Emmerson on the land tax

Written By: - Date published: 8:27 am, April 27th, 2016 - 38 comments
Categories: cartoons, housing, john key - Tags: , , , ,

Rod Emmerson in The Herald today:

Emmerson land tax

See also Isaac Davison: Options remain to dampen demand in heated market.

38 comments on “Emmerson on the land tax”

  1. RedLogix 1

    It’s an old corporate move; waiting until you see which way the wind is blowing and then stealing the credit for someone else’s idea.

    The trick to pulling this off is to initially dismiss your rival’s ideas as ‘unsound’, ‘untried’, or ‘barking mad’ … but not to give any reasons.. Then make sure no-one is allowed to act on the idea, or test it out in any fashion. When the time is right you roll out a more ‘reasonable and moderate’ copy of the idea and take all the credit for ‘taking action’.

    Then if your rival points out what you’ve just done, you paint them as ‘weak, bitter and emotional’, and this is why you were right to dismiss their idea in the first place. Your version is better because you are the ‘sound, reliable and safe pair of hands’ who can be trusted to get it right.

    Watch and learn; Key is a one man masterclass at this. It all hinges on emotional manipulation.

    • AmaKiwi 1.1

      My opinion: Politics is emotion, not reason.

      • RedLogix 1.1.1

        We need both our ‘reasoning’ and ’emotional’ capabilities in order to make decisions. Both work closely together to process complex information and place a value on the possible options so that we can choose what actions to take in the face of many conflicting options.

        But the art of people like John Key is knowing how to manipulate the emotional context to distort the process in their favour. The trick is doing it in a way that isn’t so blatant that is arouses our sense of unfairness; it has to be made to look ‘reasonable’ and un-threatening. This is why Key so often uses the ‘relaxed’ unstressed response to attacks.

        The idea is that when he smiles and makes soothing noises, he can simultaneously kick you in the balls and you’ll say “Thank you nice Mr Key”.

        • weka 1.1.1.1

          Yep, and let’s not forget that behind Key is a whole team of people dedicated to manipulating politics in NZ. He’s not doing this on his own.

        • Draco T Bastard 1.1.1.2

          You mean like this?

          Kiwis would understand if we broke our ‘no new taxes’ election promise – PM

      • aerobubble 1.1.2

        Wealthy property owners are worried their neighbors homes will be empty, whose going to see how rich they are. And the embarassment that richer peoole live in rheir paris, london, ny pad are actually richer. Key clearly reads vote emotionon this.

    • CoroDale 1.2

      Yes, very insightful. This emotional control tool is also being supported with advanced “mind control” technologies. Control of the masses is achieved with a complex mix of half-secret techs. From the obvious, like google and FB, through to electromagnetic mood reading and mood projection (certainly used in airports). The full effects of this tech will be common experience to many, but you may not have noticed. Well documented cases of mind-control in the Iraq war. Clearly this has massive political application too. Approx. 9 out of 10 people are highly susceptible to general methods. Trends toward “smart meters” in every home, this is an example of tech that should be rejected on the grounds of anti-trust. But all will be well 😉

  2. Repateet 2

    The Herald editorial said, “The Prime Minister’s talk of a new tax on land is a sign that he is worried by the resurgence in house prices, as he should be.”

    He is not worried by the resurgence in house prices. He is worried by the affect the rises might have on his support.

    • TC 2.1

      +100
      Yup this situation was designed and built by national in 3 steps. 1. Rule out a cgt 2. Change the rules so any migrant with cash gains entry then 3. Allow tax havens.
      Horse has bolted welcome to the bankstas brighter future.

  3. weka 3

    Is there any commentary on this that suggests that the market can’t solve the housing crisis, and offers other options?

    From the Davison link,

    A tax working group recommended a land tax in 2009, but it was not adopted at the time. The working group wanted the tax to apply to all property owners, not just offshore buyers. It estimated that a 1 per cent tax on the value of land would lead to an immediate fall in land value of 17 per cent, making housing more affordable.

    So on a $500,000 house, that’s $5,000. Why would landlords not be passing that on to renters? (they don’t say if valuation is GV or market though. $580,000 is the average house price. Probably not the best measure, but it’s easy to start with).

    17% makes a $500,000 house $415,000. How many people does that make housing accessible to?

    So much of the narrative on this looks like solutions that keep the housing market functioning as an investment tool, and just adjust it down a bit because it can’t keep increasing and still function. It’s not like we’re talking about solving the housing problem for everyone or for the good of the nation.

    I’m not necessarily objecting to a land tax for other reasons, I’m just not seeing why this would do anything useful other than let a few more of the upper middle classes and upwardly mobile jump on the wagon.

    Proponents of a land tax say it is a simple, fair policy, which would encourage more intensive development and stop land banking – the practice of sitting on land while it accrues value.

    That would be useful, but again, how is a land tax going to affect people across the board?

    • Lanthanide 3.1

      Just a note weka, the land tax was explicitly to be on the land value of a property, not the total capital value. In Auckland, it’s quite likely that your $500,000 ‘house’ is actually comprised of $400,000 in land and $100,000 in improvements, so the tax would be on the $400,000.

      This has a side-effect of encouraging better use of land – a crappy house on valuable land is more likely to be demolished and replaced with something that makes better use of the land value.

      Similarly it encourages apartments – the value of the land stays the same and taxes are levied against that, but you can fit more livable units on the same footprint and therefore spread the tax over more occupants.

      • weka 3.1.1

        Thanks for that clarification. In that case do you think it’s the GV not the market price?

        I’m not a big fan of infill. Apartments make sense in specific places, but pressures to infill across the whole country are not good. In a post-carbon world we’re going to need land to grow food in and around cities. Likewise we need a stable population not an increasing one.

        Demolishing houses and rebuilding is not the best use of carbon emissions either. Not sure what you mean by crappy, but better to retrofit.

        • Lanthanide 3.1.1.1

          The policy implemented would almost certainly rely on the GV. There may be other methods of accessing land value and there may be provisions to allow / require those methods in certain cases, but for 99% of properties it would be the rating valuation used.

        • Draco T Bastard 3.1.1.2

          Demolishing houses and rebuilding is not the best use of carbon emissions either. Not sure what you mean by crappy, but better to retrofit.

          Not necessarily. A cold draughty house where all the timber in it is rotten then tear it down and rebuild. Thing is, this probably applies to more houses than you realise.

          My family in the building industry always has some horror story or three of renovations which were supposed to be easy and end up being a major redo because of all the rot in the wood behind the wall.

          • weka 3.1.1.2.1

            Very true. It’s also very true that in NZ a lot of houses get demolished because people don’t like them and have the wealth to tear them down as part of a build (the demolition gets factored into the housebuild cost). That’s a huge waste. Where a house is sound (like I said, I don’t know what Lanth meant by crappy), the carbon emissions and other environmental issues suggest we’re better off retro fitting.

            Assessing whether a house might be rotten or not is a skill.

            • Draco T Bastard 3.1.1.2.1.1

              Assessing whether a house might be rotten or not is a skill.

              Yep – the skill to take the wall off and check without pulling the whole house down. In other words, a builder. Yes, I’ve heard of people cutting in to load bearing walls without a second thought and no clue as to what they were doing.

              I actually get frustrated by our ‘DIY culture’. I’m amazed that more people aren’t killed by DIYers especially those who decide to DIY build.

  4. dv 4

    So on a $500,000 house, that’s $5,000.

    The suggestion is the tax is on the land value not the whole value.

    • AmaKiwi 4.1

      @ dv

      You got that right. On the other hand, 10% or 15% interest rates would burst the bubble.

    • weka 4.2

      Cheers dv. Do you think GV or market?

      • dv 4.2.1

        Weka it would need to be GV for a simpler implementation.

        BUT there needs to be more
        I suggest designate special housing areas (e.g. auckland, queenstown)
        In which the lVR is say 40%
        The interest rate has 1-2% surcharge on borrowing.
        No tax deductibility for interest, so can’t offset tax in other incomes.
        AND surcharge on the land tax

        The special housing areas based on the
        income to price ratio,
        the amount of investor activity cf to private

        Thats enough before breakfast

  5. DFool 5

    I am amazed/amused that in all the talk of the rising Auckland market and the effects on housing affordability, and of the flow on of rising prices in surrounding regional centres as Aucklanders buy in cheaper areas, there has yet to be any real analysis of the downstream effects in those regions for the locals apart from the mere fact of rising prices themselves.

    While Auckland may have seen some wage growth, albeit not enough to keep up with rising prices, I doubt that those regions have seen anything to match, and as prices rise there, the locals will not be able to compete.

    If an Auckland DINKy middle class professionals on $120k+ who cant get what they want in Auckland continue to buy starter homes in Whangarei to get on the ladder, how are equivalent Whangarei DINKy middle class professionals earning 40K less for the same jobs going to compete? Let alone anyone else further down the totem pole?

    When I moved north in 2004 a nice villa in relatively depressed HIkurangi would fetch $100,000 and now an equivalent house is at least $250k. I can guarantee that wages have not doubled in that time!

    • weka 5.1

      As someone who lives in the provinces I agree. The focus on Auckland is skewed, and the solutions being mooted are not for the good of NZ as a whole.

  6. Stuart Munro 6

    A rent cap, a multiple property tax (1% on second, 4% on third, 9% on fourth, 16% on fifth etc), and capital gains tax also applying to sharemarket gains would begin to resolve matters without hitting non-investors hard.

    The problem is serious and the useless Key government has made it worse. Garner’s poll had more than half of responders recommending all the tax measures he could think of. Shit has got way too serious for muffins like Nick Smith.

    • Lanthanide 6.1

      “a multiple property tax (1% on second, 4% on third, 9% on fourth, 16% on fifth etc)”

      That’s effectively placing a cap on only owning 3 or perhaps 4 houses.

      Also you’re effectively saying that a company that owns say, 30 houses, would be taxed at over 100% on many of them. Is the company then forced to sell their houses? What if the company set up 15 subsidiaries, which each owned 2 houses?

      • Draco T Bastard 6.1.1

        Yep, good idea isn’t it – get rid of the bludgers.

        • Lanthanide 6.1.1.1

          So you didn’t explain how a company having 15 subsidiaries each owning 2 houses has done anything to solve the housing crisis.

          • Draco T Bastard 6.1.1.1.1

            Well, I tend to the idea that a company shouldn’t own another company and so those 16 companies will be counted as a single company and so should be taxed accordingly, i.e, they still get to pay more than 100% of their income in taxes.

            • Lanthanide 6.1.1.1.1.1

              Ok, so what if an individual owns 15 separate companies that each own 2 houses?

              • Draco T Bastard

                Why do you think that the rules should be different for an individual than for a company?

                • Lanthanide

                  Ok, so what if 1 individual has 50% ownership in 15 companies that each own 2 houses, with 15 other individuals that own the other 50% of each company?

                  • Draco T Bastard

                    Then they’re all going to be paying in excess of 100% of their income in land taxes.

                    You do understand that the whole point here is to prevent multiple ownership don’t you?

                    • Lanthanide

                      Why would the 15 individuals that own a 50% share in a company that owns 2 properties be paying more than 100% of their income in land taxes?

                    • Draco T Bastard

                      Because they own 30 houses.

                    • Lanthanide

                      Er, no.

                      Alice owns 50% shares of 15 companies that each own 2 companies. You can interpret that as Alilce owning 30 houses, if you like, so you might like to charge Alice 100% of her income in tax.

                      Bob, Carl, Dave, Evan, Frank etc each own 50% of a single company that owns 2 houses.

                      You have just said that you will be charging Bob, Carl, Dave, Evan, Frank etc 100% of their income as taxes because they own 30 houses. But they do not. They own a 50% share in a single company that owns 2 houses.

                      My point in this demonstration is that saying “we will charge tax base on X number” is practically impossible to implement or police in an environment where ownership of assets is not 1-to-1.

                      Unless you’re also advocating completely throwing out how companies are structured in this country, which seems like a good way to become a global pariah locked out of international trade.

                    • Draco T Bastard

                      Yes, we look at things wrong. We say that the business owns the houses instead of the owners of the business. We need to change this so that the owners of a business are still the owners of the assets that the business holds and are thus the ones paying the taxes. This so that taxes are properly accounted for and have the effect that they’re supposed to.

  7. joe90 7

    Meanwhile, BC launches a luxury tax..

    In 1987, the B.C. government introduced the property transfer tax: On the initial $200,000 of the purchase price, the home buyer must fork over 1 per cent and then pay a 2-per-cent tax rate on the amount above $200,000.

    That formula remained untouched until this week’s provincial budget, when Finance Minister Mike de Jong unveiled the luxury tax, which took effect Wednesday. Buyers will need to pay a tax rate of 3 per cent on the portion above $2-million, but the 1-per-cent rate would still apply on the first $200,000 and the 2-per-cent rate would apply on the portion between $200,000 and $2-million.

    http://www.theglobeandmail.com/real-estate/the-market/bcs-luxury-tax-for-homes-over-2-million-casts-a-wide-net-in-vancouver/article28790535/

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