How will the Greens pay for their poverty package?

TOP leader Geoff Simmons rips into the Greens' wealth tax policy, arguing it would be disastrous for New Zealand

1st Jul 20, 2:35pm by Geoff Simmons

By Geoff Simmons*

The Green Party is proposing to pay for their welfare reform by increasing the top marginal tax rates on income and putting in place a wealth tax.

This package would be disastrous for New Zealand. Their claims about higher income taxes being normal overseas are wrong when it comes to investments.

Meanwhile the wealth tax would remove the incentive to invest in business, including investment in greening the economy. The super rich are likely to take their money overseas, as happened in France. The wealth tax also does nothing to solve the crucial issue around the favourable tax treatment of property.

Higher income taxes

Increases in the top rates of income tax alone are unlikely to raise much money. A few wage and salary earners will pay, because they can’t avoid it. Anyone that earns their money in other ways can rearrange their affairs to avoid the tax.

In particular higher income taxes mean that speculation in housing - New Zealand’s only tax-free asset - is likely to rise. The use of businesses and trusts as tax shelters will also rise. All this happened under the 39% tax of the last Labour Government, and will happen again.

The Greens argue that top tax rates of 42% are common overseas. And when it comes to income taxes they are right. But in New Zealand income taxes apply to the income from investments also.

This is not the case in places like Europe that the Greens love to compare themselves with. There they have payroll taxes which allow high income taxes but keep the taxes on investment income down. In the case of retirement savings, many countries exempt it entirely.

Here in New Zealand we tax the returns for most investments - bank deposits, shares and KiwiSaver - at the marginal tax rate. This can be as high as 33%, which is very high compared to similar taxes overseas. Even the inflation component of investment returns is taxed, which means that effective tax rates can be very high indeed.

Take the most extreme example - current bank deposit rates. If you have money in the bank currently you are lucky to get 2% interest. Some of that will get taxed, leaving you with roughly a 1.4% return - not enough to cover inflation. The effective tax rate is over 100% - people are currently losing money by keeping it in the bank.

If you increase the top marginal tax rate this problem gets worse. Which brings us to the wealth tax.

Wealth tax

Adding a wealth tax on top of that will mean anyone with more than $1m in the bank will be going backwards every year. More than $2m? No chance. Effectively it would become a cap on wealth.

Even business investment will struggle. The long term average return for investment in businesses is widely considered to be 7%. After tax that is about a 4.5% return. After inflation it is 2.5%. After a wealth tax of 2% it would be close to zero.

Some businesses earn more than that, but others earn less. Why would anyone bother to invest in growing their business past $2m? Might as well go fishing and enjoy your money. Or send your money overseas.

In short, the Greens proposal taxes both the returns a business makes (income tax) and also the means of making that return (wealth tax) every year. It is anti-investment economic sabotage.

Left wingers might rejoice at this idea but the fact is that wealthy people do most of the investing. New Zealand businesses are already capital poor compared to overseas countries thanks to our obsession with housing. We also have a cultural problem with our business people retiring once they have the boat, bach and BMW rather than growing the business. With the Greens wealth tax that problem will only get worse.

Here is the Green Party’s ultimate own goal. In coming decades, businesses will need to invest billions to transition to a low carbon economy. With this wealth tax in place, why would they bother?

This lends a hint of truth to the parody view of the Greens. With these sorts of incentives in place, the only way we are likely to transition to a low carbon economy is by returning to being peasant farmers.

Housing

Worst of all the wealth tax does nothing to correct the biggest hole in our tax system; property. Remember New Zealand has the most distortionary tax system towards property in the OECD, which is one reason prices and rents are so high.

Marama Davidson was quoted in a RNZ article, saying: "We hope to see less incentive for using houses as merely tradable commodities, and start to see investments into more productive and sustainable industries and trades."

This is pure economic illiteracy. The Greens wealth tax taxes all wealth indiscriminately, including the wealth already being used productively. It does nothing to address the differential between how property is taxed compared with other investments (shares, businesses, term deposits) that has pushed house prices ever higher.

The incentives to invest in property compared with other investments will remain the same. The current tax rates on investments at the moment is illustrated below. The Greens wealth tax would lift all these bars equally.

Housing - especially owner occupied housing - will still be the best place to put money from a tax perspective. Perversely the Greens wealth tax could lead to even bigger mansions. There is also likely to be less rental housing, driving up rents. This is how a well meaning idea like a wealth tax ends up shooting itself in the foot.

TOP’s proposal is to ensure all investments are taxed equally. This is the only way to realise Davidson’s vision of driving investment into businesses that create jobs and exports rather than speculating on property.

*Geoff Simmons is leader of The Opportunities Party.

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115 Comments

by bw | 1st Jul 20, 2:57pm 1593572253

Less radical in tone this time Geoff. That's probably no bad thing.
TOP's ideas have merit but those who will be disadvantaged; many, versus those who understand what your ideas are and how they would be advantages; few, make your task an uphill one.

by Zack Brando | 1st Jul 20, 8:04pm 1593590682

Love TOP but they have zero-cut-through at the moment. I'd consider voting for them again if they could get their profile up. Get to 2% by the end of August and I'll probably waste my vote on you.

by Adam Parsons | 2nd Jul 20, 1:54pm 1593654865

Challenge accepted.

by Lanthanide | 2nd Jul 20, 4:42pm 1593664971

I'd vote TOP if they were polling 5%.

by Foxglove. | 2nd Jul 20, 5:00pm 1593666018

Yep, certainly food for thought, in those circumstances.

by Rob Reid | 2nd Jul 20, 10:10pm 1593684655

I can't think of anyone better than TOP to vote for, and in the past I've voted for almost all the others.

by hemihua | 1st Jul 20, 2:58pm 1593572329

The first thing I thought was "gee this sounds like TOP's treatment of assets" *shrug*.

by powerdownkiwi | 1st Jul 20, 2:59pm 1593572345

Simmons should read Kunstler's Long Emergency.

As should Davidson.

by fortunr | 1st Jul 20, 3:02pm 1593572537

I agree. Green's policies are utter madness and economic lunacy. They would be highly destructive and actually counterproductive.

by Boatman | 2nd Jul 20, 8:23am 1593634984

The Greens have just started a class war against any average Auckland family who owns a home in the city , and is likely to pay it off in the next few years .

This wealth tax is a Mom and Pop tax , designed to tax you a second time on money you paid income tax on when you earned it

These Green folk are not in touch with reality

by Foxglove. | 2nd Jul 20, 9:50am 1593640228

Well you will have plenty of opportunity to voice your concerns to them when they or their agents come into your house, check your all your bank balances and equity holding, motor vehicle(s), boat, paintings and other valued chattels, look for cash stashed under the bed, and then ask for an explanation as to any items missing or reduced from the previous year. Oh yes indeedy, Mr Orwell was precognizant for sure.

by dcnbwz | 2nd Jul 20, 3:42pm 1593661334

You lot are hysterical

by Foxglove. | 2nd Jul 20, 5:34pm 1593668094

Penguin’s turn tomorrow then?

by tim52 | 1st Jul 20, 3:03pm 1593572585

The Greens are a bigger supporter of the property market than National could ever dream of being. Everyone can afford to pay even higher rents with the UBI and zero incentive to pay of the mortgage as you will have to pay the same amount regardless and if your equity ever improves go buy another house as your now effectively borrowing at 0.6% (2.6 - 2).

With the OCR at 0.25 a wealth tax of 2 % is insanely high. All you safe assets are negative yielding, can you defer the wealth tax on government bonds or do you have to maintain the cashflow to pay for them. I have no idea how the wealthy among us would respond to this but I can see it incentivising some risky investment portfolios and frivolous purchases of assets/toys that rapidly depreciate.

by Kezza R | 1st Jul 20, 3:07pm 1593572824

Is it still TOP aim to poison Stewart Island with a poison that is persistent in the environment for over years?

by Davo36 | 1st Jul 20, 3:11pm 1593573115

Go and do some trapping then.

by Lanthanide | 1st Jul 20, 3:47pm 1593575247

Stewart Island is regularly drenched in poison anyway - H2O is a poison in high enough concentrations.

Perhaps try being less emotive by referring to things you don't like as "poison" and instead refer to them as what they actually are - cost effective means of poisoning specific undesirable animals in our conservation estate with low rates of by-kill.

If you're actually asking what TOPs policies are when it comes to getting rid of invasive species, they propose looking at every potential innovation that could help, including poisons such as 1080, new ways to apply poisons, high-tech solutions like drones and turrets and more cutting-edge techniques such as genetically engineered gene drives.

by Logicthinker | 2nd Jul 20, 12:20pm 1593649255

I have always thought a jail should be built there. It would give them time to consider re- offending.
About the Greens offer, lets see what Cindy comes out with as she said on the AM show on Monday, it is much better.

by Kauri | 1st Jul 20, 3:11pm 1593573108

Good work Geoff. While I am not a major fan of UBI or comprehensive capital tax on family home I agree with much of what you say. Keep the focus on productivity - no one else seems to be.

by delboy | 1st Jul 20, 3:14pm 1593573268

This Green policy is very similar to the wealth tax Venezuela brought in last year.

So good news we can do the research to see the impact it’s had on their economy before dismissing it.

by Te Kooti | 1st Jul 20, 3:36pm 1593574614

I agree we should be looking at Venezuela for direction, by doing the exact opposite of whatever they have done, and continue to do.

by Foxglove. | 1st Jul 20, 3:42pm 1593574933

Agree totally, but would be handy to have the oil though.

by Te Kooti | 1st Jul 20, 3:46pm 1593575203

but not the drama....

by Foxglove. | 1st Jul 20, 3:56pm 1593575788

I was there in the early 80’s TK. Fascinating time, and then Caracas was a vibrant reasonably safe city. government was trying shrug off the heavy influence of the USA and things were already becoming rather hot and hostile . Am I allowed to comment though, that there is a percentage of ladies there of outstanding beauty that you will hardly find in any other nation. Only my opinion of course.

by Te Kooti | 1st Jul 20, 4:04pm 1593576258

Todo bien para mi !!!!

I absolutely adore Latin America

by delboy | 1st Jul 20, 4:34pm 1593578098

Yes indeed the oil and the supermodels

by paashaas | 1st Jul 20, 4:37pm 1593578277

In fairness they do consistently well in beauty pageants .

by powerdownkiwi | 1st Jul 20, 8:46pm 1593593173

TeK - obviously the NZ narrative isn't the only one you misconstrue.

Try googling Monroe Doctrine. Then research Norm Kirk's reaction to the Allende murder, and his disquiet at his forthcoming visit with Nixon. I suppost you think Cuba's problem is communism, too?

Spare me. Venezuela sits atop energy, without which the nation which consumes 25% of everything consumed on the planet, cannot exist. Alle same Iran. Hence we see coups and US-puppet Shahs - then we get propaganda'd against whoever gets pi--ed off enough to overthrow the puppets.

You're a couple of stages adrift; truth is there for the taking but it takes thought. Not assumption.

by fortunr | 2nd Jul 20, 5:02pm 1593666156

I agree. Actually the Greens remind me not only of Venezuela, but also of the type of approach to economics promoted by the likes of Mugabe.

by waymad | 1st Jul 20, 3:21pm 1593573700

It will be fascinating to see Treasury's analysis of the Greens' tax proposals as to assumptions about tax base, tax receipts, avoidance, evasion, behavioural consequences and so on. Or is that little gem a 'piece of work' (as the pollies are always saying) for the future and, especially, a future well after the Election? As a budgeteer of several decades standing, I cannot see myself how their figures (worked out with the help of - gawd help us - the Parliamentary Library) can possibly stack up....The greater danger is that being so far into pixie-dust and unicorn-grease-land, it then provides sufficient apparently-centrist space for the We Know Best crew to move into and thus get away with Yet Mo' Stupidity.

by Foxglove. | 1st Jul 20, 3:40pm 1593574847

Unfortunately for them Labour are not that subtle. Hence the sudden about turn pre last election when the electorate got wind of the tax grab they had in mind. This here now with the Greens in concert has two prongs. Firstly we have to do this as a working coalition, just like we had to way back, as a precedent, to keep Jim Anderton on side. Secondly look how we have been able to moderate this proposal on behalf of all of you, be grateful. But worst of all has it not been considered just how much power would have to be vested in government and agencies to compile, store and audit the private financial details of citizens. In other words a dossier on each one of us. That is Orwellian. That is not welcome in NZ past, present or future. No political party has any justification for such a sinister proposition.

by middleman1 | 1st Jul 20, 4:39pm 1593578376

Deeply sinister to freedom loving people but just and right to state control marxists. I was on the periphery of a matrimonial settlement that required a farm value to be set. A lengthy dispute developed that saw wide disparities in formal valuations, complicated by the property being in the same general area as high value dairying units. It took a very long time and much expense to arrive at a landing point.

by fortunr | 2nd Jul 20, 5:07pm 1593666451

Perfectly said. I could not agree more. The ramifications of such proposal are quite disturbing not just in terms of economic outcomes (what the Greens are proposing can only be defined as crackpot economics) but also in other areas such as government control.
As you said, this is Orwellian and it must be resisted strongly at every opportunity.

by Calaverite | 1st Jul 20, 3:40pm 1593574824

Will be interesting to see how the wealth tax would interact with FIF rules. I'd hazard a guess that FIF tax would be scrubbed which would undermine this argument.

by middleman1 | 1st Jul 20, 4:46pm 1593578791

Given the the greens proposed investment killing tax would be cumulative on existing already high taxes on investment capital there would be no special need to can the FIF or PIE regimes.

by dcnbwz | 2nd Jul 20, 3:43pm 1593661411

Newsflash - New Zealand taxation is not high.

by Wazim | 2nd Jul 20, 11:33pm 1593689607

Try again. Go and earn a dollar, take it after PAYE and ACC then go and buy a little bit of petrol. Now sit and work out exactly how much of that dollar the government has taken back from you. Tell me again that NZ tax isn't high (or from the opposite perspective, tell me exactly what the tax take then pays for that enhances your life or provides a worthwhile service for you) You are getting robbed blind.

by Yvil | 1st Jul 20, 4:01pm 1593576077

Why can't we have a Green party which focuses on environmental issues and not economic ones?

by Believer1980 | 1st Jul 20, 4:23pm 1593577393

A greener economy is a vital part of a green focus. The problem is Greens do not have a green economy focus, they have a social justice economic perspective, which is a really strange combo with their environment protection front.

by Lanthanide | 1st Jul 20, 5:38pm 1593581938

Part of Green philosophy is that people who are poor cannot look after the environment generally. Thus increasing the wealth of those who have the least will allow them to make better environmental choices in their day to day lives, while those who are already very wealthy don't have any excuses for making bad environmental choices.

by delboy | 1st Jul 20, 4:41pm 1593578494

The closest we have to a Green Party is the National party but alas both their Kermadec ocean sanctuary and the Campbell island marine sanctuary policies were rejected by the Labour Green coalition.

by middleman1 | 1st Jul 20, 4:54pm 1593579243

And cameras on fishing boats. Nash is doing a quickstep dance with the truth while Shaw sits silently by and dolphins drown unreported.

by Davo36 | 1st Jul 20, 5:23pm 1593580998

It's all those cats mate. NOT the fishers with their set nets and trawling equipment.

by middleman1 | 1st Jul 20, 5:38pm 1593581911

As someone who has spent plenty of time in the bush ( and still do despite entering old fart phase ) I agree with Gareth Morgans position on cats in the wild. Most people would change their views if they saw at first hand the carnage to native bird life that feral cats are responsible for. I've trapped and shot more than a few.

by russellj | 1st Jul 20, 10:40pm 1593600049

With the marine sanctuaries scuppered by the tangata whenua fishing interests, kaitiaki yeah right.

by dcnbwz | 2nd Jul 20, 5:58am 1593626331

Seriously. This is surely humour. Sadly some commenters seem to be backing it up. National - party of the rich, by the rich, for the rich. Who have been actively fighting against any measures to help stop climate change. Who actually denied it's existence up until it became a PR issue.

If you can't be bothered engaging in reality it makes it very difficult to take seriously any of the other right leaning comments on this story.

And anyone commenting on the green policy, have a look at it. You know, a good look. Take a look at the costings they have clearly articulated. Then take your blinkers off. Neoliberalism has gotten us to this point, and it will only make the world worse.

The right fears any kind of progressive thinking.

by middleman1 | 2nd Jul 20, 10:14am 1593641676

'You know, a good look. Take a look at the costings they have clearly articulated' .... your slogan without substance fellow traveller Cindy says the greens 'costing's are bollocks. She used the politically vapid 'heroic assumptions' trope but her meaning was clear.

by dcnbwz | 2nd Jul 20, 3:46pm 1593661578

Funnily enough the greens have always ended up on the right side of history. We're in a pandemic. Big business has their hands out for support from the state, proving once and for all the lie that is neoliberal economics.

Take a good look at the costings, it might surprise you.

by russellj | 1st Jul 20, 10:38pm 1593599920

And a party that does not have a population breeding policy let alone one that incentivises solo mothers.

by dcnbwz | 2nd Jul 20, 7:49am 1593632990

Is this meant to be humour of some kind?

by RickStrauss | 2nd Jul 20, 11:47am 1593647223

National raises benefits and fails to rid us of Working for Families and the Accommodation Supplement. They're a different flavour of redistributionist "socialists", but also slightly too much towards asset owners.

by Believer1980 | 1st Jul 20, 4:15pm 1593576949

He is bang on money. The wealth tax is simply stupid. In low wealth growth environment, it destroys formation of capital (assuming a capital growth rate of 1%, the wealth is halves in 25 years), in high wealth growth environment (e.g. growth rate more than 7%) it under-performs a capital gain tax at the persons marginal rate of 33% (for example between 2015 and 2018, net wealth of top percentile kiwis increased by 10% a year, you would have collected almost twice the tax as a wealth tax would have).
So in good times it under-performs other alternatives, in bad times it destroys and in average times, it slows the progress to good times. Terrible idea. It also creates serious cash flow problems, it will affect business decisions, it has massive valuation issues (no one minds any valuation if there is no consequence to it, but I am sure the IRD simple valuation tool will by totally unacceptable if it puts you in a taxable bracket) etc. A realization based capital gain tax is superior in every aspect.

by Theoracle | 1st Jul 20, 9:42pm 1593596559

My vote is for a financial transaction tax, although it'll result in a cashless society.

by printer8 | 1st Jul 20, 4:31pm 1593577876

The Green’s estimate on revenue on an asset tax was estimated To include a 35% avoidance (their estimate).
This would not be a “wealth tax”, rather a “middle class tax”. The wealthy would account for the majority of that 35%.

by Glitzy | 1st Jul 20, 4:39pm 1593578343

No estimates included on how many folks simply leave the country if this ever happened.

by buyandhodl | 2nd Jul 20, 10:31am 1593642662

As a young person who is highly skilled, likely to be a salaried employee for a decent while yet and was already considering it (more fun work + cheaper houses + higher pay overseas = why stay?) it's certainly something that would push me out the door rather quickly.

by dcnbwz | 2nd Jul 20, 3:47pm 1593661674

Some great points - housing IS far too expensive due to market failure, and the wages here are low in relativity to all other oecd countries.

by lastredact | 1st Jul 20, 4:37pm 1593578275

I would've thought a more sensible policy from the Greens is to invest in more social housing, as that depressurizes the rental costs, which have been seriously affecting beneficiaries and and low income earners for the past 15+ years. That's what Kiwibuild should have been (and now is?).

And why do the Greens want to incentivise people to have children? The greenest policy is not subsidise more people. Can we cull Working For Families already?

by Davo36 | 1st Jul 20, 5:24pm 1593581082

Be kind lol.

by Foyle | 1st Jul 20, 5:55pm 1593582938

Marama Davidson has 6 kids. She doesn't obviously doesn't believe we are overpopulated

by Brendon | 1st Jul 20, 10:19pm 1593598793

Absolutely what is needed. It should be a no-brainer!

by Zachary Smith | 1st Jul 20, 5:25pm 1593581126

Geoff Simmons has only made the Greens more appealing for me. Higher taxes for high earners just as I stop earning. Higher rents. Property still all good...

by middleman1 | 1st Jul 20, 5:40pm 1593582013

And your tenants losing their jobs as the greens tax business owners to death.

by Foxglove. | 1st Jul 20, 6:04pm 1593583489

Green has many interesting connotations. Two are undoubtedly prevalent in this policy of The Green Party. Many types of fruit are green before they turn red. Green is the age old colour used to denote envy

by Zachary Smith | 1st Jul 20, 6:15pm 1593584108

Wont my tenants be getting $350 a week each? That and a part time job and it'll be fine!

by Quiet Desperation | 1st Jul 20, 6:26pm 1593584802

You parasites have no shame.

by HistoryRepeats | 1st Jul 20, 6:31pm 1593585079

The following won't go down well in our tall-poppy culture with its hatred of "rich pr1cks", but hopefully it'll illustrate what said pr1cks might do in response to a wealth tax.

I spent my career working hard and investing carefully, and as a result I retired before 60. I survive purely on investment income. Net worth is just over $2M, and my investments generate a little under $70K in pre-tax income.

Due to COVID this income is now dropping rapidly as term deposits, share dividends, and commercial rents all plummet. And now the Greens (voted for by a tiny percentage of Kiwis) want to force me to pay another $10K in tax.

I'm already investigating ways to move my assets (and possibly myself) offshore if this government is re-elected. You can be sure that others far more wealthy than me are making similar enquiries right now.

Capital flight is the common result of wealth taxes, which is why most countries who have tried them have later abandoned them.

by Foxglove. | 1st Jul 20, 7:41pm 1593589279

Rich Pricks was an example of gutter sniping that the celebrated great intellectual Dr Cullen seemed to rather enjoy. One might suppose that if by some chance, Dr Cullen had authored a volume on “Rich Pricks and How To Get Them,” then this policy by The Greens, together with the requisite Oxford commas, could easily be a chapter there from, which has coincidentally come their way. No more than idle speculation on a rainy winter night.

by middleman1 | 1st Jul 20, 8:43pm 1593592990

And there lies the fatal flaw of the greens proposed class warfare taxes. As Simmons saliently observes; 'but the fact is that wealthy people do most of the investing'. Raise already high taxes on capital and create avoidance incentives and the outcome is obvious to anyone but a bolshevik; less investment. In a country where per capita productivity continues to fall further behind our peers each year, comrade Shaw would strangle capital investment and initiate an economic downwards spiral. House prices would be high though, until suddenly they aren't. Cuba but with snow.

by dcnbwz | 2nd Jul 20, 3:48pm 1593661731

The taxes aren't already high - keep up the mythmaking.

by middleman1 | 2nd Jul 20, 5:41pm 1593668462

'Here in New Zealand we tax the returns for most investments - bank deposits, shares and KiwiSaver - at the marginal tax rate. This can be as high as 33%, which is very high compared to similar taxes overseas'
Try reading the article. And numerous other studies which confirm the same reality.

by dcnbwz | 2nd Jul 20, 6:01pm 1593669714

The wording "as high as", "can be". Not very definitive.

https://www.parliament.nz/en/pb/research-papers/document/00PLEcoRP99081…

by Foxglove. | 2nd Jul 20, 9:33pm 1593682396

Where’s JP? Night shift?

by russellj | 1st Jul 20, 10:47pm 1593600453

Glad to know that the Green pollies will put their taxes where their mouth is as they earn way more than the median, oh and wait, the pollies have that very generous super scheme and all those perks. Do the perks count as income for tax?

by linklater01 | 1st Jul 20, 7:20pm 1593588041

I despair. I want to support the Greens as an environmental counter-weight to those who have wittingly or unwittingly contributed to the degradation of our waterways-urban and rural. BUT, it appears that the left-wing of the party has captured its policy making. This policy will not work. They have vastly overstated the likely tax that they would raise. However, as this policy will never see the light of day, we can shrug and move on.
yes, we do need some form of tax on capital but this isn't it.

by Pietro | 2nd Jul 20, 10:10am 1593641410

The Greens are a conundrum. Their concept of society is one where everyone lives in homogenous flats near transport hubs, or cycles to flextime jobs. The real ‘Green’ New Zealand is the paddocks of the King Country and so on, where real wealth is earned. Most farmers take care of their land, and are greener than any spoiled urban liberal will ever be. OK, Chloe?

by dcnbwz | 2nd Jul 20, 10:39am 1593643146

Very passive aggressive Pietro. Actually, if we as a society are going to be able to handle population growth and change we need to start building transport hubs, public transport and develop renewable self sufficiency, build strong communities.

Persisting a divide between country and town suits a particular narrative but it helps no one.

by GV 27 | 2nd Jul 20, 11:13am 1593645185

So do slogans like 'pay your fair share', and yet here we are with it as the basis for an entire tax policy without considering who already pays for what and how much more reliant this is going to make the country on them.

by Foxglove. | 2nd Jul 20, 10:48am 1593643692

Pietro. Bravo!

by stuart786786 | 1st Jul 20, 7:23pm 1593588221

All this just to avoid CGT.

CGT is a just tax prevalent world over except in NZ as suits people who frame laws besides rich and powerful who always get away by lobbying against CGT.

What made JA changed the stance - Greed of power.

by house hunter | 2nd Jul 20, 6:57am 1593629839

Yes, I find the objections to CGT somewhat bizarre. Must be a cultural thing. Not that I think CGT is some sort of panacea but it would improve fairness in the tax system.

I wonder if CGT would get more support if it were inflation adjusted. Intuitively I could see it being more appealing to people.

I guess JA got spooked by all the bad press CGT was getting, i.e. the strong PR campaign run by the lobbyists! It would be interesting if she did a pre-election U-turn and made CGT an election issue. If she truly believes CGT will help make a better NZ, now would be the time to use the popularity she has built up to drive it home.

by GV 27 | 2nd Jul 20, 7:24am 1593631488

If they inflation adjust CGT then they'd be accepting there is no moral reason not to inflation-adjust PAYE brackets, which they've ruled out.

by house hunter | 2nd Jul 20, 7:51am 1593633073

Not quite the same thing. It may make sense to adjust income tax brackets based on wage inflation, but less so for general inflation. This is currently done informally when the brackets are adjusted from time to time. I can see how it might be nicer to do that in a more consistent and automated way, but I'm not losing too much sleep over it.

These sorts of things tend to me somewhat emotional, and it's my bet that an inflation adjusted CGT would be emotionally much more appealing to the bulk of people. So much so that any inconsistency with income tax would be largely irrelevant.

by GV 27 | 2nd Jul 20, 8:50am 1593636648

Adjusting the brackets 'from time to time' so far it's what, ten years and counting? That's an entire economic cycle under the old ways of doing things. I'm sure many people out there would like to be paying mortgages at 2010 levels as well; that's a reality we have to live with, but apparently not the government.

by powerdownkiwi | 1st Jul 20, 8:21pm 1593591667

"investment in greening the economy ".

That is bollocks, whether Simmons states it, or the Greens.

It's consumption is the problem. And attempting to get 'rich' without consuming just means piling up more proxy for..........the consumption of resources. That's all there is. Simmons once wrote some good books - how he ended up in religious territory (believing that economic growth is possible forever on a finite planet, is akin to believing there'a home for little children, above the bright blue sky) beats me; must have been the economics treaching - gets 'em every time.

by streetwise | 1st Jul 20, 11:01pm 1593601285

The Greens should stick to their knitting and concentrate on the environment.....after all they are called the 'Green Party'.
If they are changing direction and concentrating on the economy then they should be up-front, and honest, and call themselves the Communist Party.

by dcnbwz | 2nd Jul 20, 7:54am 1593633255

Tiresome old trope, one dimensional. We live in a multi faceted society, it's a good experience to see the world outside your echo chamber.

Communism is a lazy right slur used by those with no context and no idea what they're saying

by Ex Expat | 2nd Jul 20, 9:11am 1593637888

I wouldn't want to have that association made either. Don't want to scare the sheeple.

by middleman1 | 2nd Jul 20, 10:28am 1593642485

'Communism is a lazy right slur used by those with no context and no idea what they're saying'..... as with many words today where the proper meaning has been degraded. eg society is apparently fill of fascists and nazis, owning more than one house makes one a rabid capitalist and anyone in favour of market economies is a neo liberalist. In our shallow unexamined self world labels that convey concepts have become accepted and necessary communication media. People like you and many of those who participate in sites such as this are the odd ones out.

by dcnbwz | 2nd Jul 20, 10:42am 1593643370

If market economies are managed in a less rapacious way than the last 40 years, all for them.

It's kinda sad of false, degrading labels are the currency of communication in certain worlds. They don't have to be.

by middleman1 | 2nd Jul 20, 11:49am 1593647370

'managed in a less rapacious way than the last 40 years' ..... which should be the key mission of a genuine green movement; to moderate the excesses of capitalist consumption and thereby preserve the planets resources for successive generations. Instead their primary focus is societal reorganisation through a process of increased welfarism and aggressive identity politics. The breaking down of cultural institutions inherent in their policies would be immediately recognisable to Antonio Gramsci, creator of the modern marxist long march though the institutions concept.

by Boatman | 2nd Jul 20, 8:15am 1593634557

Thank you for pointing this out .

Wealth taxes have been abandoned by most countries in the OECD because they dont work , they create distortions , cause resentment, encourage capital flight , and are a hurdle to Capital formation .

In essence a wealth tax makes everyone poorer

Most importantly , the tax does not meet the 4th requirement for an effective tax system .....FAIRNESS

by middleman1 | 2nd Jul 20, 10:37am 1593643033

Boatie. Yes, it's intriguing that while wealth taxes decline across much of the developed world for the same valid reasons identified by successive tax working groups, the greens pursuit of deeply flawed wealth confiscation strategies ramps up. They acknowledge there would be widespread avoidance and evasion but incredibly accept that deep unfairness as collateral damage.

by Foxglove. | 2nd Jul 20, 10:57am 1593644226

And a fervent supporter of late, of said Green policy, on this site, proclaimed that because internet pirates, fishers, scammers et al, likely had hacked your banking details, then that would justify government and agencies, to access those same details. So a government prepared to run with thieves then. This would be so bloody funny if it wasn’t true.

by middleman1 | 2nd Jul 20, 11:35am 1593646513

A similar rationale to that which district attorney Chuck Rhoades of 'billionaires' applies when attempting to bring down the mendaciously corrupt uber wealthy venture capitalist Bobby Axelrod; the noble cause of the pursuit of 'justice' of itself legitimises the suspension of rights. The need to implement ideological purity justifies the removal of privacy and freedoms.

by Foxglove. | 2nd Jul 20, 4:37pm 1593664643

Guess President Lincoln might agree, to a degree. His suspension of habeas corpus in 1861 and accompanying censoring of the press for justified as necessary to suppress sedition was not much short of autocracy and there was too, curled up in that the searching of property based only on suspicion . Still it stopped Maryland going south and they were wild and dangerous times, of which that he eventually fell victim. In other words hardly 21st century NZ.

by KH | 2nd Jul 20, 9:25am 1593638714

Baby incentive schemes are murderous to the planet.
I would love to see a real green party. We don't have one.

by dcnbwz | 2nd Jul 20, 1:28pm 1593653295

Can you explain the baby incentive reference? It makes no sense

by Rob Reid | 2nd Jul 20, 10:18pm 1593685080

See below for some stuff from the Greens' child policy:
All families should receive a universal child payment in the first part of every child’s life (see the Green Party’s [income support] policy).
Family assistance payments, such as Working for Families, should not be tied to employment status.
Benefit levels should be increased to ensure they are sufficient to meet families’ needs.

by dcnbwz | 3rd Jul 20, 6:57am 1593716226

I understand the baby incentive comment is invective, just thought it was pathetic.

by RickStrauss | 2nd Jul 20, 11:49am 1593647346

Just reduce income taxes and raise land value tax slightly, with consideration given to timing and mechanisms of collection. Reduce motivation to speculate on land (and break up land banks as was done in NZ's past), and encourage investment in productive enterprise instead of lazy money in property as NZ's default.

No need to get wound up in broad wealth taxes and fail to tackle the more simple issues.

by Foxglove. | 2nd Jul 20, 1:11pm 1593652298

Yes there is room and potential for a beneficial overhaul in the area of land and that would need to include the local councils’ rapacious compounding of residential rates by calculating them on the basis of GV. It has spiralled out of control, beyond being equitable and fair. For example aware of an elderly retired couple who have a new house from an EQ rebuild. They now pay twice the rates of next door, same sized house and section. All it was, was a replacement of their home, and involuntary at that.Yes most certainly a government should step in here and iron all this out fairly and squarely with a equitable system for all and sundry that embraces the collection of government dues nationally and locally.

by andyb | 2nd Jul 20, 11:54am 1593647669

Think its lunacy?.. Jacinda hasnt ruled it out... so a vote for Labour is a vote for the Greens.

by dcnbwz | 2nd Jul 20, 1:26pm 1593653162

Nice scaremongering

by dcnbwz | 2nd Jul 20, 1:27pm 1593653229

And a vote for national is a vote for act which is a vote for the gun lobby

by Wazim | 7th Jul 20, 10:15pm 1594116947

Are you confused about where you live? This is NZ. Your 'gun lobby' consists of working, taxpaying responsible adults who have been vetted as fit and proper by the police. We will all be voting and we will not be voting for the party that ran roughshod over our property rights and completely ignored (if not pandered to) the criminal element who create 99.9% of 'gun crime'. I suspect that a great majority of us will not vote for the other party that supported the party in question and ignored it's voting base in a craven attempt to coat tail on the public sentiment. Act will reap the reward for being the only party that acted responsibly.

by lastredact | 2nd Jul 20, 1:31pm 1593653492

Maybe not, especially as the Greens are so close to the 5% threshold in the polls. I'm wondering with Labour's strong polling and add in the Green's latest policy which won't appeal to most NZers, if we will actually see the Greens make it this election.....?

by C'est la vie | 2nd Jul 20, 12:28pm 1593649700

"After inflation it is 2.5%. After a wealth tax of 2% it would be close to zero."

Sorry, I'm no economist but isn't this a mistake in the calculation? Inflation happens holistically at a rate of -2%, on the 7% in profit it represents only a tiny fraction...

-2% of the 7% is actually closer to 6.86% in profit after inflation?

A further 2% only brings it down another 0.14% to 6.72% does it not?

by Kate | 2nd Jul 20, 12:43pm 1593650631

Yes. The whole article has a bit of mathematical chicanery about it.

by Laminar | 2nd Jul 20, 4:34pm 1593664479

The chicanery is intense indeed but not in relation to inflation. If you have 100k of income and it rises to 105k, and then you subtract inflation its inflation on the whole 105k, so you lose about 2.1k at 2%, so that part of the maths is actually about correct. One of the key errors is they apply a wealth tax to the entire income, but it will only apply to the after-tax portion of income.

by C'est la vie | 2nd Jul 20, 3:30pm 1593660612

Yes, you're right, thanks Laminar! I think what threw me was adding the 2% tax on top... It didn't seem right.

by Laminar | 2nd Jul 20, 1:58pm 1593655110

"Even business investment will struggle. The long term average return for investment in businesses is widely considered to be 7%. After tax that is about a 4.5% return. After inflation it is 2.5%. After a wealth tax of 2% it would be close to zero."

This really doesn't make any sense. Just consider a couple who, for simplicity, rents but also owns 5mil in investment property with a yield of 4.5%, capital growth of 5.5% p.a. and income growth of 3.5%, costs of 20% and taxes of 33%, we will also assume they spend 100% of their PAYE but none of their rental income.

After one year the portfolio has grown in value to 5.275mil and generated $125,000 after costs and taxes. We add that income to the pool of assets as cash savings and we get a sum of 5.4mil. 0mil-2mil is exempt, so the 2m-4m pays 1%, been $20,000 and the 4m-5.4m pays 2% been $28,000. So we subtract that from the pool and get 5.352m which is a gain of 7%, or 5% after inflation.

Its similar for a business. If we have a business making 1mil in gross surplus and a 7x multiple on its value it is worth 7mil. Give it income growth of 5% and taxes at 33% we can then calculate its position in one year. Income rises from 1mil to 1.05mil, so the business value rises to 7.35mil, income is taxed and adds 0.7mil after tax to the pile. Then we apply a wealth tax. the first 2 mil is free, then we pay 1% on 2-mil so that's -$20,000 and 2% from 4mil to 8.05mil which is 80k. So from 8.05 mil we subtract 100k, leaving us with 7.95 mil. Thats a gain of 14%, or 12% after inflation.

What do they mean it will be close to 0%?

by Due Diligence | 2nd Jul 20, 3:15pm 1593659751

Why is owner occupied housing and associated council rates even on that graph? Makes no more sense than including private motor vehicles and associated licencing fees on the graph.

All income is taxed at a very similar rate (for foreign shares an assumed rate is used as a proxy for actual income). Owner-occupied housing earns no income, so of course it isn't subject to tax (council rates, which is what is shown on this graph, is not a tax, it is more of a service fee). A rational argument can be made for capital gains tax, but Geoff isn't making that argument - he wants to tax the asset, not the income or realised capital gain.

Geoism isn't going to happen Geoff, please stop this folly.

by Due Diligence | 2nd Jul 20, 3:18pm 1593659914

Eye-watering hypocrisy here given that TOP was proposing a broad-based wealth tax less than six months ago. They very recently abandoned it when they realised that it is as politically palatable as a cup of cold sick.

by dcnbwz | 2nd Jul 20, 3:51pm 1593661885

Hope the rest of the anti green hysterical mob on here get to read your comment