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View Poll Results: Should there be a Capital Gains Tax on Property

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  • No

    202 100.00%
  • Yes

    60 58.25%
  • Goff is just an idiot

    2,147,483,655 100.00%
  • Epic fail for Labour

    1,930 100.00%
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  1. #31
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    Quote Originally Posted by drew View Post
    rpcas im curious where you came up with this stuff? I've heard a lot of economic theories in my time but nothing quite like yours.
    Well I don't "come up with it" as such . Much of what I am saying here is based on the accounting identities and true realities of our monetary system. Obviously I learn it from books and online papers. Here are a couple of useful links:

    The balance sheet visualizer is accurate, lays everything out nicely and is fun to play around with: http://econviz.com/balance-sheet-visualizer.html
    This book is aimed is easy and fun to read, as well as somewhat shocking. It avoids complications and technical terms, but is still a must read: http://moslereconomics.com/2009/12/1...nocent-frauds/

    That will get you started!

  2. #32
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    Te Whetu all you comments i mostly agree with. The point i was simply making is that a constant rate of inflation can be dealt with. If we know its going to be say 5% or 10% then all prices can simply be indexed to the expected inflation rate. It would be a little problematic but Brazil has coped with high inflation for a very long time now. Thats not to say inflation is not harmful but when it fluctuates year on year is when it really makes a mess of things.

    Quote Originally Posted by Te Whetu View Post
    What form the property tax takes has different advantages/disadvantages, a CGT is less likely to drive off capital. But it's also harder to implement (and would need to be higher) than a FDR tax. I'm actually rather unconcerned which it is but we should really have I just feel we need something.
    The houses and land cant leave the additional capital required to build new houses certainly can leave or not come at all.


    Quote Originally Posted by Te Whetu View Post
    I'd argue this, but not now... and can certainly see some arguments which could be made on your side. What does history show us? I'm sure property taxes have been introduced and the impact recorded in other places in the world. Do you also say that a CGT would increase prices (I'm assuming not)?
    I think testing empirical evidence against impacts of a CGT on property prices is a very difficult task and studies always need to be discounted due to potential bias.

    I think you should base your opinion on basic economic reasoning on what impact a CGT is likely to have. Prices are only signals and are a function of supply and demand. Whenever a govt taxes something it is expected to reduce both demand and supply. Maybe check out duncan macgregors posts in the property section - he correctly points out how regulations, red tape and unreasonable costs being imposed on the building of houses that has caused the high prices in NZ.

    The basic problem in the housing market is there are not enough houses. There is no shortage of land in NZ either. During the last 10 years or so prices kept rising in the housing market. We had the most fertile conditions to create an oversupply of houses with low interest rates, rising GDP, general public confidence etc. Instead the only oversupply occurred in central city apartments because that was the only area in which the market could quickly and cost effectively create new housing units in response to price signals.

    So a CGT will reduce demand somewhat but people still need to live somewhere so the demand is a bit inelastic. The bigger concern is what a CGT will have on supply. Also it might make it more difficult to sell or rather people will be more reluctant to sell if they cannot pass on all of the cost to a buyer. Either way, supply will be restricted and costs will go up.

    I remember over a year ago reading an article by John Whitehead about how house prices were a problem and he blamed everybody from greedy mums and dads, property hoarders, the banks etc. Everyone was to blame except of course the govt. If you want to fix the housing market we need more houses - in that case we should be encouraging the speculators and high prices because thats the only way more houses will be built. If you try to force the prices down then, as is typical in the wonderful world of economics and counter intuitive unexpected consequences, you will end up with even higher prices.

  3. #33
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    Quote Originally Posted by rpcas View Post
    Yes, but whether or not that "money printing" results in inflation depends on whether the private sector goes on to spend. If for example the government "prints money" and gives it to beneficiaries who then go on to save it, then inflation won't be a problem.

    This is the situation NZ is in now. The private sector is de-leveraging, so big government deficits are not nearly as inflationary as they otherwise would be. Remember inflation of the sort we are talking about is caused by excessive spending.
    Nonsense. If the beneficiary puts the money in a bank then the bank will be paying interest to the beneficiary and will seek to onlend the deposited funds. In a fractional reserve banking system savings will exponentially grow the money supply. Inflation is not caused by spending alone - it is caused by spending of an increased quantity of money that finds its way into an economy.

    When the total quantity of money increases people will tend to spend more money. When more money gets spent on the same amount of goods and services being produced, prices will tend to rise. Thats inflation.

    Quote Originally Posted by rpcas View Post
    Yes, agreed. However the key point here is that the people that buy the Treasury securities (banks, insurance companies, funds etc) wouldn't be spending anyway. It is ridiculous to say that "Those that buy the treasury securities don't then use them to trade for goods and services" because they wouldn't anyway. Holding Treasuries instead of cash in no way alters these firms/savers propensity to spend, and therefore won't alter inflationary pressure.
    Wrong again rpcas - treasuries held by a bank will be treated by them as core capital and will allow them to increase their lending and hence the money supply will grow.

    If a non-bank institution or business or whatever holds a treasury note they can use that as security to borrow funds against. The treasury will likely end up in the hands of a lending institution and the money supply will most likely increase.

    Quote Originally Posted by rpcas View Post
    Agreed, but would China Central Bank be spending their dollars if they didn't hold securities? No, they would hold them in their reserve account at the RBNZ. Whether they hold the securities or not (if Treasuries weren't issued), and is not relevant to inflation, despite the differences in M1..
    In this example the RBNZ would likely use the funds deposited by a foreign central bank as part of its open market operations which is a more subtle way in carrying out monetary policy than adjusting interest rates and capital ratios. Those funds will very likely find themselves somehow sloshing through the NZ economy.


    Quote Originally Posted by rpcas View Post
    Government spending only crowds out private investment when the economy is almost or fully employing their resources (in which case more investment will lead to inflation). This is not currently the case in New Zealand, with 6% (?) unemployment and untold underemployment.
    No thats not right. Crowding out can occur in a specific sector it depends on what action the govt is going to take. It seems to me you are only looking at things in aggregate when oversupply and undersupply can occur at the same time in different areas of an economy.

    Quote Originally Posted by rpcas View Post
    On the other side of the spectrum, if the government doesn't net spend enough, then businesses sales won't increase fast enough, and the firms won't bother investing. Firms invest when they face increased sales/believe future prospects are better. If the economy isn't growing, then these firms won't invest.
    Well thats debatable. The govt is only able to spend money by taking it from the consumers through taxes. I prefer to look at it from a philosophical perspective - if the people at large want to spend less money in aggregate or in a particular sector (both of which can cause a recession) what right has a govt to take money from them forcibly and spend against their will?

  4. #34
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    Quote Originally Posted by drew View Post
    Nonsense. If the beneficiary puts the money in a bank then the bank will be paying interest to the beneficiary and will seek to onlend the deposited funds. In a fractional reserve banking system savings will exponentially grow the money supply.
    Banks are never reserve constrained - loans create deposits. Banks make loans and find the reserves later if need be (the RBNZ is the lender or last resort, and is obliged to lend). In NZ, there are no reserve ratio's, so there is nothing to stop lending regardless of how many reserves a bank has.

    Increased deposits at a bank does not increase their capability to make loans. The only requirement is the maximum equity to loan ratio.


    In this example the RBNZ would likely use the funds deposited by a foreign central bank as part of its open market operations which is a more subtle way in carrying out monetary policy than adjusting interest rates and capital ratios. Those funds will very likely find themselves somehow sloshing through the NZ economy.
    The Reserve Bank is never ever short of NZD's, and all of its operations involve inputing data on a computer. Open market operations involves the RBNZ debiting or crediting the commercial banks reserve account, and providing or receiving a Treasury security in return. The RBNZ doesn't get the "money" to do this from anywhere. It just types the numbers into a computer.

    You seem to have the idea that when a commercial bank or the RBNZ has greater deposits or reserves respectively, they can lend more and "money" will end up "sloshing around". This is categorically false. Greater deposits aren't required for "money to slosh around".

    No thats not right. Crowding out can occur in a specific sector it depends on what action the govt is going to take. It seems to me you are only looking at things in aggregate when oversupply and undersupply can occur at the same time in different areas of an economy.
    Alright. If the government spends inappropriately, with too much in one area and too little in another, I suppose that could happen.

    Well thats debatable. The govt is only able to spend money by taking it from the consumers through taxes. I prefer to look at it from a philosophical perspective - if the people at large want to spend less money in aggregate or in a particular sector (both of which can cause a recession) what right has a govt to take money from them forcibly and spend against their will?
    I hope your kidding because that comment proves you don't understand the topic.

  5. #35
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    Absolute - good ideas but extremely complicated so wont work.

    CGT on everything taxed at marginal rates, but reduce marginal rates (incl company and trust) to 20% (or slowly reduce to 20% as the CGT take increases).

    I am a right wing voter, but would vote for a CGT but dont trust Labour to implement it properly or to give the individual tax rates a corresponding cut. If national were to do and make it fiscally neutral (like the GST increase was), then it would be great.
    Last edited by CJ; 09-07-2011 at 12:03 PM.
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  6. #36
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    CJ they only need to use the Australian system very simple
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  7. #37
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    Increased deposits at a bank does not increase their capability to make loans. The only requirement is the maximum equity to loan ratio.
    I wouldn't dismiss the capital requirement issue quite so lightly.

    The current trend is to tighten these ratios which could well constrain the ability of some banks to increase their lending. Kiwibank would be in this category, IMO, as NZ Post (the govt) wouldn't welcome - or be able to afford? - the call for increased capital to support increased lending, regardless of how easy or difficult it may be to raise the deposits to fund them. I can see the new Heartland bank having the same problem down the track.

    All a bit off the subject of a capital gains tax. For what it's worth, I'd like to see a comprehensive tax along the lines of the Aussie one as soon as possible to take some pressure off a system which relies overly much on taxing income from earned income/company profits.

  8. #38
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    Quote Originally Posted by CJ View Post
    Absolute - good ideas but extremely complicated so wont work.

    CGT on everything taxed at marginal rates, but reduce marginal rates (incl company and trust) to 20% (or slowly reduce to 20% as the CGT take increases).
    Then it is not a CGT. That is just income tax. Exactly as it stands now for those dealing in pproperty - or anything else.

  9. #39
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    Quote Originally Posted by macduffy View Post
    I wouldn't dismiss the capital requirement issue quite so lightly.

    The current trend is to tighten these ratios which could well constrain the ability of some banks to increase their lending. Kiwibank would be in this category, IMO, as NZ Post (the govt) wouldn't welcome - or be able to afford? - the call for increased capital to support increased lending, regardless of how easy or difficult it may be to raise the deposits to fund them. I can see the new Heartland bank having the same problem down the track.

    All a bit off the subject of a capital gains tax. For what it's worth, I'd like to see a comprehensive tax along the lines of the Aussie one as soon as possible to take some pressure off a system which relies overly much on taxing income from earned income/company profits.
    I'd like to see the Aussie self funded retiree scheme introduced here.

  10. #40
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    Quote Originally Posted by janner View Post
    I am with CJ on this one.

    No income tax. Low company tax ( if any ). Retain excise taxes ( fags booze etc )

    GST with no claw back.. Thus relief from never ending paper work..

    What about introducing a Tobin Tax ??
    There is very little paperwork with GST. What have you bought, what have you sold. What is the difference, and what is the GST on that amount? It's minutes rather than hours for any businress operating the right system. By clawback I presume you mean no deduction for input. If so it would not work because gthe tax would become cumulative. Some items would be marked up hundreds of % in tax alone. It can only work if it falls to the end user. It's actually a great system whether you agree with consumption tax or not, probably the best in the world. - let's hope nobody ever alters the basic structure of it e.g. introducing exemptions.

  11. #41
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    Fungus Pudding there are and always have been exemptions Read the GST ACT bank fees for one are GST exempt. The reason for very few exemptions has gone with the adoption of computers. That was one of the reasons the increase to 15% was actually possible try working out the 15%GST without A computer for a gst return it is not simple like it is for 10% & 12.5%. It could even be included in the products barcode as to the products GST stutus
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  12. #42
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    Quote Originally Posted by POSSUM THE CAT View Post
    Fungus Pudding there are and always have been exemptions Read the GST ACT bank fees for one are GST exempt. The reason for very few exemptions has gone with the adoption of computers. That was one of the reasons the increase to 15% was actually possible try working out the 15%GST without A computer for a gst return it is not simple like it is for 10% & 12.5%. It could even be included in the products barcode as to the products GST stutus
    Yes. Financial transactions, res. rents have always been exempt, which was easy ad necessary. physical - a pure service. There are special reasons why finance never attracts consumption tax in any system and it's all about interest rates. I am not aware of any exempt countries. Consider the likes of fruit and vegetables in a mixed business. Do they go out the door as they same in, or in a salad roll? Over the checkout counter, or through the delicatessen as a salad. As it is it is very hard to fiddle. Incidentally, removing GST from perishables as Labour are on about will not reduce the retail price, just as it could not be added when introduced. Nothing responds as rapidly to supply and demand. It is always priced to sell before it has to be thrown out; that's the only criterion. Supermarkets adjust prices daily or even through the day, and the mark-up range can be massive. They won't bother reducing below what they can safely sell out at. And you certainly do not need a computer to calculate GST whatever the percentage. Anyone that can't do it in their heads can do it on a two dollar calcukator. GST content 1s 3/23rds or 13.04%. No more difficult than it was at 12.5% and content was 1/9 or 11.11 % Every review ever done on GST has commended the fact there are no exemptions. That includes various studies done by the Labour party hypocrites.

  13. #43
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    Quote Originally Posted by fungus pudding View Post
    Then it is not a CGT. That is just income tax. Exactly as it stands now for those dealing in pproperty - or anything else.
    yes. Income tax but on capital gains. Provided you factor in inflation somehow, I dont see why income gains should be taxable but capital gains shouldn't be. Anything that increases wealth.
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  14. #44
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    I think some form of capital gains tax would be fair - particularly if it also resulted in lower income taxes* (I think a flat tax across any form of income and because I'm an egalitarian prick would even consider taxing the family home too - albeit political ramifications would almost certainly preclude this). John Key has suggested CG taxes are complex which is partly true but so is the tax system in its entirety so suspect he is pandering here. I don't like the wealth tax approach and think cashflow is too important a consideration in the investment value mix so taxes should be incurred at sale time, nothwithstanding the consequences on how this impacts asset sale decisions.

    The question of inflation is complex as many people suggest capital gains should be cupped by the rate of inflation (or even the risk free rate of return). But by the same note, income taxes are often allowed to creep up the progressive scale so are not always effectively indexed against inflation. What happens in one should happen in the other.

    * Suspect investors have something to gain from lower income taxes anyway as a share of income increases will find their way into company coffers.

  15. #45
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    From what I've read it sounds like fiddling with numbers that ultimately will not end up making much difference at all to most of us. Much like the great tax cuts. Give with one hand and take with the other.

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