No. Take a closer look.
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Inequality is not a problem. The problem in society, which is often blamed on inequality, is poverty at the lower end of the scale. Does anyone who has adequate housing, and all the material goods he wants or needs, plenty of food, clothing etc, really care that some people have a lot more?
Definitely. I have a friend who earns 100k per annum, has adequate housing, minimal material goods due to poor financial management, eats well, is fully clothed. However he is always moaning about rich pricks and how hard done by he is. Plenty of envy out there, and you will find it in the middle classes as well.
More the politics of make everyone pay tax which is often a right wing outlook.
When professionals pay 30% income and gst and real estate moguls etc pay 0% there are many and varied issues to consider.
Real businesses have to pay a flat 15% on their sales while others pay nothing.
Probably poorly worded. I don't think everyone should have the same outcome. Young people should have the same opportunities (education etc) but the outcome rests with the individual. Last time I looked the NZ communist party wasn't polling well. I don't think many support the idea of everyone being exactly the same. I do agree that the continued rise in asset and income inequality is not good for society eventually, the USA might be a lot closer than us.
I don't think any party is seriously addressing the issue.
It is if you have on one end of the spectrum people who make not 10, not hundred but often thousand times (or more) of the income of the average person. Nobody works that hard - i.e. this wealth is basically stolen from less lucky people.
These super rich people start to control society and are able to buy public opinion and political favours. They are in many countries able to buy justice - even in NZ it can make a huge difference for the outcome of a trial whether you are able to fork out a couple of 100k for a good lawyer - or not. Ask the people who still wait for a settlement of their EQC claim.
Look no further than the US, Russia or e.g. Brazil to see how these things effect societies. Inequality kills democracies and turns them into oligarchies controlled by strongmen.
It is inequality which makes the rich people richer and the poor people poorer - it is a vicious cycle. Just look at how the recent crisis effects the rich in the US. The rich people (the reserve bank cares about) got richer (many doubled their share portfolios) and the poor people without political power lost their jobs.
Some of the poor and middle class have sacraficed their incomes and livelihood for years mainly for the health benefits of some here who are probably older than the NZ median age but still have the attitude that they don't want to pay a cent more.
It's not a universal view though and good on the likes of Tindall, Buffet, Gates and others.
Who pays the sales tax known as GST to the IRD.
Not the consumer. and not the person who flips properties to someone else tax free every couple of months or so.
If you do then you're doing it wrong.
If a CGT came in then presumably it would replace the tax (or be a lower rate) on those gains so why be against it.
..because they pay nothing now that's why.
Inequalities and widening inequalities do cause some of the problems in society. What is adequate housing today? A simple hut or relative’s garage that keeps you dry? Or a brick and tile house with independent power supply, filter systems, underfloor insulation, double glazing, central heating and air conditioning, moisture extraction two inside bathrooms, bidet, and shower, a fast fibre connection. It is so much easier for the children in households with the latest and best to stay in top condition, have access to opportunities and to have the option to take advantage of them.
If selling properties 'every couple of months or so', then that is a taxable activity. If you're an investor in real estate you pay tax on rental profit.
GST is not known as sales tax. It is a tax paid by any GST registered person. The sales total, while used in the calculation is not the figure GST is paid on. From sales or income a registered person deducts costs and purchases etc, and pays on that figure. i.e. the profit.
I get the distinct impression you are one of those snivelling small-minded sad-sacks who spends your life worrying that under every rock is someone doing better than you. Well if so, it's because they are more deserving than you, boosted largely by a positive attitude.
If you are an investor in residential real estate then you can pay income tax at marginal rate on capital gain. Bright line test. Note residential rentals only. Then there is the intention test as well.
There is an increasing number of gotchas in relation to rentals. Some have sold up or not added to portfolios, others owners might well be waiting for the 5 year mark to sell, or until the carried forward rental losses have been used up.
Could be a rental shortage now or coming up. There is already a shortage for even slightly risky tenants, as witness the skyrocketing social housing waiting list. And net migration is also rising fast.
Just an opinion piece, but relevant to the discussion. Not sure what you call it when a journalist is providing an opinion piece.
https://www.stuff.co.nz/national/pol...talk-about-why
Yep the Asset bubbles make the baby boomer rich richer.
There is no sense behind taxing every last cent of income (including all gains from money lent to businesses) yet leaving most of the gains from Leveraged investment housing and all the gains Owner-occupation untaxed. Residential Real estate bubbles are encouraged.
The real estate bubble (if it turns out to be a bubble - at current it is just a continuous uptrend with the odd minor ripple) has little to do with CGT or the lack thereof.
The main culprits are
- low interest rates - i.e. people can afford to pay more for a scarce resource (a worldwide problem)
- money created by QE searching a new home (see what I did there :) ) - again a worldwide problem,
- very expensive building methods (stick by stick instead of using industrial production methods - this is a NZ specific problem) and
- the aversion of most Kiwis to live in apartment buildings
(admittedly, there are hardly any good quality apartments in NZ. Chicken - egg?) - obviously a home made problem as well
Don't blame the lack of CGT for our high property prices ... most countries do have a CGT and housing is expensive there as well everywhere where people can find a job and want to live ...
Sure - I hear property prices in the UK are dropping, but this is because people don't want to live there anymore.
I agree with all those points. NZ has among the most expensive housing for our income levels. I would add two additional main points.
The lack of a CGT and stamp duties in NZ, unlike most other countries, has the effect of making real estate even more compelling an investment. The relative ease to borrow to fund the acquisition of a house or real estate (as opposed to greater difficulty borrowing for share investment and businesses) makes housing more appealing as an investment, as leveraged capital gains are more easily achievable by more people. Also no stamp duties are payable making more frequent buying and selling of the family home a more Viable and compelling option to boost untaxed gains in equity.
Housing also gets a fillip from the fact that alternatives to households’ investing in real estate are less compelling in NZ. We have a comparatively small share market (part of the reason being explained above) and a small managed fund sector. Also kiwisaver is newish and has weak incentives to attract funds away from the real estate investment for all of the foregoing reasons.
If the lack of a CGT tax does make R.E. a more compelling investment (and there's no proof that it does), then by all means leave well alone. The purchase of a home makes for a stable society, so should be encouraged - not discouraged. Of course many proponents of a CGT would like their own home to be exempt. The thinking for many of them seems to be 'it's a fair tax as long as it doesn't apply to me'.
Presumably then investor housing should be further discouraged then to make room for owner-occupiers?
There are countries with lower home ownership rates with stable law-abiding societies. So there are several factors at play and stability rests on factors other than owner-occupied home ownership.
As for real estate being a compelling investment in NZ, I guess the household wealth wrapped up in home ownership and RE investment should be compared with those assets households own in shares, businesses and managed funds. How does that compare with other countries.
A good post BP that I totally agree with. My wife and I were talking about this yesterday when we drove through one of the lowest socio economic area here in Nelson yesterday, where she works and we have a rental property. Houses are old and many have not been maintained well but all sitting on large properties. The whole lot should be bulldozed and nice apartments built. The population in the area could easily be quadrupled and all withing easy walking distance to the town center. This could be repeated right around the country.
I do not agree with FP that home ownership is necessary for a stable society. Germany is a good example of a society where over 50% of the population rents and societies do not get more stable than Germany.
But a good interesting discussion on CGT.
Hi iceman. Yes redevelopment could happen but why doesn't it? Nelson district apparently has a lot more demand than supply going by recent media reports. Developers could start with buying up 2 or 3 properties to demolish and build. That costs, but it is the day job for developers and potentially lucrative.
What is stopping it?
Good question and applies to all of NZ. I think it is mainly due to attitudes. Kiwis seem to think of only expensive city center or waterfront properties when apartments are mentioned. In my old home country nearly all young families live in nice apartments and do not even dream of houses for first homes. This Kiwi attitude is partly to blame for our high property prices
I find it ridiculous when schemes like Kiwibuild aim to provide first home buyers with brand new housing. Just build a range of saleable houses, quality homes to tempt established home owners - whatever the market demands. Leave first home buyers to snap up the older housing stock that will result. They can improve and renovate them over time. That would improve housing stock at both ends of the market. There is huge demand from existing owners wanting to trade up; every extra build adds to the housing stock - so let's forget the rubbish about building 'affordable' homes. There could be plenty of them, if only we could get the existing owners to shift out and into something nice and new. And they would if such housing existed. The answer is in town planning.
About 60% of res bank lending is to existing home owners, and not for investment, three times as much as first home buyers. (Reserve Bank.) Doesn't say if the are trading up, down or just changing. Still nearly $4bill a month so a whole lot of buying going on.
Probably a decent number will be moving into retirement villages. And those on this site have a handle on those numbers, with a couple of operators indicating increases in enquiries and sales.
Even leaving retirement village units aside, developers are going to be more interested in upmarket builds rather than the likes of Kiwibuild which are limited on several fronts.
Maybe this is why
https://www.zerohedge.com/markets/gl...-shocking-rate
Inflation is absolutely essential to get rid of debt.
If you thought they could not reverse what they are doing would it be reasonable to think it is unsustainable? or like a ponzi scheme if it requires more and more people taking on more and more debt to sustain the people who were in first.
If it is unsustainable what will be the eventual consequences? Where do I invest?
I still think getting rid of targeted inflation and having actual price stability as a goal is a good idea even if it brings the Ponzi scheme to an end.
The world central bankers appear to have taken a page from the John Law school of economics.
Dont be too harsh. "Attitude" is also people's lives. Not everyone asked for a population explosion, its a little unfair to begrudge society for wanting a bit of space for the dog and a few tomatoes on a leafy street if that is how they grew up. In my experience, apartments here are unlivable long term. Pokey, scant noise insulation, expensive and that view will be built out. Developer greed? Poor planning? Probably both. Old East European apartments are way more salubrious and genuinely nice places to stay. I suspect attitudes to commute-free apartments would change if the value/space/livability equation changed.
NZ is growing at a moderate rate, while Auckland is growing at a reasonably fast rate. Given population increases in other parts of the world, I'd say we're not really at a point where I'd call it a population explosion.
At the end of the day though, New Zealanders need to get used to apartment living if they want to live within or close to city centres. If they don't want to live in one, there's still plenty of land available throughout the country. People need to adapt.
Well said Zaphod. This is exactly what needs to happen. First home buyers should be looking at good quality, cheap to run apartments. Immigrants should have conditions placed on their Visa that they go to areas of NZ where their experience is needed. Like a medical doctor should go to Reefton if needed there, not Auckland to clog it up more . I just do not think like dibble in post 749 above and in fact think that attitude is the main reason for our silly house prices vs incomes.
This is stating the obvious, but the world changes, the older generation had to deal with other things that young people today don't.
People can either start today and work towards a house or sit around complaining and hope that someone else makes things easier for them.
I guess my view is that you can sit around complaining or work on ways to achieve what you want yourself (like buying a cheap property out of Auckland, doing it up, renting it out, etc). Property is all about getting on the ladder (love it or hate it), that's the way it is in a popular country like NZ. That everyone should be entitled to get on the ladder in Auckland just isn't possible.
Some generations do have it better than others - the generation that came after war, enjoyed socialised education and medicine, high owner-occupation rates and came before "user pays" and before the looming environmental crisis following unfettered consumption managed to hit a sweet spot?
True we do have to work with how things actually are - The existing tax and investment environment in NZ. However reform is always possible and one person's "complaining" is another person's seeking ways to reform and improve...
It does not mean that it was inevitable that NZ housing would be become so expensive for our income levels. It was never inevitable that investor housing would become the de facto pension scheme for so many - making it more difficult to get that toe-hold on "the owner-occupier ladder."
Herald reports today (behind paywall) that NZ is in a townhouse and apartment building boom in Auckland as this has now become the favoured for young buyers.
This comment sums it up: "We've created a situation where people want to get into a new house or apartment and they don't want to have any maintenance and they want double glazing and insulation - they want the best of everything," he said.
So your baby boomer argument may be a bit off the mark. FYI, my first home was in an apartment building some 35 years ago and it worked well for me back then.
There may be a boom, but until there are crews on the ground it is just a boom in approvals. I do think terrace and townhouse developments will do OK, but large apartment developments not so much. The latter provide mostly small less expensive places, especially as rentals, but will be cancelled if too difficult to sell off the plans.
Couple of years back Colliers reported that 49 consented apartment developments in Auckland were cancelled, for various reasons.
Getting a toe-hold for a first home buyer in the lowest quartile of the Auckland housing market would probably see little left over for renovation or maintenance? Plus with both people in a couple working long hours, just how much time would there be for work around the house? Especially with wood burners being phased out owing to trying to preserve the ravaged environment, surely double glazing and insulation are basic necessities? Also the average age of the first home buyer has been creeping up as the deposit needed increases at a rate faster than the increase in incomes.
I don't see how it negates my boomer point.
It is difficult for FHB to get their deposit together but servicing the mortgage is not that hard and certainly no more difficult than in the past.
This is copied from an article written by Ashley Church on One Roof on 29 August this year:
“There’s the fact that it actually costs less to service a mortgage, today, than it did in the mid-80s when the cost reached an eye-watering 52 percent of average household income – the highest level it has reached in the modern era. Today it sits at around 37 percent of the average household income despite the fact that median house prices have increased dramatically, which means that there is still significant capacity to service additional house price growth within the average household budget.”
True, although raising the deposit is expensive, It is getting more affordable to service a mortgage especially with interest rates dropping like a stone. However job security for younger people especially is less certain as the Covid protections are lifted? I guess in its own way the government is shifting wealth from (older) deposit-holders to (younger) borrowers and (wealthier and older) real estate owners.
Is the Green's "Wealth Tax" announced by Shaw not just another swipe at a variant of this sort of taxing ?
Probably equally unworkable as well .. ;)
Yes it is another swipe at a tax, but even more unworkable. Envisage an army of govt. inspectors, accompanied by art appraisers, antique valuers, real estate valuers, investment consultants and a car dealer arriving on your doorstep once a year to complete the annual valuation.
Poll choice - Goff is just an idiot
Suppose nearly 10 years on that’s still a good choice
Taxed on your income from personal effort....and all you want to do is try to feed your family and get some shelter.Yet the government grabs a chunk before you see it! Who would come up with such a scheme? After all the basic costs of food, shelter and clothing are necessary for my being able to present myself to earn the wage. Why be taxed on what it costs me to be able to work in the first place?
Yet the wealthy person can accumulate art and sell it for thousands more and all tax free...what a crazy world eh?
Would there be a threshold? Wouldnt art be valued for insurance and buildings only need to be valued every now and again (as with rates valuations) unless objected too?
It would be better to have a cgt than a wealth tax I agree, but look at the block from vested interests in that front too.
Actually - its not that difficult. Anything below 50k is not considered, and most of the bigger ticket items are valued anyway.
Real estate: For anything property related we have a GV, no additional work / valuation required.
Cars: If I believe TRA, than ways above 95% of all cars must be worth less than 50K ... i.e. no valuation required. I am sure the reminder (creme of the creme) is insured, i.e. just take the insurance value. No additional work at all.
Antiques / Art ... again - it would be quite easy to just take the agreed insurance value. I doubt there is much stuff above 50k around which is not insured. No additional work required.
Companies ... might be an issues, but than - why not go for the NTA in the balance sheet they need to file anyway. No additional work required.
While more taxes are clearly never popular - and the geese who might get plugged are already intensely hissing .... the country clearly needs a wider tax base to pay for superannuation and health for an aging population, for improved infrastructure and for educating the generation (our grandchildren) who needs to pay anyway the lions share of our super, health and the accumulated Covid cost.
The Rich are getting richer in NZ as well as everywhere, while the poor are getting poorer. A wealth tax would hit the people who benefited most from the recent crisis. I think this sounds fair enough.
I don't. The big problem is those who are asset rich - cash poor, which describes a huge percentage of retirees in our bigger cities. I know it can be deferred -- which makes it simply a return to the death taxes we used to have and dumped in the early 90s. The thing that follows would obviously be a return to gift duties, or it won't work. Both death duties and gift duties were horrible taxes. I'm sure you recall the dodgy nonsense that went with those taxes. No doubt you also recall the legitimate gifting programs used to avoid death duties. They would re-emerge on day one.
As far as limits on asset values go (individual items at 50k and the proposed total of 1 million), the levels applied on introduction of a wealth tax can be altered at the drop of a hat. Naturally they will be kept low to introduce such a scheme - but a future govt. only requires the stroke of a pen to change it.
Not many countries have such with wealth taxes and the associated gift and death duties, mainly because they are an administrative nightmare.
Couldn't agree less. We have to have some sort of tax or taxes. NZ GST system is extremely effective and easy to administer. Income tax is a necessary evil, and although we all have different views on the rates and progressions, it's relatively simple to apply and administer.
I am not sure that income tax is particular easy to apply and administer as the court cases, accountants fees and laws as to what constitutes income, dividends, profits etc attest to.
Why couldn’t capital transfer taxes (death and gift) be the necessary evil? We have to agree to differ on this.
People are taxed twice before they just obtain the necessities for life - first by way of PAYE deducted from wages and then by way of GST on food and goods. It is highly regressive. Forget about a flat tax - the NZ system has a regressive system with those with the most gains (both capital and income) ending up paying the smallest percentage in tax.
Nothing wrong with having different views and a good discussion on taxes.
What is a given is that we will need to increase the tax base over the coming decades ... as indicated health costs, super costs, costs to deal with climate change (either try to stem it or alternatively pay for the damage) all will go up. Substantially.
Good on the Greens for being the only party which at least made a proposal how to broaden the tax base ... basically all other parties pretend there is no problem. I am sure there are other ways to solve this problem, but putting the head into the sand will not cut it.
If you don't like the wealth tax - which other taxes would you like to see introduced or increased instead?
A GST increase captures the black and grey economies so produces more revenue than projections based on the legit books.
There is also the option to reduce expenditure. Management mantra - there is 30% waste in every process. I have certainly worked in and alongside jobs just like that. And that's not counting the useless or failed projects and initiatives.
Study up Laffer economics, specifically the Laffer curve, and you'll find it's indisputable there are two levels of tax, one high and one low, that will produce the same result. In simple terms lowering the tax rate can often produce as much or more revenue than raising it. If too low obviously it will not provide sufficient revenue to run Govt; but if too high it won't either because of disincentives, driving transactions to the black market, under the counter trading etc, or worse still - lack of trading. The trick is to find and apply the lowest effective rate.
There may be some truth with extreme tax and the “Laffer” curve but it depends on other factors and NZ is a long way off from prohibitive tax on the wealthy.....
However I can see why some would latch onto narratives such as Laffer and trickle-down...
https://qz.com/895785/laffer-curve-e...d-reaganomics/
Almost everything Republicans get wrong about the economy started with a cocktail napkin in 1974
Laffer made up his curve in a bar. There is no conclusion on what point between the two extremes is best. His wisest moment is noting lower tax MUST be linked to increased productivity otherwise any drop in tax is pointless. There is scant evidence to prove giving tax breaks to the wealthy achieves commensurate productivity gains (net of inflation) let alone achieves an overall net benefit to society. Indeed skeptics might suggest is the whole Laffer thing is merely something to cling to to get your lobbyist buddies tax breaks. Look at the logic, do people suddenly work more when tax drops? Do they even have the option to do that? Did everyone you know go out and work harder when National dropped rates to 33%?
I am simply saying it's impossible to argue with the conclusion of the curve. Consider an increase in income tax rates to 99%. Result - no income for govt. because the economy would be driven to underground, or barter. At 1% - nobody would avoid either earning or declaring it. Absurd examples, but that does emphasize the logic. You are correct - logic does feature in my reasoning.
An additional point to consider for NZ conditions is that unlike the USA, NZ does not have a CGT. So the NZ version of the "Laffer Curve" always has a leaky valve to those investments that rely on capital gains for most of its return.
So tax cuts for the wealthier will tend to lead usually to increased investment, not into taxable income producing investment but mostly into investment producing tax-free capital gains.
Any total tax return effectiveness, if there is one, from the Laffer theory is significantly reduced in the NZ tax environment?
National tried reducing expenditure resulting in Labour inheriting many problems that should never have occurred.
GST increases may capture the black economy but has more effect on the lower paid.
A return to death duties would be one way to increase revenue and despite FP’ s abhorrence would be a good substitute for CGT.
The Nordic system of open tax paid availability would be interesting if introduced. Reputedly many wealthy people in NZ pay no tax at all which may be legitimate, but would certainly raise a few eyebrows if there names were freely available.
westerly
The comparison between NZ and Nordic countries is an interesting one. I put it to you that the big difference is the large proportion of people in NZ that either do not want to work or are unemployable. Until we fix that, any dream of a Nordic type social system is just that, a dream. A CGT or a wealth tax will not fix it. We need to fix attitudes first.
What if part of the solution "to fix attitudes" is to broaden the tax base to include those taxes (and maybe others you also dislike?) to encourage investment into taxable income producing and employment stimulating areas. You have already excluded that part of any solution?
Have you got links to the studies that conclude that NZ has higher proportion of people who do not wish to work or are "unemployable" compared with the various Nordic countries?
However I agree. NZ does need to look at the appropriate and relevant education and vocational training, underlying socio-economic causes, underlying taxation issues and other systemic issues behind any non-engagement in NZ society. It would be great to have actual policies that address these issues head-on instead of their coming to grief against the powerful block of vested interests?
If they have a comparative advantage in producing a particular product, yes it makes sense. If kiwifruit for example can be grown and harvested more efficiently overseas then it is a win-win for NZ consumers and the country concerned. NZ then could concentrate on industries and products for which it has a comparative advantage.
(Satire) So globalism was really about a race to the bottom for workers conditions and wage rates after all? All so those nasty capitalists could import desperate and poor labourers from desperate post-colonial countries and then enjoy their capital gains off the backs of downtrodden workers and inherit daddy's wealth tax free. (/satire) I tried to make it relevant to CGT.Quote:
Every increase in the minimum rate risks sending jobs overseas.
Bjauck you are making huge assumptions about my position on taxes. I am all for fair taxes to maintain a good and FAIR social system.
But in response to your question, no I do not have any links to "studies" on differences between Nordic countries and NZ. I have interests in both a Nordic country and in NZ and trust myself to see the difference, I don't need studies to tell me about it. And the typical Leftie response is that we need to increase wages to get people to work. While that is partly true because our benefits are very high and not much incentive to work, it is not true that the jobs available are all low paying. In my industry (fishing), we can no longer crew vessels with reliable good Kiwi workers. An 18 yo unqualified but hard worker, could get a job in our industry tomorrow if they'd want to go away for 6 weeks at a time. 6 weeks on and 6 weeks off and earn $35-50k a year for 6 months work. But no, going away for a weekend is beyond what they're prepared to do.
Agriculture and horticulture is in the same situation.
I've just come from a couple of weeks trip around the bottom of the South Island. I made a point of talking to pub, hotel and tourism business owners along the way. They are ALL complaining about the lack of reliable workers available and some were working much longer hours than they wanted themselves, because they can not get workers.
So I'm sorry to hear you need some studies to prove this to you. Open your eyes and have a look for yourself. The situation in NZ today is outrageous. Stop making excuses for it.
You had seemed to dismiss certain taxes from the outset. My apologies for getting that wrong.
Individual Personal experience is great and is necessary to stimulate discussion. It does however need independent and careful corroboration.
I guess we may have different preconceptions as to where the blame for various shortcomings in NZ lie. I guess the response to Coronavirus brings these differences to the forefront. I think both you and I do try to look for the real causes and not to rely on excuses for the sake of an easy time.
I do try to keep eyes open, but concede you sound like you have greater real life experience.
Tax records are private but to enlighten you on their methods this link makes interesting reading,
https://www.theguardian.com/world/20...ir-go-identity especially the link to IRD research
wage earners can't avoid tax ,PAYE takes care of that.
westerly