Capital Gains Tax

[Bjauck]

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?