Quote Originally Posted by fungus pudding View Post
Their real capital gain has hardly been minimal. You know as well as I do that it would be political suicide to tax the prime residence - that's the only reason to exclude it. You also know that home owners have a massive advantage over those who rent over time. Of course they face costs while they have the tax free benefit of a roof over their heads, while landlords receive an income, but are taxed on their profits.
A CGT that is poorly designed is no good to anyone. Properly designed and it would be hard to argue against, provided the revenue was used to lower income tax - the worst tax of all.
Pretty disingenuous of you to constantly say that private dwellings should be subject to CGT when you realise it's not politically possible, and for good reason. Here's a discussion on the benefits of home ownership vs renting.

https://www.nzherald.co.nz/personal-...ectid=12019370

The point being made is that if a renter used the extra cash surplus each week to invest elsewhere, like in the stockmarket, they'd probably come out at the end in a better position than if they'd paid interest and capital, and have flexibility in their living arrangements the whole time. I think many of us follow the old thinking and buy a home if we can, because we're not especially good at saving. That's what I did, anyway. It doesn't mean that I made a massive capital gain on any property, I'm sure I didn't, unless money earned elsewhere paid it off quickly, saving interest. But equally I could have invested that surplus elsewhere. Inflation, interest, rates, insurance, upkeep and renovation expenses would surely take away most of the gains, without even adding in your own time upkeeping the property, which also has a value.

The example above doesn't look at it from the rentier's side, but on average I would expect most rentiers take a long time to get to cashflow positive situations, so they don't pay a lot of income tax as you imply, unless they are also paying off capital in their costs. There would be no need in most cycles, as inflation will pay it off. If, in the end, tenants have covered all ongoing costs from the bank and external costs associated with the property, there would be the difference between the original capital and the current capital value, less an allowance for inflation, which would be the true profit from the whole exercise, if any.

However the interesting point is that the risk of the borrowed money was held by the property as security, and covered ultimately by the tenant(s). If the rentier paid off no effective capital over the duration, their profit in this case is on a paper transaction that involved no real expense on their part to start with (leveraged against other property). So maybe Dr Cullen's idea of the CGT rate being the marginal rate, wasn't such a crazy idea.