Capital Gains Tax

[Bjauck]

[QUOTE=Aaron In an effort to try and balance my views, I read the argument against a capital gains tax by Steven Joyce in the herald (link no good without a subscription.)

[URL]https://www.nzherald.co.nz/business/why-a-capital-gains-tax-is-pointless-steven-joyce/7OYPSFYH65D3PH4FC2LZDZ5GOU/[/URL]

Capital Gains tax is pointless says Steven because

-Try to tell New Zealanders the Government will take a cut on the sale of their family home, which they’ve paid for via their (already heavily taxed) wages and salaries, and they’ll show you the door. Neither Labour or National have gone anywhere near including the family home. CGT in Oz and UK do not include the family home. Joyce is using a scare tactic?

-Same for the family bach This is from old school NZ when even the middle class kiwis had a beach Bach. Fewer kiwis can afford these now.

-Same for the family farm. Family Farms are businesses. If businesses are such that most of the return is in the form of capital gains, surely there needs to be reform.

-Same for small business owners, Ditto.

Is he concerned that people who earn income already pay tax a second time when they pay for goods and services? Whereas capital gains can be reinvested to earn more capital gains all without being subsequently taxed. While those relying on income to buy their first assets can be stuck in a GST/Income tax fuelled poverty trap.

He suggests all that is left to tax is share traders or on bank deposits. Someone should tell Steven bank deposits do not have capital gains unlike bonds but I guess his argument was that no one wants to pay any tax and adding bank deposits drags in a much larger group. Not all owners of shares are traders as opposed to investors. Traders are already taxed on their total return (including capital gains). Bank deposits do not have capital gains. The Financial arrangement regime already captures capital gains on bonds as taxable anyway. Foreign shareholders are subject to FIF which currently can tax unrealised capital gains

However what he writes does underline how owners of real estate do currently have a preferred place in NZ’s tax system, which many regard as a right. Owner occupiers are indeed neither taxable as to income or capital gain.

The real argument he says is

-is the economic one. And that can be summed up simply as you can’t tax your way to prosperity. The more you tax, the more you stifle economic activity. A state that keeps getting bigger simply drains away economic activity in the productive parts of the economy However that is exactly what happens now with profits and income shouldering the tax burden, whereas real estate returns get off lightly. Tax is a necessity for an organised society with modern infrastructure able to cater completely for a healthy and educated population and economic growth.

I guess we should look globally at the most wealthy and successful countries across the globe and change our tax policies accordingly, although I believe NZ is an outlier, last time I looked NZ and a bunch of tax haven countries were the only countries without a capital gains tax and only 3 out of the 38 OECD countries do not have one. Not sure what that says, possibly the rest of the world headed in the wrong direction, thank goodness for people like Steven, Chris and David.It is importantly to look at the whole tax system to see where the burden lies. - CGT, GST, Inheritance, stamp duties, corporate tax, income tax, wealth, tariffs etc.

You might be able to tax your way out of a structural deficit though, although I agree cutting wasteful spending is a better first step.
I guess Steven's strongest argument is that he is wealthy and sorted. The only way this could change is if govt redistributes wealth, that or a total breakdown in society in which we all become proper libertarians i.e survival of the fittest and that is unlikely at this stage.
MPs register of interests include many with ownership of multiple real estate properties

So the arguments that he puts forward are that asset owners do not want to contribute to society and that the workers and labour should continue to do the heavy lifting and despite global evidence to the contrary he still is tied to the small tax small govt mantra, which I appreciate is appealing if you are "sorted" We need to encourage asset ownership of the productive kind. The high tech companies with a well paid productive workforce need to remain in NZ.

One thing I can agree on was this quote.

"There are many words you can use to describe this Reserve Bank Governor, but slow and steady is not two of them.”

[Panda-NZ-]

Two interesting and relatively politically saleable ways to save money on super.

If super is eventually income tested, include realised capital gains in that.
Freeze super indexation for two or more years (could save more than even raising the age).

Free advice for the penny pinchers.

[xafalcon]

And yet, all those countries we like to compare ourselves with, they almost always have a higher government debt to GDP despite having capital gains taxes

Almost all of those countries have considerably longer histories that we do. They have had centuries longer than NZ to build their public infrastructure. I've driven down roads that were built 2000 years ago, crossed bridges built 500 years ago......

And many of those countries have far greater social inequities than we do, and far greater personal financial disparities than we do

So by looking at other countries and suggesting that we adopt yet more of their failed policies, is simply making unnecessary excuses for the situation we (incorrectly) think we are in

To be lectured by IMF is simply patronising. To accept anything they suggest is foolish - those turkeys lent money to how many failed economies and dictatorships?

Yeah, nah. A capital gains tax will simply be an additional burden on an already crazy-high cost country. It will simply lead to capital flight and more talented young people leaving for greener pastures. Until NZ has an unsustainable population pyramid and we truly leave the 1st world

The solution is correcting the crazy-high costs of everything. Quit making excuses why things "have" to be more expensive here, they don't, and many should be cheaper (dairy, meat, vegetables, fruit, wool, wood etc. Start with the primary goods - food, fuel, building materials, bank margins etc. Services to follow.

Concurrently, the government starts borrowing (printing money) to build infrastructure. Printing money is how other developed countries got where they did, we can too. The idea we need to "pay it back" is ridiculous. Austerity is a foolish game with no winners

Finally the government needs to modify monetary policy so that interest rates aren't the sole method of control. That is simply dumb - as our poorly performing economy (vs others) currently testifies

[Bjauck]

Apart from the USA, which countries with “2000 year old roads” currently have greater wealth and economic disparities than NZ ? Have those old Roman roads been resealed and widened? What about railways, power, water, sewerage , lighting, internet, schools, hospitals - They are all more recent. For example, Britain’s population was 13 million in 1813. Now it is about 65 million. That is a lot more people needing modern usable infrastructure.

Social inequalities in NZ are actually worse than in the USA and UK. So the social and economic costs of poverty are worse here.
https://theconversation.com/oecd-com...-change-239306

Another pesky international body that criticises the Laissez-faire “trickle down” dogma?

Growing inequality from 1985 to 2005 cost New Zealand 13 percent economic growth by 2010 - OECD
https://berl.co.nz/our-mahi/inequality-and-new-zealand