Bernard : As I have been banging on about for yonks , here at " interest.co.nz " , we need to undo pretty much everything Cullen did 1999-2008 . Put all the tax settings back where they were . And start again from that point .

Call it how it is , Cullen screwed up a workable system to suit his ideologies ( Socialism ) , and his master's ( Helen Clark ) desire to rule the country for-ever . Hellen dreamed of a German style parliament where small parties rotated around a central large permanent socialist hub ( Labour ! ) .

Ergo they rooted the tax system and the country's fiscal balance purely for heir own ends .

You are harsh with JK & Wild Bill , Bernard , but nary a skerrick of condemnation for the Clark & Cullen Labour government which so badly failed us , 'cos it focused solely on them , and their future .

Roger - too true. It was the CCCP (Clark and Cullen Communist Party) that created all this mess. What a complete incompetent muppet Cullen was. During his reign, we had the best terms of trade and growth in our trading partners for decades and he blew it all. That will teach us for giving the reigns to someone who had never done a days work in the real world.
If we unwound all of Labour's changes to taxation, social welfare and their massive increase in non-productive public expendtiture we would be ok. Not perfect, but hey with a few minor changes we could have been coming out of the recession in good form. As it is we are an "Easter Egg" ecomony. We are completely hollow in the middle. Over the Communist years, our productive sector and productive people fled to Australia and boosted their GDP and tax coffers.
In some way I wish the CCCP had won the last election. Cullen would have completely lost it and would have to live with the mess he made.
Our ecomony will eventually face the meltdown to restore the balance (change is much easily when people have no options). However, I would prefer it to be a quick death, rather than a slow death by a 1,000 cuts. Its like taking a sticky paster off.
The sooner we crash, the sooner we can purge our society. Bring it on...

@from the sidelines. CCCP, LOL. Brilliant!!

From the sidelines - "The sooner we crash, the sooner we can purge our society. Bring it on"¦"

Hmm, the word purge sounds like something Mao, Hitler or Stalin would say. Labour and National are so close on basic policy you can barely separate them. Neither are socialist let alone communist. Even the Greens are a party of the centre. Talk of hoping for crashes in order to purge society sounds a bit dogmatic and totalitarian.

I am defending JK's tax policies for now and reserve my final judgement until the budget.
The last thing i want is a tax to "discourage" or "encourage" any types of investment, the land tax is such that. JK's proposals will definitely remove any tax advantages that property has, so all investments will have a level playing field, is that what we all wanted?
Anyway, a land tax is like the "window tax" that coined the term "daylight robbery".

I would, however, like WFF removed, keep GST at current level, and cut government spending to make up the shortfall from reducing personal and company tax rates.

@Hard worker: What we have right now is a tax system that does just that ie encourages housing gambling and dis-advantages real businesses....ie they lack investment..so we need a level playing field. A shocking statistic, in the 1980s 25% of debt was mortgage debt...now its over 90% so now businesses are squeezed out of the borrowing market because bankers want to lend to "safe" property....and wont lend for investment....if we want to make NZ richer its via the real economy and not paper speculation or to me gambling on an asset value increase and not on an actual income from that capital...

You may not want "a tax to "discourage" or "encourage" any types of investment" but the danger is if we dont correct this then we could end up in the poo big time.

I would happily see a land tax provided PAYE and business tax dropped to compensate...real workers and hard workers then get compensated fairly IMHO.

regards

I quite like BH commentaries BUT can someone please tell him to sit down take a deep breath and let go. BH has been going on and on about how broken our tax system is for the last 4 weeks... just like a scratched CD. Let it go man.... say something funny!

Steven do you know if anyone has done stats on how much lending secured over res property is actually to fund small business ?

@Andrew: Nope.....but asking here might well get you that stat, Bernard et al do that sort of thing...I am not sure what you are trying to say? I agree there will be some lending with the house as the asset at risk...but that should be productive...ie the business & home owner is generating an income which should service the debt, pay the bills and make a profit day to day....

@gingerbreadman: Its hammering at it because its so important...like I posted earlier if in the 1980s 25% of debt was mortgage then 75% was to businesses to invest....if today 90% is mortgages then only 10% is left for business....now the pie may indeed be bigger but using 90% gambling on the asset accumulating v an income from a business....I just cant see how that is good for NZ...

regards

@steven. Not disagreeing with ya. Agree that current tax does favour property. But JK's proposals does look like those advantages will be removed and level the playing field.

Any new system, be it tax or a computer program that is put in place needs the occasional tweak...
But if those patches are numerous, and those patches need re patching because another patch has caused issues elsewhere is a sure sign the original system is very poorly written and/or thought thru....and the patches themselves have not been thought ALL the way thru.

Our WHOLE tax system, top to bottom...and that not just means those who conceived it, but the law makers who wrote it up are incompetent and the system inherently flawed.

So a fix means one of 2 things
1/Return to a basic system, be it 10 or 40yrs ago
2/Completely scrap the system and start from scratch.

The latter is not a preferred option .....after all thats what happened with this system.
Therefore it is preferable to look at the basis of a system that has worked in the past and update for todays world....ie the wage earner doesnt get T1/2 or 2T anymore and the 40 hr working week doesnt exist either.

The BIG issue is that those who write up the laws and regulations no longer have the ability to think things ALL the way thru....which is the major cause of all the problems in modern society. Combine that with pollutions who cant think or plan ahead for a couple generations, I believe what ever happens it will be impossible to have what is intended to actually reach reality

Another classic example is what was intended with the concept with the RMA and the BS we have now. DoC is another example.

Give them a chance Steps..."those who write up the laws and regulations"...are busy dealing with their bloated salaries and bonuses...can't expect too much time to be allocated to shuffling the paper.
You need to go with the flow Steps...bend with the breeze man....aint nothin gunna change in Noddyland.

Steven I guess the point I was trying to make is that not all mortgage borrowing gets spent on houses.

I suspect a chunk goes to fund small business as even at an LVR of 50% on stock and debtors most banks still want the house, and if you are putting the house up as security you might as well borrow at mortgage based rates than business rates which are somewhat dearer.

As each day goes by it is becoming more apparent from where I sit there is no need to get too radical with property taxation (the BH approach).....the sector is showing every sign of retrenching all by itself.

Best one is the 'home handiman'....Mr Fixit....works for cash...best deals in town...painting..gardening..lawns..leaky taps..interior renovations..cleaning drains..dropping trees.....heaps of ways to keep Take Take Take out of your pocket. Think of all the work being done for lower prices...all that extra cash finding a life in the marketplace and not stolen by wgtn.

Just like Greece NA. You manage your life to avoid the tax as much as you can. In the end the wgtn thieves find their flow of other peoples money is turned off and the splurging party comes to and end.

Wonder where the loot is coming from that the peasants use to pay the Mr Fixits!...they get it by avoiding tax on whatever they can...from growing their own grub...running the chooks...trapping the eels...shooting the wild pork...selling a few fish...sewing for cash...repairing the car...heaps and heaps and heaps of things going on that Take Take Take gets nothing from. See...the peasants aren't so thick afterall.

Bernard said:

Eventually something will be broken.

The back of the taxpayer, and unfortunately on the recommendation of economists who think tax is the solution to not only anything, but everything.

Pretty appalling.

@President of Property Says:
February 17th, 2010 at 9:55 am

"I think you will find people rather have 90% borrowed on their home and injecting liquidity into a small business, rather than borrowing less on the house, and paying for a business loan or the 20+% interest on a CC"¦"

By all means prove it....the comments from Bernard etc seem to suggest there is a lot of gambling on property going up in value as opposed to actually investing the money borrowed into a business, also we would need to separate out where this is genuine...as opposed to using housing as a "loss" for tax purposes...

Agreed Muzza.

Housing market crash = wallets put firmly into back pockets = not good for the productive sector everybody keeps banging on about.

Amazes me so many people consider collateral damage to be perfectly acceptable providing it brings the property market to heel.

Don't think the builders will be doing much "banging" Andrew! Amazes me so many people consider collateral damage to be perfectly acceptable providing it brings the property market greater profits.!!

Well that's just great zimmer paul...but are you collecting WFF right now?...did you pay for your education aged 5 to 17....we all suck on the state Paul. When you're an old coot with crap eyesight and creaking joints..your attitude will change..oh yes it bloody well will.

talking about builders and property shortages

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=1062...

there is a lot at play...

@ Andrew : "....there is a difference between bringing the property market under control and inducing a crash." It will be inetersting to see if this is the case.

And the differnece between being the State Pension and Invalid Benefit is.....a matter of lettering? It's like saying our unemployment stats. are down; however, and coincidentaly, our sickness beneficiaries are up.

Old Creeky Joints - Yes I did get an education from the age of 5-17. My family also had to pay topup fees and suppliment the education system through the variety mechanisms that schools use. However the country was investing in my productive future as it would be/is of benefit to the country. The country also supplimented 80% of my 5 years of university education while I paid the rest via my non-interest free student loan and part time jobs and summer holiday work. I also sucked on the welfare state having my appendix removed, however once again I was expected to be out in the productive sector for a "few more years" in order to help contribute to the country.

No I do not currently claim WFF, I did after my first child, but have not looked to claim it after the arrival of our second. I do not really need it. Am I rich....no, can I live without support, yes. Does mean that I can not drink flash wine or got out for meals other than to a cheap chinese smorgasbord.

My eyesight is crap and I have to pay for my glasses.

I really hope my attitude will not change when I become an old coot. I do not want to become an old coot. Old coots do not add anything to society except for their bitterness.

People talk about supporting the productive sector and clamping down on the unproductive, yet we have no increase in retirement age and no reduction in pension payments. Would be great if people took responsibility for their own lot in life instead of relying on me to provide it for them.

@Andrew: It maybe re-trenching now....or it may not...if you only look at the short term. So if you are using that argument hey guys no need to fix it....lets forget about it its fixing itself, well it is nto really....so then of course it raises its ugly head next time....

regards

@muzza: we are over-reliant on property speculation, we have a huge bubble, making property assets hugely overvalued against their income. That's effecting the rest of the NZ economy...therefore that has to be removed to fix the economy overall...Would wallets snap shut? not sure, the assets are paper assets its only money you can spend when you sell so its not in your wallet in the first place. Swings and roundabouts....

Golly, Andrew! Looks like quite a sledge hammer of your own, you've got there! The only item that would turn it from a No 22 to a No 24 would be to ring fence losses.

@Andrew: there seem to be two schools of thought, the one independent one that says JK's changes are in-adequate and need to go far further, and the ones who are "tainted" by their property links who say these are good enough....experience tells me to be wary of anyone such as the latter who would directly benefit from an outcome...

I agree with your earlier point I would like to see what % of house buying debt is for the single home to live in and what % of debt is to fund a small business, what % is the professional landlord making a day to day return and what % is purely the gamblers looking for an asset gain with no work involved...%s and sums of $...

Oh and Andrew which of those two schools of thought are you?

regards

Steven

Yes I own property, but I also invest in the "productive sector" so have a leg in both camps. Have held them for years and intend to hold them for plenty more, so a short term price hit isnt the end of the world for me. Im not a trader and am more focussed on the cashflow generated than the paper gain.

So on that basis one could argue I have a vested interest but in fairness I could be arguing "do nothing at all" which I am not.

However I can see for a lot of people a sudden substantial correction would cause a lot of pain, and im not convinced thats a good thing at this point in time. Irrespective of what the economists are saying there seems to still be plenty of hurt being felt out there.

If what Key is proposing isnt enough he can always turn up the pressure later, rather than the other way around.

Nah i'll ride it out Wally. If BH becomes finance minister than i'll bail.

@Andrew: "However I can see for a lot of people a sudden substantial correction would cause a lot of pain" Possible, however when you do a "something" you have to consider that a risk is the Govn will change the Legislation...

"and im not convinced thats a good thing at this point in time." Swings and roundabouts...our housing debt, ie private debt is huge and un-productive while or productive sector is suffering...by say introducing a Land tax and reducing business and/or PAYE taxes that effect businesses (in particular exporters) that's giving relief where it is needed right now, urgently.

"Irrespective of what the economists are saying there seems to still be plenty of hurt being felt out there." The ones saying that I think are in cloud cuckoo land....just reading all the not even bad but terrible news on the state of so many countries it just does not add up that we are in recovery mode....

regards