiwi children born to parents who did not have the opportunity to buy cheap assets at the end of the twentieth century often find themselves unable to buy a home and join the first class.
While they don’t get to share so much in the wealth of the nation, they are expected to contribute a growing share of their income to its maintenance.
Not just taxes!
I'm close to getting the pension but I fully support raising the entitlement age to 67 (or above) ... with the proviso that people below that age whose bodies are worn out get the appropriate benefits to tide them through to retirement age.
Nope but it does depend on the organizations & trusts versus barely connected companies (who should pay tax as any other does). Then there is always the claim that by paying any form of GST & employee PAYE is paying tax... as if it is equivalent to all other taxes to be paid. Like how paying a small amount of personal tax means your company/org as a whole "pays taxes".
ABSURD. National is busy giving landlords $3bn in tax cuts. National and ACT are supported by the rich and will never support sensible tax changes that improve NZs wellbeing. They don't have the gumption to actually do what's best for NZ.
Some people have already commented on something similar to this but the basics of a good tax system would include:
a) comprehensive capital gains tax (ideally taxed at the same level as wages & salary as the capital gains are income).
b) no wealth tax - there is no justification (unless the tax system retains loopholes that allows wealth transfer without taxation)
c) estate / inheritance tax (this will eventually capture wealth transfer) - needs to capture transfers to NZers and non NZers.
d) a gift tax to capture any pre-inheritance transfers
e) broadly revenue neutral - with the above wage, salary & business taxes could be reduced.
a) comprehensive capital gains tax (ideally taxed at the same level as wages & salary as the capital gains are income).
Most legal and tax experts agree that capital gain is not income. It can't be spent without the asset in question being first sold. However in spending the proceeds of the sale you are spending money rather than capital gain, and money is not income either - it is an asset, and though money can be acquired by earning income, it is not "income" when it is acquired through capital gain.
If the incoming government was not able to make progress on housing affordability, then New Zealand would “certainly” end up with a capital gains and wealth tax.
“Because the people shut out of the market are not going to tolerate another round of house price growth where they're locked out,” English said.
And he's right. What gets me is that everyone thinks a capital gains tax will lower house prices. I don't think so. Lower rents reduce house prices. It's the theme argued in this book;
https://www.theguardian.com/books/2024/apr/23/against-landlords-by-nick…
And the similarities to the NZ situation both current and historical are uncanny.
What the author is missing is a solution to the landlord subsidies - that's what happens when they become so ingrained in the system/market. I'm putting together a follow up article and the Minister's office is "looking forward to" it;
https://www.interest.co.nz/property/119377/katharine-moody-takes-look-r…
A capital gains tax is never a direct measure to lower house prices. It both discourages investment in houses & less productive assets, comparative to other forms of investment, and raises funds to offset only a little of the damage over reliance of speculative housing investment does to society.
There is no single tap to turn the housing market up or down, no one measure, no magic wand. Investment markets & effects are complex. No magic fix or dial exists. Something new in a complex network can affect many things long term & tangentially. But NZ has for a long time turned away from other forms of investment and business growth (leading to the downfall of many productive companies & production in NZ) and instead turned to solely trading houses between each other and using them as security for new business instead. Then instead of productive business security owning multiple houses and trading houses became the main business. We have crippled our economy & productive sectors and really fkd the fabric of society then those who benefited from that complain when small measures are taken to rebalance it. Hence to anyone with half a clue the FLP scheme was designed to fail from the outset and lead to more destructive growth in the housing market. It did not stimulate much productive investment in NZ at all.
We have an issue that NZ does not have much left in the way of growth opportunities and the 10000s graduates pouring out see that. The brightest of them started leaving over 20 years ago. Now even those who are a bit slower to the mark have caught on... took them long enough.
There are only a couple of reasons to stay in NZ and the lifestyle is not one of them as it pales in comparison.
pacifica. Yes, it's depressing to observe the increasingly negative attitudes of young students to NZs future economic prospects. But if I were young I'd also be out of here. On capital taxes, I'm amused at the breathless 'Switzerland has a cap tax so we should too' style urgings when our investment environment is so starkly different. As someone who controls a reasonably sized portfolio of family trust investments my view is that the risk vs return incentive to invest in NZ vs overseas is weak. The current tax treatment for NZ investments is just about the only reason we have any cash at all in NZ equities. If an FIF style regime were introduced for NZ shares or imputation credits wound back, 100% of our investment portfolio would go offshore.
Yes the ignorance is amazing. Switzerland is close to or may be the richest country on the planet on a per capital basis. Highly educated, organised with a different political system than us (much done by referendum type voting). In comparison we are poor, uneducated and disorganised. They are very different to us, and, as a result have many more choices. People that think we somehow compare and so we can just do the same thing live in LaLa land. It’s not the students fault either, they have been brainwashed by a poor education.
Investing overseas would still be better for NZ society then investing in the NZ housing market (as the economic & social damage from housing investment is monumental), and you still pay tax on investment incomes. Also the trusts loophole is progressively being closed, abet very slowly, but for a long time it was seen as a way to perform tax avoidance.
A fairly pragmatic article.
Pity we do not elect pragmatic governments, only self serving ones.
But maybe as the percentage of adults with little to no assets rises and therefore no substantive support in parliament this will change. Maybe.
I do know for certain there needs to be a much more broad based tax system and that taking 70% of the tax take from personal income(40% personal 30% gst) is ridiculously unsustainable.
Yes its mind blowing how people somehow think that more tax will somehow make them better off. I think its the people that have nothing that want more tax, I mean the tax is only going to affect rich people right ? Somehow they think they are going to get some of that.
Extra tax is extra tax. You can tinker all you like. You can remove the housing supplement or whatever, that will just out people on the street it’s so engrained. I personally wouldn’t care. But the extra homeless would be on you and you ilk so you would have to own it. But hanging around bleating and planning in your own little world to somehow steal money from those who have earned it and already paid tax is getting pretty boring. It really is. There is no way no how you would even get the opportunity in the next decade anyway. Labour are unelectable for the foreseeable future. So you are effectively pissing in to the wind.
If she doesn’t, it looks increasingly likely that left-leaning parties will bring in a wealth tax the next time the electoral cycle swings in their favour.
they will do it. though it will be real disaster for the middle class. the left wing's idea of wealthy people are not wealthy people but middle class.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.