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Susan Guthrie explains why taxes on wealth are important and needed now to bolster egalitarian values and prevent economic destabilisation

Susan Guthrie explains why taxes on wealth are important and needed now to bolster egalitarian values and prevent economic destabilisation
Come on Bill, do the right thing, says Susan Guthrie

By Susan Guthrie*

Enough ducking of the issues!

Bill English’s response to Oxfam’s report about rising wealth inequality was to point to a government report which suggests income inequality hasn’t got worse over the last ten years.

In other words the Minister doesn’t want to talk about wealth, just about income.

New Zealand’s tax policies don’t attempt to rein-in wealth inequality even though it is well known that significant wealth inequality can destablise economies.

With wealth disparity growing in New Zealand it is a relevant question to ask at what point is economic growth impaired, let alone whether New Zealanders are quite happy for polarisation of wealth to extend unabated.

Not helping the widening wealth abyss is the fact that New Zealand’s tax policies are based on the out-of-date notion that the only income which should be taxed is that received directly as regular cash.

The world has moved on from this.

The assets used to hold wealth these days provide a whole lot of benefits for their owners, and they don’t have to produce cash to do it. In fact, the assets are often chosen specifically because they don’t produce regular cash and hence the effective income from them doesn’t get lost to the taxman.

Wealth is powerful – it gives you a buffer to navigate life’s rocks and opens up all manner of opportunities denied others.

You can sell down your assets rather than getting on the slippery slope of debt.

Importantly, owning assets like houses and complex financial instruments are a tried and true way to earn income that isn’t taxed. They produce in-kind benefits – the equivalent of rent, in the case of owner-occupied housing, and capital gains in other cases.

By avoiding tax on the non-cash ‘income’ produced by their investments, owners of capital benefit significantly.

The solution is simple.

Start including the non-cash benefits produced by wealth in individual tax returns.

That means broadening the definition of taxable income.

It is not rocket science. It means asking people about their wealth as well as their cash income. For example, do they own their own home, and if so how much equity do they have in it?

We can then make a simple assumption about the rental equivalent of that and include that amount as taxable income.

We already do something similar for employees whose bosses provide them with somewhere to live. The ‘deemed’ rental equivalent of the accommodation the boss provides has to be included as taxable income to the employee even though no money changes hands.

We can ask about the value of the financial investments people own. If the assets generate regular cash income, that is already included in taxable income – so no need to change that.

But if the amount of cash generated is tiny compared to the value of the wealth we can make a reasonable assumption about the non-cash returns and tax that (the combined cash and non-cash returns will be at least as much as the return from risk-free government bonds). Gareth and I proposed this type of tax reform in the book The Big Kahuna published in 2011.

By failing to bring income tax policy into the 21st century the government is turning its back on something like $6 billion in tax revenues – and leaving it in the hands of the wealthy.

Bringing these untaxed benefits into the tax net would allow a significant reduction in the tax collected from wage earners.

Now that would start addressing inequality.

Why won’t Bill have that conversation?

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Susan Guthrie is an economist at the Morgan Foundation. This opinion piece was first published on the blog garethsworld.com and is reprinted here with permission.

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64 Comments

Let's be clear.

This article is was written under the auspices of Gareth Morgan who made tens of millions tax free and now lectures us on "taxing wealth"

Let him offer to pay tax on what he raked in first as an example and then we may believe him.

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Dont use "we" I am not part of your "we".

It is quite reasonable for anyone to work within the system presented.  Sure GM has wealth, however as this piece says lets tax it, in effect he would indeed end up paying more tax on previously aquired wealth.

regards

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People have a choice.......they learn how to make it.......or they learn how to take it !!!

 

GM should be a better person if he taught people....how to make it, rather than take it !

 

Interesting that the meaning of Kahuna is ""

Kahuna is a Hawaiian word, defined in Pukui & Elbert (1986) as a "priest, sorcerer, magician, wizard, minister, expert in any profession". (See also Ancient Hawaii.)

Forty types of kahuna are listed in the book Tales from the Night Rainbow. Kamakau lists more than 20 in the healing professions alone, including for example "Kahuna la'au lapa'au" (an expert in herbal medicine) and "kahuna haha" (an expert in diagnosing illnesses).

With the revival of the Hawaiian culture beginning in the 1970s, some native Hawaiian cultural practitioners call themselves kahuna today. Others, particularly devout Christians, disdain the term. The word has been given an esoteric or secret meaning by modern followers of Max Freedom Long and Huna to emphasise a priestly or shamanic standing; however, those interested in true Hawaiian traditional mysticism must understand that "Huna" is not Hawaiian and should be wary of anyone using the term.

Many myths have grown up around kahuna. One is that kahuna were outlawed after the white man came to Hawaii. It is known that there were many different types of kahuna. Kahuna can be divided into two categories: "craft" kahuna, such as kālai waʻa, an expert canoe maker, and hoʻokele, an expert navigator; "sorcerers" including kahuna ʻanāʻanā and lapaʻau (healer). According to one source, there were ten types (or ranks) of sorcery kahuna.

  1. Kuhikuhi puʻuone (literally "to direct divination"): one who locates the site for the construction of heiau.
  2. kilokilo: one who divines and predicts future events, a prophet.
  3. Hoʻounāunā: one who can send spirits to cause an illness.
  4. ʻAnāʻanā: one who can pray someone to death.
  5. Nānāuli: one who studies natural signs, like clouds, rains, and winds.
  6. Hoʻopiʻopiʻo: one who touches a part of his own body, thereby causing injury to his victim's body in the same place (like voodoo dolls)
  7. Hoʻokomokomo: one who can send a spirit, usually evil, to possess its victim.
  8. Poʻi ʻUhane: one who can catch a spirit and force it to do its bidding.
  9. Lapaʻau: one to practices procedures of medicinal healing.
  10. Oneoneihonua: one who performs the human sacrifices at the luakini heiau.

It is said that the one who can master all of the ten types, becomes a Kahuna Nui (Great Kahuna). It is known that Hewahewa, a direct descendant of Paʻao, was the Kahuna Nui to Kamehameha I.

 

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No. In this system there are those that take, and those that are taken from. You can't have a good system of makers until you eliminate the takers.

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Play the ball not the man (or woman)

One of the easiest ways not to discuss something is to discuss the person who said it rather than what is being said.

The Economist  does this by way of not publishing the writers name in nearly all instances.

 

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'and then we may believe him."

Speak for yourself BigDaddy, or are you using the royal 'we' ?

I believe him.

 

By the way, GM is very generous with his charity work, I certainly remember his typhoon Haiyan generousity.

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Haw haw haw ...... Susan ol' gal, you should not suggest such nonsense, we the "uber rich" say what "income inequality" ?! ...fiddlesticks, I say to that, sitting here in my King Louis the 17th luxury leather bound chaise lounge .... delightfully comfortable.

How are we going to our maintain of lifestyles of being "rentiers" I ask ? ....taxing capital gains on an annual basis...that is what the plebs are for !! ... It's all about the beloved banks dear, they are controlling the world ! ...keep the plebs tied up with exhorbidant mortgage repayments and high rents, way out of line with their pathetic incomes ...haw haw !!

I just love the current system ...we have you all you "bourgeoisie" wrapped around our little pinkies ....mortgage slaves.... haw haw.

Get back to your PC and you $50k pathetic salary ...... $50k pa haw haw haw haw ..... wouldn't even get out of my duck feather bed for that !! .....double haw haw !

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.... ever thought of going into politics , old chap ?

 

There's a certain party who're gonna need a new leader after the next general election , and I reckon you're the fellow with the right amount of personality to inject some oomph into these shades of grey dreary feckers ...

 

... Pip pip !

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GBH ....lovely to hear from you ol'  boy.

 

Politics ....... for the birds, say what !!  ......why, when you are in banking you can "manipulate" in private, while in politics, you have to "manipulate" in public ......there is the "Point de différence"

 

Enjoy those gummy bears squire.... the purple, are ones favourite.

 

Toodle pip ol' boy

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Indeed the degree to which our present tax system is unfit for purpose is demonstrated in the need for programmes such as WFF (a tax credit) and the Accommodation Supplement (a housing cost subsidy). Either we need massive wage inflation, a serious bursting of the property bubble or a shift away from gathering most of our tax revenue from wage earners.

 

Massive wage inflation would only serve to weaken employer profits - hence a reduction in overall tax revenue.

 

Bursting the property bubble is the present target of the RBNZ and the government - and the political parties of all colours.

 

It seems to me that the outcome of significant deflation in property prices would be worse for those holding a great deal of property assets than this proposed shift in tax revenue.

 

The problem seems to be rooted in a psyche that seems to me to have grown out of the neoliberal reform era where the general population saw tax minimisation as a means to increase ones own wealth.  Whereas, not too many decades ago, the fact that one was paying lots of tax meant we felt we were doing well and getting wealthier.  I was, for example, very proud during the Muldoon years when I first crossed over into the top tax bracket.  

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Are programs such as WFF needed? Who knows. But I have my suspicions that these redistributions simply lead to higher rents and higher price levels overall - what else could possibly be the outcome of giving more money to 'unproductive' members of society who are likely to spend every last dollar?

My question, the answer I guess we'll never know, is if WFF was never introduced, would society as a whole be any worse off?

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WFF (I believe) only applies to adults who are working and who have dependant children - so not sure what you mean by 'unproductive members of society' (unless you consider minimum/low wage workers as unproductive)?

 

If not for WFF, we'd have alot more than 250,000 children living below the poverty line, I suspect.  The 'living wage' movement grew out of recognition regarding the reliance placed on  WFF. To me it's a wage subsidy - lift wages and it wouldn't be needed ... but the lift needed to get to living wage from minimum wage would be too much of a shock to too many businesses - particularly the services sector, which is a huge part of our economy.

 

Point about the Big Kahuna however is that WFF, A/S and all other forms of income-tested social welfare/ assistance (including universal super) would be extinguished in favour of a guaranteed minimum income (GMI).

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I think WFF was introduced because of rising living costs versus stagnant/inadequate wages. WFF was probably introduced in response to rising housing costs in the 2000's. Young families being a particularly vulnerable group to this problem.

 

Fix the housing market and some of these subsidies would no longer be necessary.

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As I recall it was an OECD report that suggested measures were needed to close (what I believe they referred to as) the income gap. HC's government then introduced a requirement that all government departments address a program they titled "closing the gaps". So, initially there was to be a 'whole of ogvernment' approach to it. This program was however highly derided by the media and other centre right/right factions within government and they dumped the 'whole of government' approach to addressing it. Hence, WFF (a means of addressing it via the tax system) was subsequently introduced.

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To start with they are not un-productive, or you can show  proof of this?? Second spending every penny puts money into the economy that makes demadn and hence jobs.

 

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"is if WFF was never introduced, would society as a whole be any worse off?"

Yes as WFF is widely pointed at as reducing in-equality in NZ.

regards

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The basic problem with this is that she is seeking to address inequality, rather than poverty.   Yes, making rich people poorer will improve "equality" mathematically defined, and is certainly more easily done than making poor people richer, but will it really improve anything for the poor?   Are there actual examples where poor people have been successfully helped out of poverty, or a nation's wellbeing (as opposed to "equality") genuinely improved, through punishing rich people? 

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How do you make rich people poorer without making poor people richer?  What would the government do with the extra tax take?  Use it to provide freebies targetted at the rich?

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Yes, because throwing money in the general direction of poverty has proved so effective.

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I see no circumstance where any responsible NZ government would have a stated goal to make *any* person or group of people poorer.

 

Anyone who is places their faith in a government to make them 'rich' is building a house in a swamp.

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Straw man arguemnt, no one expects a Govn to make them rich, however most reasonable ppl would expect a Govn to prevent someone starving to death.

 

regards

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Half of auckland was built on a swamp.

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Eeeeexactly. Poverty is defined in relative terms - if we were all equally poor, there would be no poverty. Never mind tackling the underlying issues around why people are poor in the first place - no, lets just redistribute - there, problem solved. Yeah right - no wonder WFF isn't a raging success.

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No, poverty is defined as not having enough to survive or with difficulty,  "the state of being extremely poor."

http://dictionary.reference.com/browse/poverty

The only relative is V cost to live, not each other.

Having read your other posts, my conclusion is you have no idea what you are talking about what so ever.

regards

 

 

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Actually wrong, WFF seems to be a success.

regards

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The only thng successful about WFF if you can call it that, is that it behaves like a subsidy so hardly a real success is it. Successful for Politicians who want to retain this groups vote. I suspect that you like price distortions and dislike a proper free market and bad policy.

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Yes it will improve things for the poor.

It isnt punishing and actually if you look at the 50s and 60s the top rate was a lot higher, yet that didnt stop a great economy.

Put it another way are the rich productive? or parasitic these days? I suggest very much the latter.

regards

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Under Foreign Investor fund rules there is a deemed tax rate on the value of the investment.  It makes no sense to apply such a tax to  foreign 'invesmtents' and not to all other assest held. What is the diffference between investing overseas and investing in land banking (as an example).

Simple answer...too much influence by those with influence.  The donations for favours system an indicator on how corrupt things really are.  Maybe the Greens can sort it....lab and the nats sure as eck won't.

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As a "victim" of FIF rules I can see no reason for not doing the same internally.

In fact the only reason I hate FIF is that it is an unequal tax. A new government tax change should tax gross assets not gains and FIF should be replaced with the new rules.

Taxing assets ''controlled'' would obviate the benefits of using borrowed money to gear up wealth accretion and make rentiers squirm while lowering real estate values to bring them closer to what owner occupiers can afford.

 

Actually, I think the FIF rules should be wiped because I am sure I invest better than I can in NZ and eventually when I repatriate, the NZ Economy would benefit from the gains made.  Certainly the Gumint needs some help to pay off the overseas debt burden.

 

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I feel middle class, although contributing at least 60% of tax revenue, is like an orphan that no political party cares about, and is becoming a class of slaves that all political parties can screw and squeeze a bit of extra if they want to.

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So when the value of my house halves when I start paying tax on an estimated rent, presumably the fall in value will be tax deductible against other income.

Or if the house value magically falls on sale( possibly to a trust or related party) will that be deductible??

 

A whole can of worms will be opened; just looking at how incredibly complex the Australian CGT system is I don't think it would work.

Naturally a wealth tax imposed @ 50% pa on total over , say $5, 000,000 assets will equalise things quite quickly,(or send them overseas) but I have not heard this proposal from Gareth or his proxies.

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.........doesn't need to be comlex at all.. we already do something similiar...its called rates.  In effect, a tax on your property. We could follow something like the FIF rules...if you aint getting X amount of return, then we will apply a tax rate on the asset value.  The land bankers rort would end...they wouldn't want to pay say 5% on the land value as a tax when the asset provides no immeadiate income...

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So you are really saying that you do not pay $40k in rates. Someone else does unless you have a vacant rental.

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Income has to come from somewhere.

I pay my landlady's rates too. And her insurance. Which means my customers do.

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So you are really saying that you do not pay $40k in rates. Someone else does unless you have a vacant rental.

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Yes, of course they do.  Just as the people who ultimately pay company taxes  are those companies' employees (or those who would have been its employees if the company could afford it) and customers.  Thinking that you can control the incidence of a tax - who's actually going to pay it - is a mug's game

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I'm not so sure about that.

Assuming the current restrictive zoning system, if I was a land bank and my $100K land cost $500 I would have to pass that on and the sale price of the land just become $105K.  The only reason to sell it is the cashflow cost of carrying the asset.  Really all that has happened is government policy has guaranteed a minimum 5% return.

In markets like Australia where they charge a tax (stamp duty) on house sale it hasn't stopped rorts, it has just driven up market prices.

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No you can and should make the fall in value of the asset non-claimable, though at present I think it is?

regards

 

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Thanx for this piece.

More economists need to speak out.

 

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Hmmm.  Easy, populist tagline, but t'devil's in the details.  Some examples.

 

  • IIRC, the Fambly Mansion has to be included in the tax net because to exclude it is a prime distortion.
  • The CG to be taxed needs to be on an Unrealised Gain basis, otherwise, for an owner who never sells (a Trust can be eternal...) the CG is never Realised.
  • The quantum of the Unrealised Gain can only be assessed by a valuation process of some description.  This is easy for Shares, where SX quotes on two dates can be compared.  Try That with a House, an Inventory, a Business, a Software Patent, or the 'Cull Herd'.  There will be a massive subjective element in such valuations.
  • Valuers can be Bought, Persuaded, Threatened or Swapped for a More Amenable Valuator.
  • Valuation processes are costly, so the process introduces a pure economic deadweight into the mix.

 

I could go on but y'all get the drift.....your thoughts on these very points?

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Simple, any and all income / profit should be taxed.

regards

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Like the US, all incomes are taxable and related expensitures are deductible.. ie. even mortgage payments on your own home

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Nope, the rich using accountants use "deductibles" to dodge tax hence simple, say none, as per PAYE is mostly (all?) none.  That way since the Govn needs a certain amount the base tax can be lower. KISS, keep it simple and stupid.

regards

 

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Maybe you didn't read it closely, the government doesn't need any realistic valuation method.  They can make "a reasonable assumption".

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Yes.  Forget taxing capital gains, just use a deemed tax rate based on the value of the asset.  As above, we do it already in one form on Foreign Investment Funds and in another form in rates. Shift the income base from an over-reliance on paye and gst and onto those who accumulate assets that underperform i.e Would you really land bank when 5% income returned on cap value was deemed to have occurred ..and so on.  Nope..you'd sell up or only hold if the value dropped markedly. 

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"With wealth disparity growing in New Zealand"

Can you post a URL proving ths please in real terms?

As some of it I'd suggest doesnt matter as its un-realised/un-realisable?

eg, if my home doubles in value I am not really more wealthy as I cant cash it in. 

I might be asset rich but Im cash poor and cant do much to realise that.  On top of that that asset value can plumet.

So I'd suggest that income is the better measure for many NZers. 

regards

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I find this article somehow annoying. In the first instance, it ignores the research.  If the report by the department of social development is correct (that the wealth inequality has not worsened in the last ten years) then all the statements Ms Guthrie uses to the effect .. "wealth disparity growing" "polarisation of wealth extending unabated" "the widening wealth abyss" .. are all completely untrue. Also, this assertion "the solution is simple" seems very naive. I have no idea about Ms Guthrie but I inherited $3500 in my lifetime and worked for the rest, paying a full measure of tax without any avoidance or minimisation measures. How is it fair, right or just to double, triple or quadruple tax hard working people? And to think double taxation policies won't create a vast quantity more of silly structures and effort for the sole purpose of tax avoidance is to forget NZ history. Lastly, I have to say, my life experience suggests that to trust government taxation demands to "reasonable assumptions" alone would be a sizeable mistake.
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Another question is that where you would spend extra tax on, if there were any.

 

I personally loath the action of spending more on beneficiaries. That will widen the gap even more.

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Lower the base tax rate generally to balance.  So if the tax base is broadened lower the bottom braket for all.

Your second sentence makes no sense I can see.

regards

 

 

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A CGT certainly generates a lot of emotion which does not make for a reasoned debate. It seems to me that:

a) The only people in NZ who are guaranteed to pay the correct level of tax are PAYE taxpayers, beneficiaries and Superannuitants, i.e. people who are taxed at source. Although this includes highly paid CEO's for the most part this represnets the lowest paid in our society and

b) CGT is not a Wealth tax it is a tax on the unearned increase in wealth. It goes without saying the the people most effected by a CGT are the people with the most wealth and therefore the biggest increase in untaxed wealth gains every year.

There are many benefits of a wealth tax and the IRD and the Treasury both believe, I understand, that it would level the invesment playing field and so help guide more investment inot productive assets.However I beleive that the biggest argument for a CGT is fairness. It means that no matter how you earn your money or incease your wealth everybody will incur some tax.

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Well said.

regards

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Seems to me Susan has been seduced by the neo marxist wrtiting of Thomas Piketty, stealing from one sector of society and giving to another removes investment that provides employment for the very sector you are wanting to improve.

3 Reasons to be suspicious of the inequality debate

http://www.incrediblecharts.com/tradingdiary/2014-05-27-economy.php

 

 

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Absolute hogwash.

a) The "rich" these days invest in income streams that are highly speculative and even parasitic, they cost jobs.  Sure there are some real business men they however seem to be a minority.

b) Actually putting money into a "poor" person's pocket that spends it does the economy far more good than in the rich person's pocket, spending creates jobs.

c) No rich person will create jobs if there is no return, ie ppl not spending and over-capacity.

d) We have Trillions is Bonds making nothing productive that is rich ppls money.

regards

 

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Now that'sabsolute  hogwash Steven!!!

 

a) Wage an salary earners could be seen as speculative and parasitical as they rely on someone else to create their employment for them.....so they are the real speculators and also the majority of voters!

b) Putting money into poor people's pockets does very little for the economy as the money cannot expand at the appropriate rate into other income producing assets which creates a bigger economy. Why do you want to keep poor people poor? Why do you pretend that redistrubtion is good for them when you know that it is not?

 

c) No poor person creates jobs! Public service jobs administering the redistribution are a burdon and provide the same issues in (b) above.

 

d) Think about "why" the bond market exists.

 

Redistribution via the tax system is the problem. Inequality of income comes from people not prepared to work for themselves, not prepared to take risks, not prepared to follow through, not prepared to educate themselves beyond the narrow system that is their world and then trying to enforce their idealogy onto others.

 

If we had a simple flat tax like say an APT tax and all people were treated equally then we we would see a huge change. People would be incentivised to do something for themselves rather than expecting others to always be doing things for them.

You spend a huge amount of time posting on this site and yet you are obviously an employee as you have a very poor understanding of the tax system. Which makes me conclude that you are a spoilt employee who has all their taxation done for them.

 

If you were any good at all you'd be out working for yourself......so what is going on? Perhaps you see employment as your safety net !!!  Which means you don't have to take any risks....as your employer takes them for you.....Wealth accrues because of people prepared to take on risk and manage it......for some people they don't always get it right and pay the consequences.......

 

Why would you advocate a system were you want to disencentivise  risk-takers in the economy? Maybe it is simply because you love your pay too much and aren't prepared to give that luxury up.  Your pay is what causes the inequality.....inequality comes from protecting your status quo position of not taking on your share of risk.

 

If you level the playing-field tax-wise then everyone is treated the same and every investment is treated the same. This removes all the distortions that the Socialist left propaganda system has created.

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a) You wish to see what you wish to see, that isnt reality. Your views are always of course way out Libertarian.

b) Dont put words in my mouth, I dont this or believe what you believe, simple. Your views are always of course way out Libertarian.

c) By spending all their money poor ppl create demand, which creates jobs.  No real business person creates jobs if there is no demand for the good.  many "rich" ppl these days dont produce a good, they speculate which is a tax and often distructive.

d) Bond market, why it was created and how it now works could well be different.  Moot anyway, I comment on the so called parastic class hiding their $s in it, not why it exists or is meant to exist.

Your views on tax well, our views are always of course way out Libertarian.

PPl do things for themselves, not all ppl think only of $s.

"Risk takers" ie real businessmen where they make a good, yes fine, no issues, where we see speculators that destroy value, no I object.

Everyone isnt the same that is the point of a progressive tax system. Those lucky enough to have a high IQ, or ability didnt choose this, those of average or low IQ didnt pick that.  Hence in a society we choose to re-distrbute to an extent.  Hard workers can be poor or well off, wealth isnt dependant  on just "hard work" I wish it was.

regards

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It is truly not worth any effort to detail a reply.

I will ask just one simple question:-

Assuming the world is 100% full of your lot and no drones, poor and employed parasites, how would you continue to exist?

 

 

 

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BBlll......maybe you should consider the opposing simple question.....How would you continue to exist if 100% of the people were poor?

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Sure. You start.

I will reply. After all, once the natural world stops supplying its  beneficience of stored resources, we will all be poor anyway.

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Well if that is your reply to anything I might write it is hardly worth any effort on my part wasting time in replying is there? I sure hope you kept the receipt when you purchased that opinion of yours.

 

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An important factor to ensure is clearly identified here is the recommendaion to tax on the value of the family home. Many have commented but few have identifed exactly why it is flawed. Being mortgag free doe not necessarily mean one has disposable income to pay additional tax. How about the situation where sombody bought their home in say the late 80's, paid it off through reasonable levels of income, or maybe a little luck, but then lost their job for any reason and can only get a low paying one? Asset wise they may appear well off, but cash wise could only be just scraping by.

This arguement is an old saw that regularly pops up by academics with no understanding of the real world. Actually I see this arguement as one proposed by property investors because it will push a few more people into the rental market as they will not be able to afford owning their own home. Thus property investors create more demand and can push rents up, increasing their returns and then ultimately pushing property values up.

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No-one has thought through the Valuation conundrum:  if a 'wealth' tax is to be introduced, there has to be:

  • a definition of 'wealth' which will withstand legal challenge
  • a way of valuing it
  • an appeal process for that valuation
  • an absence of loopholes
  • an absence of ways for graft and corruption to take root

 

What most common taters here seem to believe, is that the definition has to include capital appreciation, hence Unrealised.....and needs to include the family residence (the major loophole, and the very thing that the Big Kahuna advocated).

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Maybe it is simpler to tax the 'asset' not the 'wealth' and let the ownership be claimed. Give  everyone a tax free allowance and much of the value in their residence could be removed.

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This whole issue and talk of "unearned income" bugs me.

If I don't want "unearned income" Is there any way I can "unearn" it ?

I bought a property in 1996. As a retirement buffer, and also as a protection against the shrill baby boomer haters who I am sure will ensure that there is no meaningful superannuation for me by the time I retire.

I intend to retire on my savings and rental income.

All the increase in my property value is because of:

1. Renovation i.e earned by my personal hard work, material/labour paid for using my tax paid earnings. So just like any other value-added manufacturing Should I be taxed for something i have not realised (silly talk about deemed value CGT) ?. I am happy to pay tax on increase in value FROM THIS RENOVATION EXERCISE (minus costs) when I sell it which would be 20-30 years after my original purchase if CGT applies then.

2. General increase in property values. RE Asset and general inflation based gains are no good for me -- they balance out (in fact do not keep up) with general costs inflation and new charges like WoF. council fees, rates etc. As an example, if I passed on the property to my children and they wanted a different one, they would be effectively exchanging this property for something similar (i.e. sell and buy) on the current market. So where is the gain? This so called "income" is something I do NOT want. I would have been happy to remain on the original rental return with my original value on property and original costs. Do I have a choice to opt out of this so called "unearned" income ? NO. So who gains apart from the banks and the government ?

3. Rental return. My rent is not unearned income. It is my tax paid savings invested, earning me income with my small rental "business". Note that I have been paying income tax on rents received for quite a while because I paid off my property in full and wanted to before my retirement. SO this tax is a reasonable amount.

Susan Guthrie is blind to the implications of assumptions, or indeed not even questioning/justifying the assumptions she makes. Such as, inequality is bad, there must be more tax, one group should pay more tax because they can.

What about this simple assumption--Treat ALL people equally and let them do what they will the opportunity (legally). Do not try to penalise success and their earnings by trying to tilt the playing field and tax them more just to "reduce inequality". Why is there inequality in the first place.

I came to NZ over 25 years ago on a 38K salary. Never partook of the free education, never been on the dole, never done anything illegal, apart from one emergency surgery never used the hospital system, still fully insured for most non emergency needs. My children went to private schools. I think I paid a fair amount of tax from my earnings for whatver benefits people may deem I got from the government.

What do you think I should do when they come for my money when I retire with all these new ideas, concepts and rules ?

What should most reasonable "Mom and Pop"s in my position do ?

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Ugh. 'Value' of wealth might as well be a made up number. Nothing has a price until it is sold - 'market price' is the value agreed by purchaser and seller. Until such an agreement is made, it has no market value. We can estimate based on the sale of other similar goods, but a sale takes place, it is an estimate. And it tends to be wrong quite often - see stock market and housing bubbles.

I don't see how is a wealth tax is any different from 'consuming capital' - surely bad for the economy overall.

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