Why a Capital Gains tax is necessary

Written By: - Date published: 8:09 am, April 27th, 2023 - 186 comments
Categories: chris hipkins, Christopher Luxon, david parker, Economy, labour, national, same old national, tax - Tags:

David Parker is one of the most important members of this Government and one of the most influential.

The current Government has said that it will not implement a full Capital Gains tax although it did implement an extension to the bright line tax for land sales which for all purposes was effectively a capital gains tax for land.

And Parker has continued with his work on showing that the wealthiest amongst us are doing rather well from the tax system.

From the Beehive website:

Inland Revenue research released today reveals a large differential between the tax rates ordinary New Zealanders pay on their full income compared with the super-wealthy, Revenue Minister David Parker says.

“This internationally ground-breaking research provides hard data showing that the wealthiest New Zealanders pay tax at much less than half the rate of other Kiwis,” David Parker said.

“The data, based on full income information from 311 of our wealthiest citizens, shows that the average person in this group pays an effective tax rate of just 8.9% tax on their economic income – that is, income from all sources, including capital gains on investments.

“In contrast, most New Zealanders pay tax at more than twice that rate. For example, someone earning a salary of $80,000, with no other income, pays 22% tax on that income, excluding GST.

“The difference is mainly because the very wealthy earn only a small portion of their income from wages and salaries, unlike most New Zealanders.

“The differential is even larger when GST is included: for the wealthiest, their effective tax rate rises to 9.5%, but for the person on an $80,000 salary, it goes up to around 28 or 29%. That is because wealthy New Zealanders spend a much smaller portion of their income each year, compared with other earners.”

The High Wealth Individuals Research Project is internationally significant because it uses real data, unlike other overseas studies which draw on surveys or scenarios, David Parker says.

“In 2020, the Government changed the law to enable IRD to require high-wealth individuals to provide their earnings data, in order to do this work,” David Parker says.

“To be clear, this work is not about chasing tax avoiders, nor is it about attacking the rich. Wealthy New Zealanders are usually hard-working and creative people who comply with current rules. They have assisted IRD with this inquiry, and I am grateful for that.

“The excellent work in this survey will enable future discussions on tax policy to be based on solid evidence. Later this year, we intend to introduce a Tax Principles Bill to ensure that information like this continues to be transparently collected and reported on.”

Today’s IRD report release is accompanied by a new Treasury report setting out effective average tax rates across the population. It uses scenarios to show that effective tax rates paid by middle New Zealanders (including GST) are between 6.8 and 10.8 percentage points higher than for the wealthiest people.

The question is what the Government will do with the report.  Jacinda Ardern had ruled out a Capital Gains Tax while she was Prime Minister.  To the best of my knowledge Chris Hipkins has not announced his position although given his Blairite approach to politics I do not anticipate anything radical.  He is giving a speech today on economic matters so we should find out soon.

And meanwhile National has chosen to respond to the release of the report by advocating for, you will never guess, tax cuts for the very wealthy the report highlights.  Be under no illusion if National gain power the only thing the uber wealthy will receive is some sort of tax relief.

Since the 1960s working group after working group have recommended a capital gains tax.  Maybe what David Parker is doing is carefully and gradually opening the debate so that the current limited capital gains tax that we have can broadened and expanded.

186 comments on “Why a Capital Gains tax is necessary ”

  1. tsmithfield 1

    The thing about that report is it implies that, in principle, unrealised gains should be taxed.

    So, anyone who purchased a home prior to recent house inflation, in principle, should be taxed.

    That point should not be lost. Because, publishing research that considers the uber-wealthy may be politically astute. But, in of itself, hitting that group with extra taxes will not make that much difference. So, the government will need to go significantly lower on the income band I expect.

    But, once this door is opened, in principle, this tax could be applied to anyone who owns assets. And, it may well be, in future years. Who knows? It could be a gradual sinking lid effect, similar to boiling a frog.

    • AB 1.1

      As Parker pointed out, once you are seriously wealthy with income-producing assets, you don't actually need to sell them to generate cash to live off. Instead, you can leverage your assets to get favourable interest rates for borrowing and acquiring more assets. It ends as a spiral of runaway asset accumulation with not that much realisation (sale) of assets occurring, apart from some swapping as people move to asset classes with better returns.

      In other words, if you are talking about the seriously wealthy, unrealised gains have to be taxed to stop that runaway spiral of accumulation. And if you don't stop that spiral, the economic and political power that accrues to the very wealthy risks your society being controlled by some of the worst people in it. The very wealthy are quite different from ordinary middle class people who might have acquired some assets which they liquidate in retirement to live more comfortably than is possible with superannuation alone.

      • Incognito 1.1.1

        You would think it is all about hard & dry numbers, but it isn’t; perceptions matter and subjectivity, which often is a euphemism for bias. It happens everywhere, in healthcare, in education, and in the whole FIRE economy. The system favours the well-offs, the so-called ‘successful’ and ‘winners’.

        Just look at Māori business creation, for instance. The Reserve Bank finds they’ve been held back by the “persistently higher” interest rates they pay on their liabilities, as shown in the chart below.

        https://www.newsroom.co.nz/ensuring-financial-inclusion-when-nz-cant-bank-on-the-big-banks [see graph in article]

      • That_guy 1.1.2

        I agree. The excuse that the rich aren't really rich because they can't derive income from their assets is false, and is also by far the most common cop-out given by people who don't want a CGT.

        • mikesh 1.1.2.1

          The excuse that the rich aren't really rich because they can't derive income from their assets is false

          Since when has rent not been taxable? Why has nobody informed me of this?

          • That_guy 1.1.2.1.1

            I said

            1) that the rich can derive income from their assets, and

            2) that the claim that the rich can't derive income from their assets is a common and incorrect claim.

            I never said anything about whether that income is taxed. So this is a straw-man argument.

            • mikesh 1.1.2.1.1.1

              I never said anything about whether that income is taxed. So this is a straw-man argument.

              If I got i wrong I apologise but since we were discussing tax that seemed to be implied.

      • tsmithfield 1.1.3

        Define seriously wealthy. We have students staying with us from the Phillipines. They were saying they were earning $10 per day over there, and living on that.

        So, they would likely think that most of us are seriously wealthy here.

        • AB 1.1.3.1

          I think I did in the first paragraph. However, when it comes to making actual policy decisions it is always very difficult knowing where to draw boundaries – I agree with you on that point. There is certainly a lot of scaremongering value in saying to ordinary people that if they go after the very rich, they'll soon be going after you too. That scaremongering is the essential political difficulty that stops us actually doing anything.

          • tsmithfield 1.1.3.1.1

            The point is, that once that door is opened, there is nothing to stop future governments going after you.

            So, the fear is real and justified.

            • AB 1.1.3.1.1.1

              Slippery slope arguments are easy to make – and at some level, fundamentally dishonest. The important thing to remember with slippery slope arguments, is that they run in both directions. To use your language – if opening the door constitutes a slippery slope, then so must closing it. More explicitly – if National close the door on taxing the super wealthy, what else will they close the door on? Will they close the door on progressive income tax and just go for a flat tax of (say) 15% and gut public services commensurately? Dishonest games like this are easy to play.

      • mikesh 1.1.4

        Interest, of course, should not be tax deductible. Rectifying that particular anomaly would probably not do much to mitigate the problem in question, but it would certainly help.

    • Tricledrown 1.2

      tsmithfield most developed countries have a capital gains tax or land tax.Businesses pay a form of capital gains tax that's why companies have to do a stock take every year.The wealthy are using assets to avoid paying any tax . So if the wealthy are paying 11% less than the low wage earner capital gains should be set at 11% so it makes it easier to get compliance.The wealthy are money hoarders if this was any other type of hoarding it would be called a mental illness.

      • tsmithfield 1.2.1

        In principle, I don't have a problem with a CGT. So long as it applies across all assets, including the family home.

        In practice, I can imagine this becoming a dogs breakfast and God's gift to valuers and accountants.

        • mikesh 1.2.1.1

          The trouble with CGT is that only those who sell get bitten. The rest get off scot free. What is needed is a tax that can be levied on a regular basis: yearly, half-yearly, or quarterly say, independently of selling. Perhaps a land tax, or a property tax similar to rates.

        • SPC 1.2.1.2

          It was DPF who stated the only CGT he would support is one including the family home. He is now in the Taxpayers Union. His purpose, then and now, to make a CGT politically impossible.

        • Hunter Thompson II 1.2.1.3

          CGT on the family home – that sacred cow – might be a hard sell for the pollies.

          There is another side to the coin – the tax equation must include capital losses (house prices are currently falling).

          The final report of the Tax Working Group is worth studying. It favoured a CGT: https://taxworkinggroup.govt.nz/resources/future-tax-final-report.html

        • Tricledrown 1.2.1.4

          CGT would be an easy sell if income tax from wage and salaries was reduced by good amount making capital taxed at the same rate as income tax as it is income.

    • Incognito 1.3

      When Ugh sold his cave for three dinosaur bones, he made a healthy profit. His estate should pay tax on this now, here in NZ.

      • Thinker 1.3.1

        NB: When Ugh was alive, dinosaurs had been extinct for millions of years (watch Jurassic Park…). With limited tools, it's doubtful that Ugh and his fellow citizens would have been able to extract enough dinosaur bones for them to become common currency.

        While on the subject of flippant comments (sorry, Incognito), the news today cites Luxon who says that the top 2% pay 26% of the tax and that's fair. The real question would have to be whether the top 2% bring in more than 26% of the income/wealth share. Like saying Bill Gates pays 10 times the average taxpayer's tax, so that must be fair. tax https://www.1news.co.nz/2023/04/26/luxon-refuses-to-say-if-tax-system-unfair-wealthy-arent-the-problem/

        I'm ok with a capital gains tax, but it must be taxable at the time of the gain. It can't be a wealth tax that forces people who are asset-rich and cash-poor to, say, have to sell their homes.

        • bwaghorn 1.3.1.1

          The top 2% pay 26%of the income tax, which is his way(luxon) of covering up the fact they pay less tax than low income earners if you put in the top 2% s total income.

          Sounds bite fluff

          • Nic the NZer 1.3.1.1.1

            At least he didn't try to put it in net tax terms or something. He seems to treat voters as more intelligent than our previous National government PM did.

          • Tricledrown 1.3.1.1.2

            The Top 2% probably own nearly half the resources monopolizing the assets on speculative tax free income like land banking while we have a housing crisis ,Food banks are stretched beyond there capacity 4,000 families are homeless creating more inter generational poverty

        • SPC 1.3.1.2

          Those who cannot pay their rates can defer the payment against the estate.

          The alternative to a wealth tax – is of course an estate tax (and possibly gift duties).

        • Incognito 1.3.1.3

          Sigh

          Dinosaur bones are highly sought after and go for a lot of money.

          Anyway, flippancy is to stimulate the non-reptilian dormant brain (can’t remember what it is called).

          I could say something serious about the ‘idea’ to implement a retrospective CGT (essentially a pseudo-Wealth Tax) but I can’t be arsed.

    • Bearded Git 1.4

      The "unrealised gains" argument is as silly as the "my shares are only worth that on paper" argument.

      The fact is that an asset is worth what it is worth in the market at any point in time. It follows that any capital gain at that point in time should be taxable.

      • Nic the NZer 1.4.1

        I think the Greens added plenty of provision for un-realized gains into their wealth tax, rather than simply declaring it irrelevant. Un-realized gains can't be paid in money to the IRD is an actual problem and needs to be addressed in any proposal.

        While implementing a tax base is fundamental to our monetary system and should be imposed fairly, the IRD doesn't need to collect any amount of tax to facilitate government spending. This is obvious just considering the way payments work inside the RBNZ set of accounts (where government tax and spending actually clears through).

        The ideas being discussed here are more or less about switching the balance of taxation from income to asset price level changes. I don't think its necessarily clear what the impacts of these changes would be on either asset price levels or associated income flows however. One potential impact of a tax on changes in asset values as income could be a shift towards short term ownership of these assets over longer term ownership (because you need income to support your asset portfolio expansion). It's at least plausible that the increase in turn over of ownership would lead to more rapid asset price appreciation and that would be consistent with changes in turn over rates in the housing market across the last 20 years.

        • SPC 1.4.1.1

          We have unpaid tertiary debt – collected based on income level and otherwise left against the estate.

          • Shanreagh 1.4.1.1.1

            Usually on death the balance of a student loan is written off.

            'In fact, the policy settings at the moment incentivise this: strictly speaking, the fact that the debt is written off at death is one reason in support of paying a student loan slowly: most other debts will need to be paid by your estate. A 0 per cent interest rate if you live in New Zealand helps too, there's an argument in favour of letting inflation pay the loan off."

            Financial adviser Martin Hawes also did not think it was necessarily a concern that people were carrying lifelong student debt. "I think a debt is a debt and remains until it's repaid, or you die. I do not think they should have any sort of time limit."

            https://www.stuff.co.nz/business/119397157/new-zealanders-carrying-student-loans-until-they-die

      • mikesh 1.4.2

        If it is true that an asset is worth its market value at any point in time then there is no profit to be had by selling it. In other words if a property is worth 500 million and that's what the seller gets for it, then where is the profit?

        A rental property's value, I think, is determined by the rent obtainable from it ad infinitum. Such a value is real and this is the value that a seller is passing to the buyer when he sells.

        • Bearded Git 1.4.2.1

          It's accountancy 101…I can't be bothered explaining.

          • mikesh 1.4.2.1.1

            Most accountants, I think, would define income as what one can take from a business entity without reducing its capital.

            That's probably "Accounting 101".

            • Incognito 1.4.2.1.1.1

              Over time, capital assets go down in value. It is called depreciation.

              Over time, money (currency) loses value too, or buying power. It is called inflation.

              Ask ChaptGPT to explain these terms & concepts to you before you comment again on this with your typical reckons.

              • mikesh

                Over time, capital assets go down in value. It is called depreciation.

                Depreciation being a non cash expense item does not reduce capital, providing it's catered for out of earnings.

                Over time, money (currency) loses value too, or buying power. It is called inflation.

                Inflation does not reduce capital. Capital of one million dollars continues to be worth that much. Although the value of the "unit of account" may be reduced

                Ask ChaptGPT to explain these terms & concepts to you before you comment again on this with your typical reckons.

                I don't need to. However I think you need to go back to school and refresh your knowledge of accounting 101.

    • SPC 1.5

      Why are you connecting CGT to home ownership – there is no CGT in the world that includes home ownership?

      Does the existing brightline tax include the family home? No.

      • alwyn 1.5.1

        " there is no CGT in the world that includes home ownership?".

        There are actually. A prime example is the USA. If you are genuinely in favour of a CGT, or a wealth tax for that matter, you should be in favour of including a family home.

        • SPC 1.5.1.1

          Wealth taxes can include the family home, as might estate taxes.

          Care to explain in what way the US CGT (federal or state) includes the family home?

          I suspect your answer will demonstrate that most family homes are not included.

          Most totally exclude them from CGT and have a separate wealth or estate tax regime that covers only some/few.

          • alwyn 1.5.1.1.1

            It's all explained here. Although they say avoid it is mostly delaying.

            https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp#toc-how-to-avoid-capital-gains-tax-on-home-sales

            The property has to be pretty cheap though. You can only, as an individual, exclude $250,000 on a family home. That would be roughly a single year increase on an Auckland home I suppose and it is the increase over the entire time you have owned the place you are looking at. You may be able to defer, not avoid, payment if you quickly buy another property of a similar type, and price.

            You still can't easily get out of paying though.

            • SPC 1.5.1.1.1.1

              Do you have to pay capital gains tax on a home sale? That depends. You could owe capital gains tax if you sell a home that has appreciated in value because it is a capital asset. However, thanks to the Taxpayer Relief Act of 1997, most homeowners are exempt from needing to pay it.

              If you are single, you will pay no capital gains tax on the first $250,000 of profit (excess over cost basis). Married couples enjoy a $500,000 exemption.

              It's only on the CG over $250,000 or $500,000 and that can be deferred by buying a new home (until death tax liability)

              The average total value (both median and average) of a home property in the USA was c380,000 in 2022 (little chance of that much of a capital gain then).

              So even at death the chance of any CGT being paid on a home ownership is very unlikely for the great majority.

  2. That_guy 2

    So, for the election, what are the options? Genuine question.

    Seems to me the options are:

    Labour = pasty weak form of CGT that they refuse to call CGT for political reasons

    TOP = land value tax, which is a CGT that also has the added benefit of encouraging densification and discouraging land-banking

    Greens = CGT, a real CGT, but then there are off-topic values and rights-based reasons not to vote Green in the current round.

    Just my 2c but I'm leaning towards TOP, since a land value tax is probably better, plus you don't have to support a subgroup within the party which has lost the plot.

    • Res Publica 2.1

      land value tax, which is a CGT that also has the added benefit of encouraging densification and discouraging land-banking

      We already pay a land value tax though: rates.

      • That_guy 2.1.1

        To a limited degree, sure but I don't see this as a slam-dunk argument against a central government land value tax as an alternative to a CGT.

        If you're in favour of a CGT (and I am) then you should at least look at a LVT, which is basically a CGT with extra benefits (encouraging densification and discouraging land-banking).

        If you're not in favour of a CGT, vote Labour or National.

        • Res Publica 2.1.1.1

          To a limited degree, sure but I don't see this as a slam-dunk argument against a central government land value tax as an alternative to a CGT.

          Neither do I – I'm definitely in favour of a CGT for exactly the reasons you outlined. But I'm also opposed to the idea being taxed twice for the same thing.

          So any reform of capital gains tax should either exclude the family home, or find an alternative basis for funding local government.

          • That_guy 2.1.1.1.1

            I just can't see any way of having an effective LVT of CGT without getting over the whole "family home" thing. It's a loophole so big it makes the whole thing pointless.

            As for things being "taxed twice", it depends on the size of the tax. I mean, if I cut two hairs on my head I've been "cut twice" and if someone removes my kidney I've been "cut once" but the size of the cut is rather more important here.

            As things stand, a large chunk of an entire generation would love to get to the point where I they have to worry about a small tax on their family home.

            I agree that funding of local government is an issue.

            • That_guy 2.1.1.1.1.1

              that should read "LVT or CGT"

            • Molly 2.1.1.1.1.2

              Our situation may not be average, but I'm sure it's duplicated in some form many times throughout NZ. We have the title to one property, which we reside in.

              Until we pay off the mortgage, we currently pay around an extra $500wk in mortgage repayments than it would cost to rent our home. Our rates are low because we are rural, so our annual cost is approx $2,500. (In the 18 years we have been here, our sewage and water expenses have been around $30,000 and they have included a replacement septic tank and field, and replacement of three pumps.)

              This extra expenditure throughout the lifetime of the mortgage limits the choices that are able to be made in terms of excursions, holidays etc.

              Ignoring the maintenance costs, and not quantifying in any way the lost lifestyle choices, sticking to the top-up of $500/wk and the rates of $2,500/yr gives a conservative premium paid for home ownership of $28,000/yr. In order to pay that amount – my partner has to earn $42,000.

              (Note: Our housing costs are higher than this.)

              Extrapolating this over twenty year mortgage, the extra costs (only in terms of mortgage payments and rates) are $560,000 which required an income earning of $840,000 over that period to service.

              The value of the house in the eighteen years we have owned it, has risen (according to Council valuations) by around $800,000. But remember this does not take into account any monies spent on maintenance and improvements. It also doesn't take into account any lost value of that money, in terms of generating compound interest if it was invested in a bank account which would be a very conservative return.

              So, there is a very important query on how they would propose to calculate CGT on family homes, (as opposed to investment properties, or development properties) when there is an added cost to ownership (sometimes) that needs to be accounted for but has probably not been worked out by many home owners?

              As I'm someone who believes that house prices should be falling, this outcome would create another dilemma. If the government is going to tax capital gains on the family home, will it also reimburse or allow tax losses when housing prices (hopefully fall)? Note: That for property developers this loss already reduces tax calculation, because the business is already taxed on profit.

              Are we essentially creating another incentive for government to maintain excessive house prices, if they do indeed choose to tax unrealised capital gains on family homes?

              Housing prices have not only been allowed to rise, they have been actively encouraged by government policies of both National and Labour. These gains – for many – are paper only. The houses are the same quality, in the same location, and requiring ongoing maintenance to avoid deterioration. Material benefits only are achieved, if someone sells and downgrades, because people still need shelter. The sale of a person's residence – requires them to find another residence.

              It'll be interesting to see what the full policy is.

              Also, the press release is low on details on calculations, and it does strike me that the demonisation of landlords, is perhaps making it's way to the critique of anyone who owns property. I guess we'll see.

              • SPC

                Are you completely unaware that CGT around the world exclude the family home?

                • alwyn

                  As I pointed out on this comment by you earlier this statement is false.

                  • SPC

                    No not really, I expect any evidence you supply will note that most family homes are not included – only those seen to be storing investing wealth in high vale real estate.

                • Molly

                  No. Because I read the linked press release, which is why I said:

                  "It'll be interesting to see what the full policy is."

              • Craig H

                All of that is one big reason why CGT is often less than income tax rates to attempt to recognise, for example, that some capital gain is inflation rather than real gains.

                • SPC

                  The two types are CGT at the income tax rate after inflation adjustment or a lower flat rate.

              • mikesh

                Comparing mortgage payments, including interest, with rents is like “comparing apples with oranges”. When all the mortgage payments have been made you will own a freehold property worth perhaps one million dollars. After the same period of time the renter will own nothing.

                • Molly

                  You missed the part where I said what was paid OVER the rental value.

                  Someone renting our home could put that excess into a compounding interest account:

                  https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

                  Start $500 Add $2000/mnth @ 4%

                  After 20 years: $734,660.54 in the bank.

                  • mikesh

                    I re-iterate. You will own a freehold property. The renter will own nothing. You will gain the benefit of having somewhere to live while you pay off the mortgage. That presumably is worth as much as the renter pays in rent. In other words you get to own a freehold property in addition to living rent free for twenty years.

                    • Belladonna

                      And, based on Molly's figures, the renter will have $734K in the bank.

                    • Molly

                      Read again. Investing the cost of the mortgage OVER the probable rental value.

                      https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

                      Just for the hell of it, add the following:

                      The above calculation did not include rates, or maintenance over 20years which would quite conservatively add $5,000/yr:

                      Start $400 Add $400/mnth @ 4% monthly interest

                      At 4% that's an additional: $147,598.88

                      Home insurance (not paid by renters) $200/mnth:

                      Start $200 Add $200/mnth @ 4% monthly interest

                      At 4% that's an additional: $73,799.44

                      So the renter – in this particular scenario – might actually be better off than us as homeowners.

                      Renting – benefits

                      They have accessible capital throughout the twenty-year period, and are more able to meet any unforeseeable expenses, or large expenditure items without going into debt. In terms of times of financial stress, these savings can be stopped for a period without requiring permission from lenders or the threat of losing your place of residence.

                      As a tenant, any maintenance or repairs are the responsibility of the owner which should require no investment of time or capital.

                      Homeowners – benefits

                      As homeowners, we have the benefit (that we utilised) of being able to offer accommodation to others without having to get owner's permission, and the possibility of reducing our housing cost considerably when the mortgage is eventually paid off. (Which in our case is not going to be in twenty years, but 30 as high item costs, like the septic tank etc was a addition to the loan and the term)

                      The point is, we need to challenge the assumption that property owners are always and significantly better off than the renters who never purchased.

                      They have often just made different choices – which have costs that are sometimes also financial.

                      That said – I think housing costs are far too high, and if prices fall then it will benefit both home-owners and tenants.

                      Any CGT should be strictly applied to profits made on houses that are flipped, or developed for the purpose of profit.

                      The discussion around rentals being sold with capital gains, has to be reviewed if they look at CGT for that, given that interest (in every other industry is looked on as a business expense) and that has been removed.

                      CGT for commercial property or landbanking would be easier to identify.

                      Particularly if the increase has come from council zoning changes – increased equity value was briefly on the table during the Unitary Plan for Auckland but was dropped quickly and left very little trace. Those zoning changes, increased the value of thousands of properties without any input from property owners.

                    • mikesh

                      Renters pay for the landlord's outgoings indirectly, since the landlord will usually pass them on as part of the rent. And what a tenant does with his spare cash is not really relevant since it is accommodation costs rather than investment philosophies that we are discussing. Mortgages are ownership costs, i.e. a cost of investing in a property. You get a property, a tenant may get a better return by investing in fixed interest securities, or in the stock market. Maybe he does better or maybe you do. Who knows. There is nothing interesting about that the fact the different areas of investment may provide different returns.

                      You seem to be failing to distinguish between accommodation costs and ownership costs.

                    • Molly

                      @mikesh

                      "You seem to be failing to distinguish between accommodation costs and ownership costs."

                      You are failing to distinguish between financial choices.

                      Those that purchase a house end up with a house.

                      Those that don't, don't.

                      This is not an unexpected outcome.

                    • mikesh

                      [You are failing to distinguish between financial choices.

                      Those that purchase a house end up with a house.

                      Those that don't, don't.]

                      That's the point I was trying to make. The two situations are as different as apples are from oranges.

                    • Molly

                      @mikesh

                      "That's the point I was trying to make. "

                      Your point however seems to be a combination of the following

                      1. Those that rent should also end up with a house;
                      2. Those that purchase a house who end up with a house, are somehow impoverishing those that don't;
                      3. All those that rent are compelled to do so by landlords,
                      4. All those that buy have done so without sacrifice,
                      5. All landlords don't invest further after purchase.

                      It's only by ignoring other factors – which are likely to be common in the demographic between unable to afford to purchase a house, and able to comfortably afford a house – that you can make such poorly thought out generalisations.

                  • RedLogix

                    A very perceptive analysis Molly.

                    Most people who hate their landlord have not recently tried to apply for a mortgage. In essence what tenants are doing is using their landlords capital and creditworthiness to indirectly access the finance for the house they are living in.

                    • mikesh

                      Most people who hate their landlord have not recently tried to apply for a mortgage. In essence what tenants are doing is using their landlords capital and creditworthiness to indirectly access the finance for the house they are living in.

                      Rubbish. They are simply renting a property. They may not know about the landlord's creditworthiness, or how he came by the property, and they may not be particularly interested anyway, even if they did know. Indirect access to finance is not a service that a landlord is providing. The landlord is probably not providing a service since the capability for providing accommodation comes with the the property. The landlord is simply passing it on without adding anything of his own. The return that he gets for that is rentier (i.e. unearned) income.

            • mikesh 2.1.1.1.1.3

              @that_guy 10.45 a.m.
              If two hairs on your head are cut neither hair is being cut twice. With certain financial arrangements, e.g. dividend income prior to the introduction of imputation credits, it is possible that the same income is being taxed a second time.

        • SPC 2.1.1.2

          Even those in Oz can work out that a vacant land tax discourages land banking.

      • mikesh 2.1.2

        Rates are not a tax paid to central government. It is high people got this into their thick sculls. What we are discussing here is the question of the funding of government.

        • Nic the NZer 2.1.2.1

          If the government in local government is silent then its not a tax any more?

          • Descendant Of Smith 2.1.2.1.1

            If the extra I pay over the cost of production is called profit is it not a tax any more?

            • Nic the NZer 2.1.2.1.1.1

              I'd say calling that a tax is more of a rhetorical device than the actual meaning of the word tax.

              • Descendant Of Smith

                It is the private sector taxing me though. The excess profits by the supermarkets is a good example that easily meets this definition.

                to require a lot from (something or someone) : to put demands on (something or someone)

                https://www.britannica.com/dictionary/tax

                or high interest rates, or the Mongrel mob taking a cut, or high power costs due to power companies borrowing to pay dividends to well off share holders over and above profit levels.

                Not only governments tax. Profit, especially excess profit is a tax.

                • Nic the NZer

                  You're giving me definition two from the dictionary because definition one was clear, applicable and that didn't work out for you? Maybe we should also refer to forced labor as fiscal policy? It's certainly very taxing.

                  • Descendant Of Smith

                    No I'm giving definition two because I do see profit as private taxation. Have posted on this previously. It isn't like it is a new concept – even at primary school I was aware of the concept of taxing as being more than government.

        • Res Publica 2.1.2.2

          They're not paid to central government, no. But they're still a tax on property ownership.

    • Bearded Git 2.2

      The Green's Wealth Tax from the 2020 election is the option I still prefer.

      https://www.greens.org.nz/progressive_tax_reform

      Notice that in 2020 only 6% of people would have had to pay the WT-94% would pay nothing.

      (This may have shifted to 7-8% now…hard to tell with the recent significant falls in house prices)

    • SPC 2.3

      Land banking is discouraged by a vacant land tax, it does not require a tax on all land.

    • SPC 2.4

      A LVT is not a CGT as it applies whether land values go up or down.

      And a vote for TOP is a wasted or protest vote – promoted to remove Labour and install NACT.

  3. Tricledrown 3

    tsmithfield so while 70% of New Zealanders are doing it tough since the pandemic the wealthiest 300 families have increased their wealth by $14.6 billion .If that Capital gain was taxed at the same rate as ordinary hard working wage earners the govt would not have a $3 billion deficit.Working people are subsidizing Mega Wealthy Money Hoarders.

    • tsmithfield 3.1

      Look, argue for a capital gains tax for sure. But don't just assume that it will target the uber-wealthy. I think that sooner or later it will target the family home once that door has been opened.

      So, I think your argument needs to allow for that possibility.

      • Molly 3.1.1

        I agree.

      • SPC 3.1.2

        Can you name one CGT in the world that includes the family home – it's near exclusive not to incolude the family homes in any CGT.

        In fact, the most prominent proponent of the inclusion of the family home in any CGT is DPF, now of the Taxpayers Union – but as a means to reduce popular support for any CGT.

        • tsmithfield 3.1.2.1

          Germany does.

          Though, it can be avoided if you have been living in the house long enough. From the article:

          There are a few ways you can reduce the tax you have to pay when selling your property. For example:

          • Live in the home yourself in the year of the sale and two years prior, at minimum. This means if you move into a house or apartment today, you could resell it tax-free in three years. Just be aware that having the right of residence alone is not enough—you actually have to use the residence yourself.
          • SPC 3.1.2.1.1

            So it excludes the home people are living in. Doh.

            • tsmithfield 3.1.2.1.1.1

              Only if you have been living in it longer than three years.

              So, it is still a CGT on the family home in some circumstances.

              Plus, inherited homes can be taxed as well.

              • SPC

                Presumably it’s designed to capture those who buy to do up (with their untaxed labour) and on-sell for CG

                Inherited homes is part of estate tax, part of wealth taxation.

                • tsmithfield

                  But still the "family home".

                  Many people buy and sell their homes in a short time in NZ here for a variety of reasons. So, if this tax was in NZ, plenty would be caught by it.

                  You asked for an example, and I found one in a few seconds of google searching.

                  • SPC

                    And elsewhere you indicate your support for including homes in any CGT.

                    Yet no one does this.

                    Germany applies it only within 3 years (little likelihood of CG unless there is doer upper work) and the USA effectively restricts it to those who buy high value property.

                    • tsmithfield

                      And elsewhere you indicate your support for including homes in any CGT.

                      I support simplicity in tax systems. And, the same argument why other assets should be taxed applies in principle to the family home.

                      The more complications in a tax system, the more loopholes and opportunites for avoidance.

  4. Ad 4

    Would a CGT make NZ more equal, or more prosperous?

    I haven't seen this government show how it would improve us.

    • That_guy 4.1

      To examine the effects of a CGT you first have to have one.

      • Nic the NZer 4.1.1

        The implications discussed for a CGT seem to mostly be around property. If we can't judge this from the bright line test then clearly a CGT doesn't work as intended, because that is largely covered by the bright-line test (and the bright line test would be fully replaced by a CGT).

        I think the implications of this report are largely not about tax on property and a lot of the income being reported here was not earned on property.

        (Property meaning housing here).

        • Nic the NZer 4.1.1.1

          Should say the report is measuring changes in wealth, not specifically income.

        • mikesh 4.1.1.2

          Income from dividends is mostly taxed at either 33 or 39 percent, albeit that 28 percentage points worth of that tax is paid by the companies in question on the shareholders' behalf.

          • Nic the NZer 4.1.1.2.1

            You're saying the tax rate is miss-stated by the report because a lot of dividend income is notionally paid by companies on shareholders behalf?

            I don't understand what point your trying to make with this comment.

            • mikesh 4.1.1.2.1.1

              You're saying the tax rate is miss-stated by the report because a lot of dividend income is notionally paid by companies on shareholders behalf?

              I don't understand what point your trying to make with this comment.

              The shareholder pays the tax on his dividend income, less the tax already paid by the company on it. I have no idea whether this has any effect on the report. However, since the company is paying some of his tax it may give the the impression that the shareholder is is paying less tax on his income than he is. I don't know whether his imputation credit is included with his income.

              • Nic the NZer

                and this description (that shareholders pay tax on dividends) had a point? I'm sure the IRD is aware of this fact.

              • mikesh

                There seemed to be an idea being bandied about that only wage and salary earners paid tax, or alternatively that other sources of income were less heavily taxed. That of course is untrue.

          • Molly 4.1.1.2.2

            There is an extra problem here that if they focus on capital gains in share investment, it will have a knock on effect on the returns people have from compulsory Kiwisaver schemes.

            This is going to be an interesting policy rollout to watch.

            So far the options to tax banks and supermarkets that make "excess" profits are flawed in intent. They don't relieve the customers of either from the extra costs, they just redirect a larger share of that extra cost to the government.

            Spending reductions may help, and the first tax changes should be relief for those on low incomes, by eliminating tax in the lower threshold and reducing it in the next.

            • Christopher Randal 4.1.1.2.2.1

              Any "excess profits" tax will result in the consumer paying more as supermarket owners move to recoup the cost of the tax

              That's until another law is passed stopping them from doing so – oh wait, the current "tough" stance against supermarkets has really worked well!

    • Sanctuary 4.2

      I agree, you won't ever get a CGT over the line politically if you try and sell it for dry technocratic reasons like removing "distortions" in the tax system.

      It has to be part of a package couched in terms of Kiwi values- fairness, egalitarianism, rewarding Kiwi battlers.

      So a CGT on all properties purchased after, say, 1 April 2024. Phase in over five years from that date a tax free income threshold of 10k, starting with the first 2k then adding 2k per annum until 2029. And I'd really like to see an FTT, with the whole system being financially neutral to negate the charges of a tax grab…

      • mikesh 4.2.1

        It has to be part of a package couched in terms of Kiwi values- fairness, egalitarianism, rewarding Kiwi battlers.

        And also by obfuscation apparently.

    • SPC 4.3

      So the greater productivity of Oz to us, since the 1980's, has nothing to do with the incentive here to speculate for untaxed CG?

      Thus those in Oz can more easily afford property ownership (and rentals) off their incomes.

      The lack of a CGT allows wealth accumulation – and we have no estate tax or gift duty to mitigate it. Thus inequality and class division – will those with parents who do not own property ever own here or will they have to go to Oz to do so?

      • Nic the NZer 4.3.1

        Productivity is largely a measure of how much income a business can get of its employees time. The most relevant differences between NZ and OZ being population density and general income levels, both of these leading to Australian businesses finding it much easier to turn activity into higher income.

        Some of the primary policy differences impacting this would be that Aus often avoids recessions and has had a long standing policy of minimum industry rates leading to slightly higher Aus wage rates over time.

        This is much more by policy design rather than about levels of speculative vs productive investment. In fact if you measure it then NZ workers are much more highly skilled and versatile than their overseas counterparts, though at lower wage rates.

        If (somehow) the demand was there for NZ businesses then investment in productive returns would likely follow automatically. But on the other hand putting more into expanding a business capacity isn't so obviously lead to the customers showing up in greater numbers.

        • SPC 4.3.1.1

          If people were investing their savings in things other than property, then they and banks would have a greater focus on other investment. There would be more focus on venture capital, firms would have access to such (share issue) finance. Our whole finance and investment culture would be more advanced.

          More companies would grow here, and more would found a business with more capital than that provided by a mortgage on their home.

        • Descendant Of Smith 4.3.1.2

          That is a long winded way of saying NZ business owners are pretty shit at investing in quality businesses that can generate a high rate of return and instead depend on low wage / low productivity businesses such as cafes, tourism, pretend language schools, horticulture…..

          Apart from booze – you can make lots of money from booze even if you don't underpay your workers.

          The higher income point for workers is important though – just like NZ has had money churn through the economy the last 20 years from baby boomers with two incomes and no kids and no student debt to repay, Australia has had that and better wages and will continue to be helped via those higher wages as the baby boomers reduce their spending as they age.

          Money has to churn through the economy to create wealth at the bottom – capital savings does not do this. Fundamentally it is part of what Picketty is saying – violent revolution comes when capital growth to the few dominates over common spending by the many.

  5. lprent 5

    Maybe what David Parker is doing is carefully and gradually opening the debate so that the current limited capital gains tax that we have can broadened and expanded.

    That is smart just collecting the data to make these types of decisions with. The reaction from Act, the party almost entirely funded by the capital rentiers, was the most interesting. They attacked the whole idea about researching at all.

    One thing that I looked at had Act muttering about privacy issues of doing a similar exercise for people on benefits. Just shows how divorced from the real world the nutbars in Act are – because this is the types of information that people on benefits give to MSD, WINZ, and IRD all of the time now and for at least the last 40 years.

    I can't see any reason why wealthy who avoid or evade taxation shouldn't provide the same income and asset information as someone who is disabled and on a sickness benefit?

    One of the more interesting political analysis came from Richard Harmon at Politik "The big money up against Parker" which may be paywalled.

    He points out the level of agreement and the explanation of differences between this study and one carried out by treasury in 2018. My italics.

    Treasury found that the high net worth families paid 9.4 per cent of their economic income in tax, but those whose net worth placed them in the middle of the whole population paid 20.2 per cent of their economic income in tax.

    Treasury’s analysis was limited to 2018, whereas IRD’s analysis ran from 2015 – 2021.

    The Treasury figure would seem to give the lie to the argument from Opposition Leader Christopher Luxon that the inequity evidenced in the IRD study was simply the product of Labour’s profligate spending, which had led to the asset price inflation that had benefited the high net worth households.

    “It’s really grossly unfair that we’ve got a government that has mismanaged the economy so badly that they’ve actually created the asset inflation that we’ve seen that has created the inequality that we see today,” he said.

    But the Treasury study shows that inequality existed in 2018, well before Labour and the Reserve Bank began the Covid spend-up.

    Continue reading at https://www.politik.co.nz/the-big-money-up-against-parker/ | Politik

    But of course he would say that. National is also largely funded by the highly wealthy

    The most intriguing question left after yesterday’s unveiling of the Inland Revenue study of the tax paid by the ultra-wealthy is who refused to respond to the survey,

    Nearly 12 per cent (41) of the 352 families with an estimated net worth of at least $20 million did not agree to respond even though the Tax Administration Act makes such surveys compulsory.

    The survey started in November 2021, and the questioning was over by May last year.

    As early as November 2021, there were reports that high-net-worth individuals were seeking legal advice to avoid having to participate.

    At about the same time, substantial donations from some of the country’s wealthiest individuals began to flow to the National Party.

    The party got over $1 million in donations last year, mostly from wealthy individuals like rich listers Trevor Farmer and Craig Heatley who donated $100,000 each, and in April last year, New Zealand’s wealthiest individual, Graeme Hart, donated $250,000.

    There is speculation that Hart is one of those who did not respond to the survey, but Revenue Minister David Parker told journalists he did not know who had and who hadn’t.

    Nevertheless, the huge flow of money going to the National from the ultra-wealthy points to the politics of the IRD report.

    Inevitably it pitches the ordinary taxpayer against the very wealthy and National leader Christopher Luxon yesterday defended the ultra-wealthy. “It’s not the wealthy that are the problem here,” he said.

    Continue reading at https://www.politik.co.nz/the-big-money-up-against-parker/ | Politik

    Act will have the same political conundrum.

    But with National, as Harmon points out, they will have a real political problem trying to push a election message of effectively giving really large tax cuts in dollar terms to the highest income groups. That is their current political party funding model.

    In a way, Parker has trapped National.

    Luxon yesterday was left defending the high net worth individuals.

    “This government has pumped up asset values, and the wealthy have done well.”

    But then he may have played right into Labour’s hands by arguing for tax reductions.

    “What’s clear is that what this report says very clearly is that working New Zealanders need a tax break,” he said. “That’s what we’ve been talking about for the last year and a half.”

    However, Labour now has the opportunity to go into the election delivering tax reductions to middle and lower-income earners, which it pays for by nobbling high-net-worth individuals.

    But it will face a very well-financed National Party and its supporters in total opposition.

    Continue reading at https://www.politik.co.nz/the-big-money-up-against-parker/ | Politik

    A very useful well researched article. It alone just paid for my subscription to it.

    • adam 5.1

      Big thanks Lp these excerpts are good.

      I got a feeling the greedy only have so many cons left in the bag.

      If you don't want to pay tax, I'm sure Belarus will have you, or maybe a dozen other banana republics. Otherwise if you want to live in a civilised society, and not be a greedy wanker – pay your bloody taxes.

    • Patricia Bremner 5.2

      Excellent comments LP You expressedyes what I bumbled through.

  6. Sabine 6

    yeah, sadly since 2017 not a single person in the Labour Party saw the need for it, i guess it must be election time.

    • Nic the NZer 6.1

      Sabine your too smart for politics.

      • Sabine 6.1.1

        not sure if you are snarky of not, i don't have a sense of humor that i am aware of, but we had this captial gains taxation discussion for many years, under John Key, under Jacinda Ardern and now under Chippy.

        We have had the discussion of a tax free threshold as it is in OZ under all these PMs. We have had the discussion for a tax on high income for a while now.

        And here we are again, discussing the same thing, hoping the people that did nothing for the last 5 years will change it.

        So i can only assume that we are in an election year, the Green Party is about to implode in their own juices, and Labour needs to rally the faithful, and chances are it will be enough, but do I expect changes coming? No.

        In the meantime CHCH closes its only birthing unit, hospitals are overflowing, children leave school barely able to count and read, roads are held together by potholes and so on and so forth.

        • SPC 6.1.1.1

          Christchurch is getting a new birthing unit twice the size of the one closing later this year.

          • Sabine 6.1.1.1.1

            oh great….that was not clear by the article that i read. Hopefully it does happen.

            • SPC 6.1.1.1.1.1

              The problem is the current unit is staffed by midwives – a nationwide shortage (so they have staffing problems). The new unit (at the hospital) – probably by doctors and nurses.

              • Sabine

                The problem is that once closed there is no birthing unit at all, staffed by midwives or others until the other one is opened. And unless the country starts hiring nurses and doctors by the hundreds you still have that nation wide shortages for nurses, doctors and midwives that we currently have.

                In the meantime the birthing bodies can just home birth alone, or with the aid of a midwife if they find one, and if it goes wrong they can call an ambulance – but they are short staffed too, and i guess that needs to happen before anything changes. But then i guess the birthing bodies are made for birthing and really its just a birthing body, no one of consequences should this go wrong.

  7. Tiger Mountain 7

    I still remember during the first media rush of “Jacinda–mania” when in a puff piece style magazine interview Ms Ardern talked about her media and personal interests. A recent Thomas Piketty book was on her shelf, and she candidly admitted to having not finished it.

    And that is 99% of the Labour Caucus problem–lack of a class left analysis and ideology. They are captured by monetarist orthodoxy & an embedded neo liberal Parliamentary consensus, hugging the centre line and the middle class and the employing class.

    A circuit breaker is needed, and at the moment that looks like Te Pāti Māori in a tight election. For 2026 there will hopefully be a new gen led mass community movement that will finally boot Rogernomics and Ruthanasia–for the love of all that is good or could be…

    • Stephen 7.1

      Is there a socialist left in the Cabinet? Or indeed the caucus?

      • Thinker 7.1.1

        Ruthanasia seems to be redefining herself as the poster child for the downtrodden:

        How have we got to the point where our lowest-waged workers are now paying tax rates that were set up to sock it to those on higher incomes?

        If you’re a minimum wage earner who works more than 40 hours a week, you’re now in the middle $48,000 tax bracket, paying 30% on any additional earnings.

        Inflation has dragged you into a higher tax bracket.

        To make things worse, the higher bracket at such a modest income level is a tax on ambition that risks killing the incentive to upskill, gun for promotion or take on a side gig.

        The idea that drives progressive taxation is that as people become better off, they should pay higher taxes. We need to rethink this logic. The trouble is that our so-called progressive rates have become regressive, hitting minimum-wage workers.

        https://breakingviewsnz.blogspot.com/2023/04/ruth-richardson-taxation-problem-i.html

        • SPC 7.1.1.1

          Only if you fall for it.

          The people most disadvantaged by lower tax revenues are those who use state schools, public health care and are either reliant on state housing or the AS (rentals) and WFF tax credits to afford rent.

          Without the bracket creep or some specific provision, we cannot afford the rising cost of health – aging population (nor Super). Note she has no regret about not making any provision for these costs in her responsible budget regime. Talk about even now, not getting it. Labour at least did the Cullen Fund.

          A wealth tax could cover an increase in the low income tax earner rebate (currently only $10 a week between $24-48,000, easy to broaden this to $14,000 to 60,000 – median wage).

          A CGT could cover any threshold changes.

        • mikesh 7.1.1.2

          Since altering tax bracket thresholds would put more money in peoples' pockets it would seem counterproductive during times of inflation. And when inflation does not exist it's unnecessary. In that situation a progressive tax system works just as it is supposed to.

        • Tricledrown 7.1.1.3

          Thinker you are forgetting that working for families and rent subsidy community services card etc. Single people or those who don't have families don't have the liability of dependents .So very few people pay top levels of tax.If those people making tax free profits paid their fair share those on taxable wages would pay less and tax bands could be moved to higher levels

      • Tiger Mountain 7.1.2

        Not in classic terms. Michael Wood, MP Mt Roskill is about as close as they come. He has good achievements for working class people and the country–Coastal Shipping commitment, Bus Driver pay increases etc.

  8. tsmithfield 8

    First they came for the Uber-Rich, and I said nothing.

    Then they came for the wealthy and comfortable, and I said nothing.

    Then they came for the professional people and I said nothing…

    Then they came for…

    • bwaghorn 8.1

      They came for me years ago , it's time the tax evaders and loop hole leapers got cornered as well

    • Thinker 8.2

      Assuming you earn your income from wages and not capital gains, "they" came for you and me a long time ago.

      • Descendant Of Smith 8.2.1

        And my disabled non-working spouse who somehow I'm supposed to save for retirement for despite paying an extra $6,000 per annum in tax over a couple earning the same amount.

        My parents luckily were born at a time where you could claim a tax rebate for a non-working partner.

        • SPC 8.2.1.1

          Campaign for the right of the non working partner to get independent support (unable to work, caring for someone, looking after children or looking for work).

          Those on disability payments have this problem when they partner. Couples who marry do too when one loses their job – yet unmarried flatmates get their own access to support. This is long overdue for reform.

          • Sabine 8.2.1.1.1

            That was already 'campaigned' on by various groups for many years, and Labour did nothing. 5+ years of fuck all. 3+ years of a full majority squandered.

            What is the poor part in this is that if these spouses worked and paid taxes they have earned these benefits, yet are not granted access to them.

            ditto with secondary tax, for people that work several jobs to have enough to pay rent/ food/ electricity.

            • Descendant Of Smith 8.2.1.1.1.1

              Yep to that. She spent part of her life working and part raising kids with lots of hospitalisation and extra costs and disability. We are forever grateful that our taxes paid for the specialist and hospital costs when they were young. All kids now work and are productive – though one has now at 30 moved to Australia for better employers and wages. Daughter simply wouldn't be here with our good public hospitals.

              Secondary tax is a bit of a misnomer – the PAYE tables for employers to use are designed to treat your income from them as the only source of income. This means all multiple sources gt taxed at the lowest rate which is fine if you have only one source. If you have more than one source you will not get PAYED enough to pay sufficient tax eg if you had three jobs earning $20,000 each each job would be taxed as if it was in the $0 to $20,000 bracket and you would get a bill at end of year.

              One needs to pay PAYE in this scenario at $0-$20,000, $20,000 to $40,000 and $40,000 to $60,000. (For the pedants I haven't worried about the $ rounding here).

              Secondary tax is simply a PAYE method to mitigate this effect. You should in fact ask IRD to give you a special tax rate based on earning $60,000 per year and give this to your employers to deduct PAYE at that rate.

              It doesn't matter whether you income is from one or three jobs – you'll pay the same amount of tax. Working out the right amount of PAYE to pay is the tricky part.

              And lets not forget Labour removed the ability to include underage partners in NZS thereby meaning many of us will have to work beyond 65 now as well. I suspect I’ll die before my wife gets super as per all the other genetically related men in my family. I notice in forums etc some couples are just discovering the impact of this change.

          • Descendant Of Smith 8.2.1.1.2

            The irony being that the argument against poor people getting this as a tax rebate is that the rich might get it as well.

            We have very rich friends who gloat about having a community services card. Anything based on taxable income for entitlement can be rorted.

            Universal assistance is always better and easier to administer. We should return to universal family benefit as well and simply tax high incomes more highly to recoup the cost.

            If we go capital gains exempt the family home being lived in but impose stamp duty on it if sold.

            • Sabine 8.2.1.1.2.1

              i am just simply for a. worked? – entitled to unemployment benefits, irrespective of marital status. need assistance – entitled to it as per the law.

              One reason imho we have these high rates of domestic issues in NZ is the fact that people don't have enough money, one of the reason being that being in a relationship will take away benefits cause 'the other' is your meal ticket. We have known that for a long time.

              as for secondary tax, those that have more then one job are also often on the poor end of the income, again, all i would like to see is an easy solution for people that have three jobs but don't work more then the average full week, should be paid an average full week and taxed per se. Not needing to ask IRD for a special income tax group, not being taxed higher by the end week and thus not earning the money that is needed, and thus benefits are needed.

              Ideally we get a government one day that will make it so that working is actually better then being on the benefit.

              But i am not holding my breath.

              I hope that your family is doing well in all of this.

    • Patricia Bremner 8.3

      That barrow you are pushing has a squeaky wheel, and your goods are shoddy.sad

      The fallacy of a tax for the uber-rich hitting the poor, if we introduce a mechanism to help the uber-wealthy pay that 11% they are currently "managing" to avoid. "Tui"

      It is ludicrous to infer the Government is so greedy they will come after all sectors…that is a deflection from the missing 11% not paid by the uber-rich.

      The poor or the middle do not have the ability to hire help to structure their affairs to minimise tax.crying

      The Government has to do that for them through adjusting the progressive system.devil

      Things we want as a community through Government need to be paid for fairly, and this work by Parker may lead to changes in tax brackets and upper level taxes to even the playing field.

      It is not the Government being greedy!!frown It is the "Uber-Rich" who are not participating fairly, currently they are getting an 11% "dividend" on their wealth.

      The Government wants only what they should be paying. Some of this 11% Dividend" will be tax evasion or at best avoidance which they and their accountants work.cool Many have been pulled up through the IRD's new systems, but other dodges need to be fixed.

      So they are coming for that group at last, having set up systems that IRD use well, and by getting the majority of this group to self report, Parker's research gives a lie to Luxon and the National Party saying this group need a tax cut as they are overpaying. angry What a lie that is.

    • That_guy 8.4

      But they didn't come for the Uber-Rich first, or at all, and if they did, I would say "OH YEAH!", not nothing. Because the Uber-Rich are Uber-Rich because they own Uber-assets.

      Who did "they" come for first? Workers, not asset-owners. Workers.

    • AB 8.5

      first they came for…

      Excellent – comparing a debate about tax policy in a modern social democratic state to a murderous totalitarian dictatorship. And equating being taxed to being killed. Seems fair and balanced.

      I described above how slippery slope arguments run in both directions and the implication is that they will result in a contradiction. Essentially: if I can't do something because it might lead to me doing something else, then I can't do anything. And if I can't do nothing about one issue, because it might lead me to doing nothing about another issue, then I can't do nothing either. I can't do nothing and I can't do anything.

    • mikesh 8.6

      Well, as the bishop said to the actress, "I came for her".

  9. Thinker 9

    Was thinking about the other elephant in the room – speculative tax.

    I seem to remember a debate some years ago about if 0.0025% (that's one quarter of one percent) tax was put on every external currency speculation from offshore, it would translate into billions of extra income for New Zealand.

    Does anyone remember that?

    Surely, that would be the place to start, without taxing New Zealanders more than they already are and, sorry I'm not an economist, I think it would help our dollar to be more stable and help exporters, too.

  10. tsmithfield 10

    It could be a moot discussion, because it looks like Hipkins is not planning to introduce a CGT, not in the coming budget, anyway.

    • Craig H 10.1

      Parker himself said policy changes were for cabinet or parties during election campaigns. Given how close to the Budget we are, I can't see cabinet doing anything this year about it.

  11. Ad 11

    Great to see Prime Minister Hipkins kill all speculation this morning, ruling out both a Capital Gains Tax and a cyclone levy.

    https://www.nzherald.co.nz/nz/politics/watch-live-chris-hipkins-torpedoes-tax-speculation/PPPYNGLUFRBORLILDEJC22LWQA/

    Hipkins may not be an ideological giant but at least he's not out of touch with the political suicide of proposing higher taxes in the middle of a massive cost of living blowout.

    • SPC 11.1

      If Hipkins does not propose to tax the wealthy to afford public spending and or income tax relief Labour will lose.

      • Tiger Mountain 11.1.1

        There is a venerable Labour movement saying…“If we fight we might lose, but if we don’t fight, we will definitely lose.”

        Labour needs to take the plunge. They have an absolute Parliamentary majority until October, they could take action right now.

        The population demographics are shifting towards the new gens many of whom are doing it hard, locked out of home ownership, renting overpriced dumps, paying off student loans, precarious employment, and only knowing a digital world. By 2026 they will rule, the worry is if the Natzos and ACT gain office this year it will be hard to undo the damage.

        • Anne 11.1.1.1

          Absolutely TM.

          Who doesn't know young people who are fighting a losing battle to have what is their absolute right – a home they can call their own? Nobody.

          All they want is the certainty and security that their forebears took for granted. Nothing more.

          And most of all I endorse:

          There is a venerable Labour movement saying…“If we fight we might lose, but if we don’t fight, we will definitely lose.”

      • Ad 11.1.2

        The Green voter can make that choice if they want.

        I can't see another prospective voter who wants a More Tax policy for this election.

        • SPC 11.1.2.1

          Most people would pay less tax, if there was a CGT and or wealth tax to balance out collection.

          If Labour says only those to the left of them would lower tax on those below the median wage, by increasing the tax on CG and wealth – where exactly do they stand?

          That is the policy of the Liberal Party in Oz and many other right of centre parties. Being to the left of National on tax is not left of centre.

      • Incognito 11.1.3

        Government can decide that it won’t introduce new taxes and Labour can campaign on new taxes 😉

        • SPC 11.1.3.1

          Only if the PM wants to win the election.

          • Incognito 11.1.3.1.1

            I think both you and I know the answer to that rhetorical question.

            Hipkins has been showing a drive & energy and yesterday’s speech included enough positive signs for me to have hope and some confidence in some of our politicians. Hipkins is getting closer to a plan with a vision. Luxon and National, OTOH, have no plan whatsoever, unless it is BAU and/or going back to the past that never was, and want to win because they believe it is their turn.

    • That_guy 11.2

      National: We Will Do Nothing but will blather about struggling kiwi battlers and the politics of envy

      Labour: We Will Do Nothing but will blather about kindness and equality

      Some choice. Most people aren't policy wonks, they vote for values that inspire them. Nobody is going to be inspired to vote in this election, and low voter turnout favours the right.

      • Ad 11.2.1

        Labour will continue to support people who need support with the largest taxpayer cash subsidies year on year since the 1970s. And do it better than anyone else.

        • That_guy 11.2.1.1

          I am sure you're correct. I'm also sure that the average voter is far less informed than you and will vote on feels, not reals. This feels totally uninspiring.

  12. ianmac 12

    Wouldn't it be loverly to do this in NZ. Mr Luxon might blush.This might help:

    In Sweden and Finland, people can find out about anyone else's tax returns just by making a phone call, but Norway is the only country where you can just look up that information on a government website.

    https://www.google.com/search?sxsrf=APwXEddRDq8-kA3oPvlGiZQ93Tjtu-L28w%3A1682558702311&lei=7s5JZPrVEojz4-EPx8mbsA8&q=sweden%20tax%20returns%20public&ved=2ahUKEwj6hI_O88j-AhWI-TgGHcfkBvYQsKwBKAN6BAhUEAQ&biw=1462&bih=844&dpr=1

    • Descendant Of Smith 12.1

      Yep always supported this and the open publication of salaries.

      Part of the "you can see my tax return" includes that those requesting to see it are notified to the person whose tax return it is as well.

      I also support a public register of trust beneficiaries and disbursements. I've seen some shocking cases where only a privileged few get the disbursements and others don't even know they are a beneficiary.

  13. Descendant Of Smith 13

    The other thing about this report is that it doesn't even include an assessment of those private good things that the well-off enjoy that slide under the radar – personal use of business goods, personal use of business vehicles, disbursement of money from the increasing capital value of trusts, overseas trips for business that just happen to always co-incide with All Black tests, etc but can be put down as a business expense, the home office, the paying of wages to a non-working partner to reduce tax liability – occasionally coming unstuck when there is a work related accident to the actual earner, the home office, phone, newspapers etc as a business expense.

    These are things that go on every day that wage and salary earners simply cannot do.

    I'm still of the view that a turnover tax is much more useful that the current system. Leave expenses out of the taxation factor and let shareholders etc take responsibility for managing that.

    • alwyn 13.1

      "Hipkins said he was always happy to pay the tax governments had asked him to pay."

      "When the previous National Government cut my taxes I didn't agree with that – I was happy to continue to contribute more."

      https://www.newshub.co.nz/home/politics/2023/04/chris-hipkins-admits-he-s-wealthy-as-inland-revenue-probes-how-much-tax-rich-people-are-paying.html

      Perhaps our PM could take a look at this list of things you object to and scrap his use of some of them. Why, for example, do we provide all the Cabinet Ministers with unlimited use of Limos' for their official duties and also supply them, every 3 years, with a brand new car for their, and their families private use? Couldn't they pay for their own luxuries?

      • Patricia Bremner 13.1.1

        Yes Alwyn. I can think of an occasion when walking would have been better.devil

    • Sabine 13.2

      The other thing about this report is that it doesn't even include an assessment of those private good things that the well-off enjoy that slide under the radar – personal use of business goods, personal use of business vehicles, disbursement of money from the increasing capital value of trusts, overseas trips for business that just happen to always co-incide with All Black tests, etc but can be put down as a business expense, the home office, the paying of wages to a non-working partner to reduce tax liability – occasionally coming unstuck when there is a work related accident to the actual earner, the home office, phone, newspapers etc as a business expense.

      Again, who most benefits from all these tax loopholes. Generally the ones at the higher end of income. Again, i re-iterate, i do not think any party in parliament would freely increase the tax burden on themselves first or ever.

      we could have a creative look at taxes, import the income system from OZ, no tax at the low income end, higher tax at the high income tax, we could close these loopholes you speak about, we could tax car ownership and promote a tax refund for public transport use. Germany created a 'solidarity tax' after unification, why not have a one of timed i.e. 1 year only such a tax to rebuild after the cyclones, and heck what happened to the millions donated to the relieve fund?

      • Patricia Bremner 13.2.1

        Red Cross said they would pay out the relief fund by June.surprise

        • Sabine 13.2.1.1

          i hope they pay out the interest that they received on the 18 million too, cause the people that lost everything at the moment and for the last few weeks sure could have done with Red Cross showing up with more then just good words and a few buckets.

  14. alwyn 14

    If you want to read an informed, and relatively neutral, appraisal of Parker's hobby horse I would recommend this post by Michael Reddell. He was a RBNZ senior official back in the days when it had some significant firepower and before Ord replaced the Economists with PR flunkies.

    He knows what he is talking about and it is well worth your time to read the whole thing while you find out the bits that Parker hasn't told you.

    https://croakingcassandra.com/2023/04/27/parker-taxation-and-that-ird-report/

  15. adam 15

    Duce Luxton, can't even lye.

    His spin doctors are having a hard time cleaning up the shit he is spinning.

    What a truly juvenile response from a so called leader/duce.

  16. Ad 16

    “Somehow, New Zealand’s policy advising community decided it would restrict most of its attention to the ways income tax could be perfected rather than question whether income taxes (which are particularly distortionary when applied to capital incomes) should be replaced by other taxes. It is almost as if we have the Stockholm Tax Syndrome – fallen in love with a system that abuses us.”

    A broad-based capital gains tax would just reinforce that problem.

    I would have preferred Labour to generate a discussion about the policies that are going to make local companies bigger, with greater dividends, far more attractive than owning houses, and worth holding shares in businesses for the long term.

    The best way to avoid any tax on your capital is to hold onto it and grow it.

    If Labour or National had decent policy on that, I would wake up to economic development and I suspect so would Hipkins.

    After all is Minister Wood can get cross-Parliamentary support on a congestion tax (as he did yesterday), then Hipkins can get cross-Parliamentary support on a business wealth generation pack.

    • RedLogix 16.2

      Yes. While one cannot fault the broader left for instinctively wanting to sock it to the rich, the question of whether a CGT would change anything for the better is harder to answer.

      Many other countries – notably Australia – have CGT's and are notably not taxation nirvanas either. (Accountants, lawyers and tax experts do love the chargeable hours complex CGT’s generate however.)

    • alwyn 16.3

      I fear that if he tried to get support for a genuine policy that would provide business wealth generation he would discover the truth of the comment that is attributed to Churchill

      "The opposition occupies the benches in front of you, but the enemy sits behind you"

      I think if he tried to do such a thing he would be devoured by his own caucus. Support from the Opposition might be possible. From his own Party I suspect it would be merely a wishful dream.

  17. pat 17

    To establish whether any 'tax' is 'desirable' it may be wise to first establish the purpose of taxation

    • Descendant Of Smith 17.1

      It is pretty clear, and has been for many years, that the cost of the baby boomers superannuation must be met as well as their increased health needs. Those two things are going to happen.

      Increasing the age of NZS will simply mean that many poor people and blue collar workers and Maori will never see a cent of NZS ie increasing the age favours the well off.

      • RedLogix 17.1.1

        The "health needs' thing is I suspect a tad over-rated. Most people are not much of an extra burden to the health system until the last few years of their life – regardless of age. Whether they pass on at 65 as our grandparents did, or at 95 as many do now, there is not much difference.

        What matters is 'years of healthy life' – and for much of their ‘retirement’ older adults do continue to contribute to the economy in various ways.

        The big problem is that in most of the developed world the Boomer generation was the largest cohort – almost all being smaller in size. So as the Boomers retire – and fully half of us turned 65 last year – the generations to replace us in the workforce are typcially smaller. This demographic inversion is a wholly novel situation in all of human history – way more novel than a relatively mild virus.

        • Descendant Of Smith 17.1.1.1

          When I was young and playing rugby a visit to A&E meant a wait with other sports people, car accident victims, sick toddlers and drunks – whereas a visit these days is overwhelmingly old people even at 2:00 am in the morning.

          This before the big wave of dementia and diabetes hits.

          It has definitely changed.

      • Patricia Bremner 17.1.2

        That is already the case.

  18. UncookedSelachimorpha 18

    Brilliant work by Labour and Parker here I think. I'm not sure the best way to correct the massive injustice in our tax and financial system, but solid information is a good start.

    Links to the actual report and associated materials are here:

    https://www.ird.govt.nz/hwi-research-project

    • Patricia Bremner 18.1

      Thanks. That sure puts egg on Luxon's pate.!!

      • UncookedSelachimorpha 18.1.1

        It is almost amazing how hard and fast Luxon and Seymour have gone into bat for the rich on this one!

  19. georgecom 19

    a phrase I have heard used in Aussie, a dollar earned is a dollar earned and should be taxed. Simply comes down really to whether kiwis think it is fair that some types of income are taxed and others are not. If it's not fair, a CGT goes some way to readdressing that issue.

    Luxon was totally disingenuous the day the report came out. he bleated on about labour spending and raising tax thresholds but failed to answer the question, is it fair some types of income are taxed and others not. It's not about spending Luxon, it's about what income streams are and are not taxed. Come out and state clearly where you stand on that matter.

  20. mikesh 20

    Simply comes down really to whether kiwis think it is fair that some types of income are taxed and others are not.

    The assumption with regard to capital gain is that the seller has done nothing to add value to a property since he bought it. So the part of the selling price that covers capital gain is a simple transfer of income from the buyer to the seller with no new income being created. However that income has already been taxed in the hands of the buyer. Therefor it's not true that "income" from capital gain is untaxed. It has been taxed in the hands of the seller.

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    BeehiveBy beehive.govt.nz
    2 weeks ago

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