CGT as a Charitable Donation

Written By: - Date published: 12:44 pm, March 2nd, 2019 - 31 comments
Categories: capital gains, Deep stuff, poverty, socialism, tax - Tags: , , , ,

The Government has dropped the ball [hat tip to Ad] with the report from the Tax Working Group and left a narrative void till April, or May, or till they do something substantial and relevant (…). This void is filled up with attack tweets from the Leader of the Opposition and the usual MSM noise. Don’t get me wrong, these tweets are not attacking in their own right but they are about the Government, or rather the recommendations of the TWG, attacking ordinary Kiwis going about their ordinary lives. The tweets themselves are masterpieces of irony, hypocrisy, tone deafness, and comedy and are as harmless and funny as a flying rubber sex aid hitting an unmovable object.

We hate paying tax. Even though we all know it’s necessary for a functioning society and we all benefit tremendously from taxes paid throughout our lives we seem to have this in-built negative reaction to paying taxes and nearly die from tax increases or even just thinking about it. The objections span a wide range but often objectors mention that our taxes are being used for stuff that they don’t agree with but they have no say in, no control over. This is particularly common among neo-liberals who carry high up in their flags personal control and self-responsibility, especially in their own affairs.

Contrast this with charity, donations, and voluntary work, for example. People love giving, freely. People love helping others, from the goodness of their hearts. The rich – some of them – don’t mind showing their largesse by donating large sums of money to the cause of their choice. A little bit of attention and positive PR (AKA being in the limelight) does help. It suits their egos and they generally have large egos. They are becoming a separate class of citizens (often domiciled overseas) who have to be admired, wowed, and lauded with gongs: philanthropists.

However, we might not need their largesse if we were to tax the rich and seriously and not so seriously wealthy at rates that are more appropriate. This argument could include any large taxes that are infrequent and unpredictable like a CGT. If we were to legalise for a part of any CGT to be donated to a charity of your choice, with all the fanfare and largesse on show, it could well change something we hate into something we love – the line between love and hate is a fine one at the best of times.

We would get to have a choice, we get to do something good that we love doing! It might take some practice, some getting used to, but I reckon it could work. Imagine this, you’ve just sold one of your rental properties and netted a CG (profit, if you like, or good luck or windfall) of $1 million and you have to hand your fair share, say $300,000, to society. You organise a big charity fundraiser (e.g. a BBQ sizzler with a blind auction of donated goods to keep up with the trendy Kondomania hype) with friends and family and raise another $50,000. The sum total of $350,000 will be donated as you wish. The media will be there because they like feel-good easy stories and you and your friends and family get the feeling of enormous satisfaction, compassion, love and happiness – it might even spark joy! I reckon this could be a winner!

What do you reckon?

31 comments on “CGT as a Charitable Donation”

  1. Sam 1

    I would hope that Jacinda and her cabinet would err on the side of pragmatism and balance its budget and not raid welfare to the poor and disabled because the opposition will take that as if you vote for the opposition they will not take those things from our taxes but from the down trodden.

  2. arkie 2

    It would be a good move to stop taxing welfare as income, raise to the tax-free threshold to a 40-hr week at minimum wage and tie the tax brackets to minimum wage increases. CGT is just a matter of fairness and that’s the real ‘kiwi way’.

    • Sam 2.1

      Also it’s a right wing policy to try and privatise the tax system through philanthropy. It’s the worst parts of trickle down economics which has been thoroughly debunked.

  3. Andre 3

    I’ve got a really cynical view of the entire charity sector.

    Far too many of them are run as enterprises for the benefit of the executives, doing the bare minimum of “good works” to plausibly maintain their charitable status.

    Far too many of them have really offensive strings attached to their “giving”. Whether they’re of a religious nature or some other kind of social engineering, it’s still about trying to exert control.

    Charitable giving is often about powerful control freaks wanting to boost their particular hobby-horses, rather than things that benefit society as a whole.

    Whereas when the government undertakes the “good works” charities ostensibly do, there’s at least some chance those activities will be done as some sort of co-ordinated plan with some kind of rational prioritisation of resources.

    So nah, screw the charities. I’m all for going even a step further and taking away their tax-deductible status. Those donors so full of themselves that think they’re better than full-time government professionals specifically tasked with balancing priorities for the nation as a whole can express their control-freakery out of after-tax money.

    • left_forward 3.1

      Sounds like you know very little about the charities sector. You are not the sort of person I would go to to seek policy advice on for sure.
      This is like blaming all companies by saying there are far too many of them who have shonkey practices. – Nah lets screw all companies because of these few.

      • Andre 3.1.1

        Let’s start with tax-privileged charitable organisations of the type run by Density Church, or Scientologists, or even the competitive advantage enjoyed by the likes of Sanitarium. You want to defend those? As far as I’m concerned, the mere existence of those kinds of models shows the underlying principle of that particular tax-privileged sector is deeply flawed.

        Then there’s the next tier that’s not quite such a comprehensive rort, but where the executives of a charity indulge themselves in shameful extravagance with charity money. Buffoon Bradbury talks about one example of it here:

        https://thedailyblog.co.nz/2017/12/13/are-we-really-sad-kidscan-is-getting-dumped-really/

        Occasionally there’s a charity comes along whose stated goals I agree with and as far as I know are careful with their management spending in order for as much as possible of the donated money to go to the intended purpose. I’m sometimes momentarily tempted to donate. But these purposes always end up being things I strongly believe the state should be doing, and if the charity ends up even doing a mediocre job it gives the government cover to abdicate its responsibilities.

        So I think in the end it’s much better for that money to go directly to the state rather than a charity. Because, for example, I think it’s much better for how much resource gets allocated to cancer care is determined by careful professionals balancing the costs and benefits across the entire health care spend, rather than how successfully the Cancer Society can pull heartstrings.

        Then there’s the fundraising companies that charities employ that take their very substantial cuts:

        https://www.radionz.co.nz/national/programmes/ninetonoon/audio/20169204/should-fundraising-companies-disclose-how-much-of-our-donations-they-keep

        • RedLogix 3.1.1.1

          Your faith in big government is touching …

          Big govt welfare does indeed work, but we also know it tends to be a crude, dehumanising instrument. What we have evolved in the West is a hybrid system, one that relies on the state to provide a ‘one size fits all’, bare bones safety net; complemented by networks of varied charities which can more flexibly target specific areas that interest them.

          It’s not a perfect system, but I struggle to point to an example of anything better.

          • Andre 3.1.1.1.1

            Your faith in big government is touching …

            It’s probably more a case of the depths of my cynicism about what the charity industry has become over the last few decades, and how parasites have taken over to suck out most of what was once good about charities.

            • RedLogix 3.1.1.1.1.1

              Without gainsaying your legitimate point there; I could also suggest that much of this negative change was driven by the charities moving to contractual models forced on them by big govt departments …

          • KJT 3.1.1.1.2

            Targeted, big Government welfare isn’t working because, since Richardson, it has been deliberately punitive. And underfunded. The well off had, to have their tax cuts.

            Largely untargeted, where it allows human dignity, such as the super, have been remarkably effective.

        • left_forward 3.1.1.2

          Well, there is a lot that I agree with there.

          However, you have missed something important.
          When a community wishes to act as a collective to provide local services in a manner that is responsive to a community need, a Charitable Trust entity is a pretty good vehicle for that, and I have seen and been involved with many examples.

  4. RedLogix 4

    Contrast this with charity, donations, and voluntary work, for example. People love giving, freely. People love helping others, from the goodness of their hearts. The rich – some of them – don’t mind showing their largesse by donating large sums of money to the cause of their choice. A little bit of attention and positive PR (AKA being in the limelight) does help.

    The left has always been suspicious of charity and philanthropy, sometimes not without good reason. Yet this critique misses one essential difference between the generosity of the individual and that of the state. Individual welfare is essentially a personal matter, it can be shaped and targeted in a manner that enhances the life of the recipient and moves them out of the poverty trap they are often in.

    At it’s height the Islamic world had a practice which is pertinent here. Every Friday after prayers it was an ethical expectation that the poor and the wealthy of the congregation would meet on the steps of the mosque to distribute alms. In a world completely absent any notion of the welfare state, this had the immediate effect of assisting those in dire need.

    But there was also a more persistent, powerful effect. Because the transaction was personal it had some interesting psychological impacts. For one it kept the human face of poverty live and real in the minds of the more fortunate. It tended to minimise the isolation of the elites from the realities of life for the masses. It also created an incentive for the donor to find ways, beyond the mere giving of money, to help the poor find ways to move out of their poverty trap. Set them up in small businesses, find employment, basic social networking at a very intimate organic level.

    For the recipients it meant having to personally face your donor and make your case. While the Faith created a right to be there, a right to be helped, it also created a responsibility to find your own specific way out of dire poverty if you possibly could.

    The modern welfare state transforms this into a faceless, bureaucratic function that corrodes away this sense of personal connection and trust, making the experience for both donor (taxpayer) and recipient (beneficiary) both demeaning and diminishing. The taxpayer feels little sense of the value of their personal contribution, while the beneficiary feels devalued and reduced to a second class of citizen.

    In the modern context it would be foolhardy to suggest we return directly to such a model; and I’m not doing so. But a deeper understanding of the emotional drivers and needs, that underpin our concept of welfare, is certainly worth discussing if we are going to devise better ways to do it.

    • Incognito 4.1

      I think you captured it very well, thank you. There are other ways and they can only come to the fore in a wide-ranging general inclusive discussion in which many will and do participate.

      • RedLogix 4.1.1

        Thank you. Sometimes its discouraging to have a comments like this ignored; while others stalk the comment threads sniffing out the slightest impurity to get outraged about.

        The longer I participate here the more convinced I am that the primary problems we face are no longer so amenable to classic left wing class/economic analysis. The big challenges are psychological/spiritual in nature.

        NZ is a country wealthy enough so that none of it’s citizens need suffer from physical or economic want. So why not? What holds us back?

        Just ranting about the greed and selfishness of the already fortunate and wealthy, while emotionally satisfying for some fleeting moments, manifestly changes nothing. It’s a dead end.

        • Incognito 4.1.1.1

          I know what you’re saying and paradoxically I tend to avoid reading let alone replying to the comments on the posts I write. However, today I felt differently and I’m glad I did.

          The longer I participate here the more convinced I am that the primary problems we face are no longer so amenable to classic left wing class/economic analysis. The big challenges are psychological/spiritual in nature.

          Indeed, same for me and the older I get the more I realise that “It’s the economy, stupid” needs to be kicked off its pedestal in contemporary politics and discussions about society.

          Our big challenges (still) are and always have been psychological/spiritual in nature. What makes this time in human history so interesting is that right now we don’t seem to have a clue or any answers that we can apply. Or at least, that’s what we think is the case.

          In the last few weeks there have been a couple of posts and a few comments here on TS that really stimulated my thinking but I’m not ready yet to put it into a post. Let’s just say for now that I’m optimistic about the future but that it’ll be a hell of a ride (but not to Hell!).

        • KJT 4.1.1.2

          The big challenge remains the same.

          The conflict between, those who give back to the society that nurtures them.
          And those who are simply out for all they can get.

          We tend to call the first left and the latter, right wing.
          Not always fair differentiation. There are people like Marilyn Waring on the right wing. And a lot of anti democracy, we know better on the “academic” left.

          • RedLogix 4.1.1.2.1

            The conflict between, those who give back to the society that nurtures them. And those who are simply out for all they can get.

            That is our view as left wingers; but you do realise that right wingers hold exactly the same view as well?

            • KJT 4.1.1.2.1.1

              No. They damn well don’t. See Gosman, on people expecting a return for compassion.

              • RedLogix

                lol … can I kindly suggest you missed my point by quite a lot.

                Absolutely the right will underpin’s their value system differently to the left. When we see tax dodgers, they see beneficiaries dodging responsibility for their lives. Where we see capitalists leeching off the sweat of the workers brow, they see the innovator and risk taker generating wealth and prosperity. And so on.

                Reflect for a moment and run those words through the lens of a right winger if you can, and see what it means to them. You don’t have to agree or like it, but I’m asking if you can understand.

                Explicitly I’m not trying to say the two systems are equivalent; nor am I suggesting to anyone here we can abdicate those innate values which make us who we are. Remain authentic to who you are.

                But if we want to lay claim to who we are as left wingers, we must at the same time acknowledge the legitimate claims of those who are on the right. Endlessly demonising them is … so 20th century.

            • KJT 4.1.1.2.1.2

              https://www.scientificamerican.com/article/how-wealth-reduces-compassion/

              “Who is more likely to lie, cheat, and steal—the poor person or the rich one? It’s temping to think that the wealthier you are, the more likely you are to act fairly. After all, if you already have enough for yourself, it’s easier to think about what others may need. But research suggests the opposite is true: as people climb the social ladder, their compassionate feelings towards other people decline”.

    • KJT 4.3

      Sort of true.

      When I describe the individual circumstances of someone I know of, to a well off person in my social circle. Such as the women who looks after her two mentally retarded brothers, they say “we should help them”. I answer, “then we need to pay taxes”. The answer is usually, ” but there are all these people who made poor choices” or ” solo Mum’s breeding for a living”, “I don’t mind paying for your example however”.

      The deserving and undeserving poor.

      But, almost all the poor are like my example.

      Caught in circumstances beyond their control. Just look at the mental effects of growing up in a family that is always under stress, through not knowing if they can pay for tomorrow..

      All the false propaganda memes seem to have taken root. So the greedy can feel less uncomfortable about poor people. Unfortunately they have biased many people who could be compassionate.

  5. CHCoff 5

    https://www.msn.com/en-nz/news/national/pm-wants-to-hear-from-people-who-dont-have-a-column-in-the-herald/ar-BBUgH7F?li=BBqdk7Q&ocid=mailsignout

    How can a capital gains tax be done effectively, if there can’t be a discussion on a FTT (financial transaction tax)?

    A well rounded CGT has to be looked at in terms of a FTT, as to look at one without the other, is a blind spot basically in implementation of either. It might be common practise elsewhere, but then how can greater elsewhere resulting or related problems then potentially be avoided?

    A good sustainable govt. should be careful to not build up a sustainable case against itself to anyone thing in particular to the mind of common prejudice, in the absence of reasoned debate also.

    Finally, if giving the natia something relevant to talk about for election, why not make it useful as well?

    • xanthe 5.1

      Would also like to see more discusssion and awareness of FTT as a useful tool for a rairer taxatiom system is there any mention in the tax working group report (which shamefully i have not read!)

    • Incognito 5.2

      Good comment, thanks.

      CGT is an entirely different beast and may therefore trigger a different (emotional) response than FTT, or GST for that matter.

      My point is that the main problem around tax in general and CGT in particular is an emotional one, an attitude issue. This is why it is so easy for opponents to avoid any meaningful debate by simply generating mass hysteria and irrational fear mongering.

      As RedLogix said @ 4, we need to understand the emotional drivers and needs and include this into a (holistic) discussion about welfare. The debate and associated narrative theme(s) should focus on welfare (giving and taking care of) rather than on tax (taking); two sides of the same coin but approached from opposite perspectives.

      • KJT 5.2.1

        Labour put themselves on the back foot, when they fail to put their efforts into explaining why we need taxes, and the value we get in our public services.

        I suspect because some in Labour are still Neo-liberals at heart.

        National didn’t even bother. Just put in 18 new taxes and raised GST, to pay for reducing the top rate, without any public discussion whatsoever.

    • Incognito 6.1

      Not quite the same category as ordinary Kiwis who (might) donate a (minor) portion of their CGT to IRD or a charity of their choice. This doesn’t make them philanthropists per se but there’s nothing to stop them donating more than they have to. In fact, I’m pretty sure that many people who’d object to the introduction of a CGT do donate to charities and other good causes. That paradox could be exploited, if you like.

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