Surely the best way to cool down the property market is not to use a capital gains tax, which we know dosn't work, but to remove the ability to offset loses againts personal income.

Andrew, that would be a great idea. Just ring-fence property source income, as a start. However, limits on interest deduction would also help.

Just the talk of a land tax is effecting farms sales at present. The other tax the Carbon was is scarring the hell out of buyers. Some certainty is required other wise fear will take over and we will see a collapse in land prices. As most farms only return 2-3 % a land tax of %1.5 could be devastating. The ETS which was going to be a carbon trading scheme but is now a carbon tax could destroy the profitability of many sheep and beef farms as its going to be per head. Looks to be starting at $4 a head for sheep rising to $8 as we already pay levies of over $4 me thinks interesting times are around the corner.

... except inasmuch as it allows for a reduction in taxes on productive activity, i.e. labour, capital, enterprise.

Well there's just one of the Archilles Heels of creating yet another tax David: while we're borrowing $250 million a week to keep the wheels on the Welfare/Public Service Sector State do you seriously believe this Government, or any in the wings, is going to reduce taxes on productive activity on the advent of a new tax?

I don't.

We're just going to have to lump yet another tax.

Slash the size of the State - it all has to start from that, every other measure is Nero fiddling while freedom is burning.

Mark, I'd like to see the size of the state slashed, just like you. But I'd rather have less socially destructive taxes to fund what's left of it.

Of course the govt will reduce other taxes if it introduces a land tax. Introducing a land tax would be politically impossible otherwise.

While I too agree that the tax burden should be reduced overall (on the back of reduced govt spending), debating the appropriate mix of the taxes that we are left with is an important debate worth having.

Thx a lot, Andrewj! I thought my temper had calmed down after the words yesterday from.....well....let's just recall some apt words from the Beatles song,

"...The man with the foolish grin is keeping perfectly still
But nobody wants to know him,
They can see that he's just a fool,
And he never gives an answer,
But the fool on the hill,
Sees the sun going down,..."

Andrewj - I wonder if John and Bill know about that kind of thing? Come to think of it, I wonder if Michael and Helen did?

If any of them did know about it, I wonder what they'd do about it?

The trouble with the 'land tax/capital gains tax debate' is it fails to take heed of the fact that much of the so called 'wealth' associated with rising house/land prices is an illusion. This conjuring trick is possible because, hitherto, a tidal wave of debt money has acted as a pressure wave pushing prices further and further ahead. The outcome has been the development of impecunious nations, ranging from the bankrupt like Britain and America, to the aspirant bankrupt like New Zealand.

What the New Zealand government now appears to be planning is to introduce an additional lien on peoples earnings - based on the pretext that they got rich via property. However, because of our 100% fiat money system this alleged 'wealth' is much smaller than is supposed - especially as the increase in house/land prices has mostly been driven, not by banknotes, but by instruments of credit. Thus on a 'gain' - reposed upon foundations of sand - an additional proportion of income will have to be handed over. This is why I think government will 'huff and puff' over a capital gains tax, but finally come down on the side of a land tax. Why? Because it can be levied arbitrarily via a civil servant declared valuation - without 'Mr Market' delivering a transparent 'willing buyer, willing seller' assessment of what your property could command in a genuinely transparent transaction. In essence it is a system of taxation in which the state 'declares' you have the following 'wealth' - irrespective of market verification - and in consequence you must hand over 'tribute'. In philosophical terms it is not too dissimilar to the protection rackets run by Ronnie and Reggie Kray in the East End of London in the 1960s - where they would 'assess' club owners as making an arbitrarily declared sum and then demand 'tribute' accordingly.

The first requirement of sensible financial and tax planning is to embrace sound money - so that value (as opposed to nominal price) can be transparently established. The combination of a land tax, and a government with (at least theoretically) an unlimited ability to produce fiat money, is a recipe for effective asset confiscation of the kind that occurred in the later stages of Imperial Rome's bankruptcy and decline.

Rogie, lunch is ready- are you still in Loburn or driving wireless in Kaikoura ?
Walter

Loburn ! Got a corned beef on the boil . Two hours should do it . Thanks for offer , Walter . You scuba for fresh crays up there ? ( I lived with a Swiss couple , in Geraldine , in 1983 . Amazing people . Always felt that we [ NZ ] as a nation could learn much from more established cultures )

We're still skewered toward the left , Les . Boring of me to repeat , ah , for the zillion'th time , that socialism doesn't work . But totally unfettered capitalism may not be the whole answer either . There is a balance , not set in stone , as the world keeps evolving , but we seldom get near that point of stability . Cullen & Douglas seem to be polar opposites . And where have each of them led us ? ( for sir's lunch , may I recommend a Basle loaf / some Bagnes cheese / Nostrano ( salami ) / and a cheeky little white wine from Neuchatel . Bon appetit , Monsieur Rudd . )

http://www.telegraph.co.uk/earth/environment/carbon/6527970/Everyone-in-...

If you want something to ruin your lunch then check out the link above. Incidentally, I notice that the British Government is planning some 'formula' to value celebrity contributions to the economy. Now why might this be? A more cynical man would suggest it is because, as Britain morphs into a cross between Nazi Germany and Stalin's Russia, they will form part of the new elite with special carbon allowances etc (whilst the peasants shiver). Thus a justification will emerge for their unencumbered first class travel, the private jets, the big cars etc because of their overwhelming "˜contribution'. (as they journey to plush resorts to discuss climate change perhaps). Meanwhile, Joe Public (a much lesser 'unit of human capital') will struggle to get the carbon allowance for a week's holiday with his wife and kids. Frankly, you couldn't make this nonsense up!

"A society grows great when old men plant trees in whose shade they know they shall never sit"
I hope we can as a generation stops this stuff.

Well put Selwyn.
I suspect that most people who add to the Blogs here feel the same way.

The babyboomer generation have never known hardship or war, so are quite unwilling to sacrifice themselves for the greater good. They do not even see getting ahead at the expense of others as a problem, in fact it is their modus operandi.

While a small amount of individuals are better off, we as a nation are a whole lot poorer as successive generations have to borrow more to pay artificially inflated house prices. The interest bill in killing the country, but those "getting ahead" don't care.

I've always thought that "investment" in property to not be a true investment while the supply of houses is constricted. If the market was truely balanced only those who wanted would rent and the rest would buy. But as most "investors" know the constriction of supply unbalances the market and many more are forced to rent who would otherwise buy. If this were not the case then it would not be seen as the sure thing "investment" returning the above market returns that it does.

The Baby Boomer's parents would be turning in their collective graves at the thought of their children robbing successive generations of the chance to own a fairly priced house, given the sacrifices they made. They saw housing as a means of shelter from the elements not from tax. Making a living from productive work was their motto, not from unproductive housing.

The original article says "a capital gains or land tax may not be taken up for "˜political reasons'". Can anyone explain what these political reasons are? Which voting block doesn't want it? Surely that's the only political force a government has to pay serious attention to.

If John Key had opposed the 'anti smacking' bill he would have been even more popular it now transpires. Someone though made him think that it would be politically dangerous to oppose it. Hi heart wasn't in it so someone scared him about it.

Who is making him think there is a political risk here? I just can't see it.