View Poll Results: Should there be a Capital Gains Tax on Property
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No
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Yes
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Goff is just an idiot
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Epic fail for Labour
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Originally Posted by Lizard
One issue with CGT as a form of revenue is that it tends to dry up just when the economy is at its weakest, thereby dealing a double blow to govt accounts and capacity to stimulate.
The same could be said for GST and income tax. Maybe not losses but much reduced.
Capital gains tax would not be about going after anyone in particular as Shasta suggests above. I just think that an earned dollar of income can sometimes take a lot more effort than a capital gain so why is it that we are happy to tax income but not capital gains.
Last edited by Aaron; 13-04-2011 at 09:44 AM.
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Originally Posted by Aaron
The same could be said for GST and income tax. Maybe not losses but much reduced.
Capital gains tax would not be about going after anyone in particular as Shasta suggests above. I just think that an earned dollar of income can sometimes take a lot more effort than a capital gain so why is it that we are happy to tax income but not capital gains.
GST and income tax reduce in a downturn, but maybe 10% would be extreme. Corporate tax can fall more dramatically along with profits. But CGT seems likely to dry up entirely AND erode income tax when losses are used as offset.
In theory, I actually like the fair dividend rate method used in FIF. FIF is only complicated because it doesn't apply across the board and there are the options for using CV.
To use FDR for all assets would just require a quick totting up of assets at the start of the year and then applying a low-level tax based on that amount. Make interest costs and rates tax-deductable... this should pretty much offset all the FDR on most properties. The great thing about FDR is that those who can achieve a better return on assets get rewarded for it and those who want to tie money up in non-returning assets have to pay the cost. There are very few loopholes and minimal administration. Money goes where it works hardest and should increase asset base and therefore tax-take over time. Of course, I know you are all thinking the obvious - the reality is that finding a fair and accurate way to set value across all assets is not simple, let alone getting people to declare all their assets. However, we seem to put up with the rating system and that can be fairly arbitrary in places.
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Junior Member
Once you go right back to the basics and think about the purpose of a tax, you start to get a better idea of which taxes are well directed. The purpose of a tax, despite common belief, is NOT to fund government spending, but rather to create demand for the currency and to regulate aggregate demand (restrict inflation). Quite clearly, the government actually believes they must tax or borrow in order to fund spending (this is not the case for a sovereign government that issues its own non convertible currency, with a floating exchange rate), therefore they enact tax policy with the idea that the more tax revenue, the better. This is all misguided.
Since the purpose of the tax is not to raise revenue, how taxes are directed should depend mostly on the side effects of the tax. I believe income taxes discourage additional work, unfairly take away from the people that produce NZ's real output, and do not meet the purpose of a tax (like land taxes and GST do).
EDIT: Oh, and another problem with income taxes.... there are loopholes, and they require a lot of work to keep track of. The sad part of all this is that the income taxes hurt the productive capacity of NZ. How much time is spent keeping track of income taxes that could be spent elsewhere? How many bright students go into tax accounting/law, an industry that adds absolutely nothing to the real standard of living? I have read of one former hedge fund manager and fiscal/monetary operations expert that estimates this loss of productivity from income taxes could be between 10-15% of GDP.
Originally Posted by lou
Taxes aren't fair at the moment. We have a progressive tax system where higher income earns pay proportionately more. A land tax would fair in the sense that it is a proportionate tax, however would be less equitable to lower income earners.
I think it would be more equitable for lower income earners. The current system, whereby ordinary workers automatically get dollars deducted from their wages while property speculators and those that can afford tax lawyers/accountants get away free (well, relatively) is not fair.
A land tax would be perfect. Like you said, it could be based on value, and I think it could be perhaps slightly progressive. For example, 4% per annum for the first 500K of the houses value, 5% for 500-1M, 6% for 1M+.
The biggest hurdle or moving to a tax system like this is it will change the land values around the country meaning thousands of people will be either adversely or positively affected for no reason and that would not be fair.
Agreed, though it could be phased in over time (and income taxes phased out) to reduce this effect.
Option two they own land with no income. They are not making efficient use of the land. It should be sold so that the most efficient use of the land can be found.
Agreed.
Last edited by rpcas; 14-04-2011 at 09:17 PM.
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Originally Posted by rpcas
Once you go right back to the basics and think about the purpose of a tax, you start to get a better idea of which taxes are well directed. The purpose of a tax, despite common belief, is NOT to fund government spending, but rather to create demand for the currency and to regulate aggregate demand (restrict inflation). Quite clearly, the government actually believes they must tax or borrow in order to fund spending (this is not the case for a sovereign government that issues its own non convertible currency, with a floating exchange rate), therefore they enact tax policy with the idea that the more tax revenue, the better. This is all misguided.
interesting. Can I just clarify. Taxes aren't there to fund government spending because the government could just print the money. Therefore taxes are for another purpose????
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Junior Member
Originally Posted by CJ
interesting. Can I just clarify. Taxes aren't there to fund government spending because the government could just print the money. Therefore taxes are for another purpose????
Yes, though I prefer not to use the term "money printing", as there is plenty of room for confusion because of its many different informal meanings.
Essentially, every time the government spends they are "money printing", and every time they tax, they are "destroying money". If the government spends $100 today on welfare benefits, all that will happen is the Treasury's account at the RBNZ will be debited by $100, and the recipients commercial bank's reserve account at the RNBZ will be credited $100 (and so will the recipients account at the commercial bank). If the government then decided to tax the beneficiary $100, the exact reverse process would occur.
Looking at this process, it becomes quite obvious that there is no operational limit to the government's (Treasury + RBNZ) ability to credit and debit numbers on a computer - meaning that there is no operational constraint on government spending (There is perhaps a political constraint on government spending though. I am fairly sure that the USA has a law prohibiting the Treasury's account at the Fed from going into overdraft [a stupid law made by misguided politicians]. I do not know for sure if there is a similar law in NZ).It is also important to note that government spending logically must come BEFORE taxes and the issue of securities (contrary to popular belief) - if the government didn't spend before it required taxes to be paid, then citizens could not obtain the dollars necessary to pay their taxes.
Moving on, the purpose of taxes is to create demand for the currency (the obligation to pay the government NZ dollars creates demand for those dollars, essentially enforcing their use), and to regulate aggregate demand (to ensure the private sectors "spending power" does not outstrip the productive capacity of the economy) in order to maintain price stability. Don't get me wrong - taxes are absolutely vital, just not for the commonly thought reason.
Note - I think it is worth mentioning here that the USA, UK, Japan, Australia, and NZ governments are all currency issuers, whereas Germany, France, Greece, Portugal, California, Christchurch City Council etc are all currency users. The differences between currency users and issuers is HUGE, and any comparison of the sort that John Key regularly makes is totally inapplicable.
Last edited by rpcas; 15-04-2011 at 02:41 PM.
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Junior Member
Originally Posted by Lizard
One issue with CGT as a form of revenue is that it tends to dry up just when the economy is at its weakest, thereby dealing a double blow to govt accounts and capacity to stimulate.
Sorry, but that is totally incorrect.
The sovereign government that issues its own non convertible currency never has nor doesn't have dollars, and ALWAYS has the ability to spend/stimulate. Government spending is NOT funded by taxation or the issue of securities, and the extent to which the government collects taxes does not in any way limit the governments capacity to spend (despite politicians and commentators telling you otherwise). Think of it this way - how can the NZ government "run out" of dollars, when they create them out of thin air on a spreadsheet?
The only issues with a capital gains tax are there is normally plenty of loopholes, and other taxes are potentially more efficient.
Last edited by rpcas; 15-04-2011 at 03:11 PM.
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Junior Member
Originally Posted by rpcas
Sorry, but that is totally incorrect.
The sovereign government that issues its own non convertible currency never has nor doesn't have dollars, and ALWAYS has the ability to spend/stimulate. Government spending is NOT funded by taxation or the issue of securities, and the extent to which the government collects taxes does not in any way limit the governments capacity to spend (despite politicians and commentators telling you otherwise).
That begs the question then why do we pay taxes. The govt does indeed issue securities to raise funds to spend.
The better way to look at it is any type of spending by the govt is taxation. When the govt borrows to spend its just a delayed form of taxation as the taxpayer not the govt has to repay the debt.
I think what you mean is the govt can print money. But I dont think the RBNZ would be too keen on doing that. The end game of that scenario is inflation which is also a form of taxation, the one you dont get to vote for.
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Originally Posted by drew
That begs the question then why do we pay taxes.
No it doesn't. It raises the question, but it's a simple, if inaccurate, statement.
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Junior Member
Originally Posted by fungus pudding
No it doesn't. It raises the question, but it's a simple, if inaccurate, statement.
Oh im sorry i didnt realise the internet spelling police were patrolling these forums.
In any case it is not an inaccurate statement. The statement by rpcas was a circular argument saying taxes do not matter the proof being it has no impact on govt spending. Which is a bunch of nonsense.
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Originally Posted by drew
Oh im sorry i didnt realise the internet spelling police were patrolling these forums.
In any case it is not an inaccurate statement. The statement by rpcas was a circular argument saying taxes do not matter the proof being it has no impact on govt spending. Which is a bunch of nonsense.
It is rcpas' statement that is inaccurate, which is what I wrote, but there is nothing circular about it. And I'm not sure what any of this has to do with spelling.
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