By Jonathan Barrett*
Cyclone Gabrielle’s trail of misery and destruction presents a major fiscal and political dilemma for the government: how should the country pay for the recovery? Does it borrow now and spread repayment over generations, or raise taxes in an election year?
Either way, the cost is significant. Finance Minister Grant Robertson has estimated the bill for fixing damaged or destroyed infrastructure at NZ$13 billion – equivalent to 11.5% of tax revenue collected in the year to June 2022.
According to Waka Kotahi, just repairing roads in the affected areas will cost an estimated $1 billion – more than a fifth of the agency’s usual annual expenditure.
On top of all this, New Zealand is still grappling with inflation and a cost-of-living crisis. The likley stimulus effect of significant government spending has to be part of the government’s calculations.
Between a rock and a hard place
Reserve Bank governor Adrian Orr has already suggested those in power will need to choose carefully between borrowing and raising taxes. The first option is predicted to stoke inflation. The second is politically challenging in an election year when the opposition is offering tax cuts.
Borrowing is undoubtedly the more politically attractive option for the government. The burden of repaying capital and interest could be spread over several years, perhaps over generations. (There are precedents for extreme debt spreading – some British government debt incurred in the 1750s was only repaid in 2015.)
Borrowing money then spreading capital and interest costs over generations is a reasonable option for infrastructure projects, such as a dam that might be expected to last 100 years.
But the problem with borrowing to fix the damage caused by Cyclone Gabrielle is that we don’t know if, or when, another catastrophic weather event will occur. In fact, we seem to be experiencing so-called hundred-year storms with increasing frequency.
The burden of borrowing
Adrian Orr has also cautioned that borrowing is likely to increase inflationary pressures. If that happens, we can expect the Reserve Bank to move the official cash rate higher sooner, prompting retail banks to raise interest rates.
This will cause further pain for owners of mortgaged properties and businesses with high levels of borrowing. The economy could move into a deep recession as a result. There is a risk, too, of the economic nightmare of stagflation (recession and inflation, last seen in the 1970s) reappearing.
The government also needs to consider whether it’s fair to borrow to fix current problems. Younger generations already face the prospect of a bearing a disproportionate tax burden of funding the superannuation and health costs of older people.
And shifting an unpredictable climate-related debt burden between generations appears unfair. Even if global warming is restricted to 1.5℃ from pre-industrial levels, it’s impossible to predict whether Gabrielle-type events will become the new normal, or what other climate change remediation future generations will have to fund.
The trouble with tax
While increasing taxes would not create the same financial problems as borrowing, it’s clearly less politically attractive in an election year. But if we were to assume the government might take this option, which taxes might be increased or introduced?
In the medium to long term, a shift to carbon taxation is needed, but that won’t solve the current fiscal problems. The rates base in cyclone-affected areas has been decimated, and there is no precedent for cross-subsidisation between local government authorities.
An increase on the goods and services tax (GST) might be anti-inflationary, but it would disproportionately affect lower-income groups. And a steep increase in fuel levies, while theoretically attractive, is politically implausible in an inflationary environment.
A punitive tax on forestry companies – a type of reverse windfall tax – might have some populist appeal, given the role of slash in cyclone damage. But this could lead to job losses in some of the poorest parts of the country. Besides, reform will be best achieved through fundamental changes to forestry practices rather than an ad hoc tax.
The introduction of entirely new taxes – such as a land tax, a comprehensive capital gains tax, or some form of wealth tax – would takes years to craft and implement. That leaves an income tax increase as the only plausible option.
A fairer flood levy
Income tax surcharges are common during wartime. Countries like Germany and South Africa introduced temporary “solidarity” surcharges to fund national reconstruction or reunification (although the German Solidaritätszuschlag has still not been fully abolished).
But the most relevant precedent for New Zealand is the flood levy raised by the Australian government in 2011 to help pay for the devastating Queensland floods.
For one year only, taxpayers with an annual income between A$50,000 and $100,000 paid an extra 0.5% levy, while those earning over $100,000 paid an additional 1%. Taxpayers living in the affected areas were exempt from the levy, which was designed to raise A$1.8 billion.
In my view, the Queensland levy provides an appropriate template for partly funding infrastructure remediation after the catastrophe of Cyclone Gabrielle. A flood levy on higher earners would make a significant contribution to recovery funds and would send a message of solidarity: we are all in this together.
Regardless of what the government decides, in the years ahead we need to debate how taxes may alleviate the harm suffered by people and businesses after natural disasters, fund remediation and – maybe most importantly – reduce carbon emissions.
*Jonathan Barrett, Associate Professor in Commercial Law and Taxation, Te Herenga Waka — Victoria University of Wellington. This article is republished from The Conversation under a Creative Commons license. Read the original article.
137 Comments
What a shame the government has cynically called sledged the concept of indexing the tax brackets as 'tax cuts'. I can't imagine there is a huge amount of buy-in for a real increase in taxation after a decade of stealth increases to boost government coffers with no electoral mandate to increase taxes across the board.
The realty is the government has already had extra tax revenue - it helped itself by ignoring what should be a basic fundamental element of tax administration. I will also note the Australians frequently adjust their income tax brackets and sometimes do so years in advance of them taking effect. It makes this kind of proposal far easier to swallow. And given the odds of a natural disaster in a decade vs. the apparent inability to adjust tax brackets for the inflationary environment the government literally requires RBNZ to create, it's going to have to be a no from me.
Agree 100 % ... they've painted themselves into a corner by misusing the term " tax cuts " over many years .... Hipkins has stuffed himself ....
... allowing inflation to gradually push low to average wage earners into higher tax brackets has been Robbo's modus operandi .... as it was for his mentor Michael Cullen during the Clark government ...
Bugger off Labour : you've taxed us more than you should have already !
That's the real kicker. Tax seems to be higher than ever but I can't think of a single public service that's actually better. Hospital wait times are terrible, good luck getting the cops to show up if your house gets robbed (if you're lucky the police commissioner will just claim crime is made up), education standards seem to be declining, and our roads are so bad that I'm considering investing in an ex-Ukraine war APC for the morning commute.
Where is it all going and who is actually benefitting?
I understand the argument that if taxes hadn't risen that services would be even worse ... but we hardly seem to be getting "value for money" either.
Starting to think I'll just vote for whoever is going to let me keep the most of my hard-earned, and to hell with the consequences as they already seem to be here anyway.
Yip. Spoken as a successful businessman btw who used to always vote national and conservatives (uk). But to get my vote its not enough just to be the party that used to be good at economic management..
Right..
Whilst labour niaively made decisions that pumped the housing ponzi.. under them right now its plummeting (awesome)
7 house luxon and his merry band of landlord MPs want to pump it immediately and teintroduce policies to encourage kiwis to invest in rentals. We need an economy built on successful export and tech.. housing is boom bust and long term womt help.
Luxon wants councils to have responsibility for water assets with a nag dept in the govt. Has zero chance of working. Councils will coutinue as now to raise money under the guise of spending on water.. will spend on everythibng else.. waffle and excuse themselves and colle tively blame govt. The outcome will be expensive water bills for all and eventually cemtralisation. The only thing wrong with 3 waters is confused cogovernance..
Further luxon has no meaningful climate or crime solutions. He is looking to old failed solutions liek bootcamps and more prison time.. everywhere else where they are getting traction in the world they place less emphasis on jail etc.
And.. luxon wanta more low skilled immigration to help his rich mates who own businesses reliant on low cost labour. Nz doesnt have the infrastructure to support those people nor do those immigrants contribute enough taxes to pay the country enough to improve the infrastructure. Further that excess growth has contributed to the issues around flood damage (not enough stormwater infrastructure in auckland for the no of houses etc).
So.. i need luxon to come out with some decent policies as right now he is simply spouting populist views and isnt actually a popular leader (i feel not trust). I am far happier with a labour shackled to winston than pure national. My tech related business and other (non property related) interests will perform way better without national and i am more likely to invest and find better skilled staff who cam afford to live here and enjoy decent infrastructure.
Labour now spends more money on emergency and social housing than it saved by eliminating the interest tax deduction. So now everyone pays more - taxpayers and tenants. 30,000 families on the public housing waitlist. Thousands of kids living in emergency motels. Rents sky rocketing. Labour caused all this with their misguided interference in what used to be a functional private rental market.
Exactly. And my arguement isnt that labour are perfect. Lol.. far from it.
The problem is that 7house luxon and his band of landlord MPs have even worse ideas. They are simply saying what they think people want to hear and assuming we are dumb enough to nod and vote.
I really wish nat would come out with a dectn vision and policies to that end. But they are a bunch of moaners with no ideas or experience
You'll probably find they're in emergency housing because from 2015 to 2017 Kainga Ora's managed housing stock dropped from 67k to 63k. So we lost 4k houses where rents are capped at 25% income. Meanwhile Feb last year "Almost 10,000 Kiwis are currently living in emergency accommodation, including 4500 children.". Interesting. 10k people into 4k houses = 2.5 people per household.
- https://kaingaora.govt.nz/assets/Publications/Archive-Managed-and-Vacan…
- https://kaingaora.govt.nz/assets/Publications/Archive-Managed-and-Vacan…
- https://www.1news.co.nz/2022/02/18/exclusive-record-365-million-spent-o…
I recall the Labour government criticising the new highway North of Auckland as the "holiday highway" and now they have let the project run over deadline and Northland is cut off from the rest of the country at times.
Labours call for affordable housing with promises of 10 thousand to be built fueled the perception that home ownership is a right and prompted everyone to try to buy one or consider themselves a failure, fueling the housing crisis further by stoking demand but not delivering on supply promises.
Crime is occurring in ways never before seen in NZ and only when Dairy owners are being killed is anything done.
All the rainy day fund has been spent and now that a rainy day has come the coffers are empty.
But I guess at least a few people got hugs from the PM, that's something I guess.
An extra 50,000 Govt bureaucrats soaked up a few billion, plus all of Mahuta's Mates sucking on the teat of all those "Working Committees" that delivered nothing. Plus the billions going on emergency housing and Kainga Ora buying up premium developments in high end suburbs for their meth head gang mates.
I have never understood why they put people who have no interest in participating in society, into such central well located places to live, yet every other Tom, Dick and Harry work to pay rent, and engage in society, then move further out of the center to afford a home of their own, yet the scumbuckets still get cheap central locations making it easier to deal drugs etc
Are you saying that Kainga Ora are not buying houses in prime locations for their tenants or that Kainga Ora tenants aren’t undesirable neighbours?
The latter would mean that would could build tower blocks to house them all together and these blocks would be no different from any other aparetment.
$ 1 billion + now spent annually on " consultants "
... such as the $ 55 million wasted on them for the proposed $ 785 million new walk-cycleway across Auckland harbour ...
Yet SH1 at Tinwald is still hampered by a lack of $ 35 million for a new bridge across the Ashburton River ...
... geez Labour , you really are a bunch of useless dopey sods ...
#1 Drunken sailors
#2 left
#3 right
#4 centre
#5 dopey ideas
Or did you mean actual things, because mindless stuff way easier.
I'm actually more inclined to pdks end of resources thinking and I certainly don't think people actually realise the true cost of infrastructure or it's cost to maintain. For instance thinking that the rucs and excise covers roading is nothing but a dream.
We can't afford to borrow as inflation is the #1 priority given it impacts all but the wealthy disproportionately. Harsh to say, but IMO true. We also have lost out on a huge amount of tax due to the 25c 'temporary' [scoff] tax cut on petrol and cheaper RUC's. Also lost out on large amounts of revenue for NZTA due to lockdowns; less car registrations and less tourism demanding rental cars which provides revenue for NZTA also. Now we have a large bill to pay for debt no only for the cyclone damage. It would appear that the labour government, with their knee jerk reactions, have stiffed themselves of some serious tax revenue, in the name of buying votes, that they are now in dire need of. The chickens are coming home to roost and as usual, we will all pay for their poor decisions. Perhaps Mr Orr could donate some of the 400k+ he got for his last payrise in the name of paying down our debt?
Yes. Before the government cries poverty and imposes extra tax, it had better cut out all frivolous spending. Otherwise it would be like a customer coming to you in their new Range Rover to say they can't pay their bill this month but will sort out what they can do when they get back from the overseas holiday.
And no, don't borrow the money, our kids are already going to have enough on their plate.
As a self employed person, I pay 15% GST on my income after expenses. Then I pay say 30% tax on what is left. Then I pay 15% tax on all my spending after that. Is that not enough tax, the right amount, or too much? How can a government squander that much tax for so little return to it's taxpayers? It has been going on for far too long. I can see why people try to minimise their taxes in any way possible. The answer is to slash and burn all government spending that I don't like. Then our taxes would be down to some small amount that encourages one to work. In the meantime, it is minimise tax payments as much as possible.
If you are self employed and paying too much tax you need a decent accountant.
The rich in NZ pay very little tax..their contribution (as with most western countries) is to run businesses and employ people that pay lots of tax and pay a fair amount of business taxes.
Unfortunately it has always been and will always be this way. If you try to charge them more taxes ( which they should pay) they either get their accountant to avoid paying or permanently move their homes, businesses and money overseas where tax is less and the employees and nz economy loses out.
Well you collect GST from the client and then pay it to Inland Revenue. The GST does not come off the bottom line of the business, it's added to the top of your invoice.
Not sure what you mean by "net GST payee", GST is not coming out of your pocket. GST alone won't make a business go broke.
Companies such as the one I work for have been well-positioned to service the large Aussie market from their relatively cheaper outposts around NZ but looks like that's starting to change. In fact, we may also be on the preferred list for incentives from the Aussie government soon.
My niche industry alone contributes to hundreds of millions in high-value service exports; something NZ should be grasping tighter.
Share your workings? Someone on 185k pays 52,270 in income tax, so 28.25% average tax rate. If they then spent their entire remaining income of 132,730 they'd have paid 19,909.50 in GST. Total tax paid is 72,179.50 which is 39%. So even if you spend all your income you can't pay that much tax.
Jane Doe bought a house in 2018 for $1,000,000. Courtesy of favourable government policy she sells in 2022 for 3,000,000. In 2022 Jane is on the dole but identifies as a 39% tax payer.
her actual gross tax rate is: 38.12% once you factor in GST her tax rate is 47%. Jane happens to have a 1989 Toyota Corolla, the Toyota Corolla likes petrol. Jane likes it when her car gets what it likes as it will then help her get to her happy place. Jane has to pay tax on the petrol she buys for her car at a rate of about 26% meaning that in total each dollar she spent on petrol attracted over 61% tax.
Only half of nz households are paying any net tax after credits and benefits.
Half of NZ income tax is paid by 12% of taxpayers & 3% pay 25% of income tax.
Another socialist academic conveniently ignoring that his salary is ultimately funded by taxes on capitalism's competitive efforts to generate profits. Along with the Govts dysfunctional efforts to eg. waste $55M on studying Harbour bridge cycleways.
WFF needs to go ! ... Cullen's tax bribe to beat Brash in the 2005 election was a stupid idea at the time , and still is ... but , Kiwis are gullible , and easily suckered by the promise of " free money " ...
What's WFF now costing annually ... $ 3 or 4 billion ? ...
I agree, WFF is corporate welfare, it allows companies to pay employees less, who then have their wages topped up by the government.
End corporate welfare.
Get rid of the accommodation supplement while we're at it, since it's ultimately landlord welfare and pushing up the prices of housing.
And lest we forget with the average salary increasing, it takes far less work to lose out on far more WFF henceforth making it less attractive for families to earn more unless it is a substantial increase in joint income that would still be a worthwhile profit on top of the loss of WFF due to said increase in income.
Weird - for an article purporting to discuss the fairness of such a tax, the author does nothing of the sort. An Associate Professor in Commercial Law and Taxation should be able to give us some actual considered discussion on what tax fairness means and how alternatives might affect different segments of the population. Instead, the only justification provided is that some other countries have done something similar in the past, and it would "send a message of solidarity". Well I can't think of a stronger message of solidarity than imposing an extra tax on tall poppies, doesn't that just shout "we are all in this together, thanks for the cash!".
Its where Victoria University has got to - very woke lefty views and often once over lightly like this
NZ Govt has become a redistribution organisation rather than a capacity building organisation - maybe time to get back on track and spend more of the taxes raised on "infrastructure"
And stop using climate change as an excuse
No. Our family already pays 10k more tax than other similarly incomed families.
Along with the unfairness that is the Auckland Regional Fuel Tax - I noted this wasn't on the cards for removal when they dropped the levy, thus leaving Aucklanders paying even more disproportionate tax than the rest of NZ.
The only people the government should be assisting after the events of this past month are the affected tenants - everyone else (businesses and landlords) should be covered by their insurance. If not insured, that's their own risk.
If they get the dole then they should be forced to work at least 30 hours a week on socially useful work, leaving the residual 10 hours a week to actively look for a job.
The dole is not an entitlement, but just a temporary emergency support paid by the working part of the population.
Protip the DOLE DOES NOT EXIST. Most of those on Jobseeker, (over half) are disabled and most of those physically cannot work as in so ill many are bedridden or without any form of transport or need daily support worker care. Also many recently out of work e.g. made redundant or offices downsizing, employed in highly seasonal roles with fixed terms e.g. fishing, hospitality or moving to new areas will be out of work for a short time so they almost don't count. Also captured in Job seeker benefits if not disabled are also carers for disabled people (a role the government gets cheaply instead of actually employing someone full time to do the support work they otherwise would have to). So they already have jobs of over 60 hours a week they work for below minimum wage. NZ really really hates the disabled people as you so keenly demonstrate with widespread discrimination and abuse of them.
National really scored a good propaganda win when they rolled thes Sickness benefit into the "jobseeker benefit".
They magically 'disappeared' all those people and lumped them into the same group as the 'feckless unemployed' without making the process of applying for the benefit any easier at all - lots of stories of people forced to jump through hoops and spend money they don't have to get doctors reports every single year confirming that their life-long disability has not miraculously cured itself since the last report 12 months ago.
@sadr001 Let me bring you up to speed on reality in the public sector.
1) If we cap public sector FTEs then more work is tendered to consultants at 3x the price.
2) If we cap salaries ($100k has been the popular "high end" mark for >15yrs now) then people leave and come back as contractors on $100 per hour.
3) If we cap salaries then the work is less attractive compared to private sector, so things just don't get done or go to Items 1 & 2.
4) How many teachers, nurses, junior doctors, DOC staff, firefighters, police or mines inspectors do you want to fire to satisfy your lust to learn the bureaucrats a lesson? Or are you referring to those "other" bureaucrats that do fluffy stuff like policy & regulation?
5) Government funding for outsourced service contracts is not CPI-indexed, so every year the available money buys less & less "stuff".
Cut PR staff, middle management, vanity projects (sky bridge, light rail, provincial growth fund), reduce ideological regulatory overhead, additional trust reporting standards, reporting per pay period instead of annually, co governance, rebranding government departments with Māori names, DHB rebranding into health authorities, 3 waters, gang run meth rehab programs with exceptionally high relapse rates, etc…
How many teachers, nurses, junior doctors, DOC staff, firefighters, police or mines inspectors do you want to fire to satisfy your lust to learn the bureaucrats a lesson?
How much disposable income should people be expected to cough up at a time of exploding living costs for these roles you want to appeal to on emotive grounds of necessity to still get paid sod all in the first place? This needs to start cutting both ways. Just exhaustively tapping taxpayers when they're copping it from every direction and still coughing up garbage levels of services where essential workers are still poorly paid anyway isn't the slam dunk argument some people seem to think it is.
Most who you consider to be on the fictional "dole" are disabled and denied education, employment and training by people like you calling them invalid. Protip someone blind or in a wheelchair can be perfectly capable of work but is frequently denied any or told they must be picking fruit when clearly that would be near physically impossible and illegal for the employer as it is unsafe
Correction
The highest welfare costs are and will be the pension benefit which far exceeds all other benefits and housing costs put together and is steadily growing.
Most collect the pension benefit and get additional income sources past the age of 65 so saying they all need the income support because they are out of the workforce is incorrect. I just hired a perfectly able bodied capable 70 year old who looks after a young disabled family. The young woman can receive no income support even though they are bedridden and unable to work while the able bodied 70 year old collects full super benefit, accommodation supplement, owns their own house without mortgage and gets well over the living wage. They were offered council housing and were considering it as their trust could collect additional income from their primary residence while they got cheap council housing (taking the option away from families who do need housing). Go figure no wonder there is such a wealth divide and high benefit costs.
Too much goes towards benefit & housing support to those who need none while those who are literally homeless & disabled are left without any or amounts far below an equivalent to minimum wage. It is a biased system of immediate benefits by age not ability. Likewise council housing available to those over 65 while their trust can rent the home, but not to those under 65 homeless. We have detrimental view on abilities of people by age that cuts both ways & in turn reduces job opportunities (but never to the dire state we deny jobs to actual disabled people).
The Government had no problem implementing $53B in QE and then incurring an additional loss as the value of their bonds fell (approx $7B).
Always come back to 'tax the rich.' How about spend less, spend better. Cycle ways, arts grants, consultants, PIJ....these clowns wouldn't survive in self employment or industries with genuine competition. And this includes all political parties and academics. God I hate them.
Yep. And look at how political/ ageist the article is:
"Younger generations already face the prospect of a bearing a disproportionate tax burden of funding the superannuation and health costs of older people."
Why is not the increased debt associated with all the money printing not included in this sentence?
I see you're still pretending like inflation in NZ is solely caused by government actions and ignoring that every country in the world is suffering from inflation, a good part of it down to increasing prices of scarce energy.
Also failing to consider the counter-factual of what the country would look like now had our response to COVID been different, because it's likely the situation would be worse - we have very low unemployment and amongst the highest GDP growth rates in the world.
My query is : is Lanthalidomide an actual Labour insider ... or just a dyed in the wool rabid red supporter ...
.. I mean , even staunch Labour man Chris Trotter has blasted the Arden/Hipkins government ... they have lost the plot ... they stand for nothing that traditional Labour did ... a blot on a proud history ...
As I have repeatedly said, I do not belong to any political party and never have done. I am also not a Labour supporter, I am anti-National, as should be abundantly clear to anyone who reads my comments with an open mind instead of pigeon holing me. In the last 3 elections I party-voted Labour once and am quite unlikely to party-vote Labour this time, either (they'd need a massive adjustment in their policies to win my vote back).
You can in fact find a comment from me on this very article, agreeing with you that WFF should be scrapped.
Labour can have all the policies in the world, the core issue is they are either incapable or just plain don't to actually execute them. See: Light rail, Kiwisaver, Tax reform. Imagine if those had actually come off. I'm a huge light rail fan and there is huge potential for it to transform Auckland. Suburbs should be clamouring for it. It should already be running. It isn't. It may never happen. Who knows now.
There is so little moral high ground when it comes to bickering over which brand of party gets to lead the electorate on and then gaslight them when they ask for the things they've been promised as policy when someone need to get elected. Focusing so much energy on things a National Party did close to decades ago while a government with an absolute majority dithers (and none of their partners walk away on principal, for all they supposedly care about progress) tells you what matters most in NZ. Being seen to care is more important than caring enough to actually change something.
You yourself said you didn't understand why National wanted to cut the 39% tax rate.
And no, I don't want more Labour government, but they're better than National and the next PM is going to be from one of these parties (barring totally unrealistic fluke / black swan events).
... still not answering how they're " better " than National ... when it's obvious to most folks here that this Labour government are a train wreck...
And . . your repeated defence of Labour / repeated hatred of the Gnats makes me think you're full of sh*t about not being a Labour stooge ... dude , your credibility is in tatters ...
The core issue with National is the only policies they have are demonstrably bad for the country.
...like the bipartisan accord on housing development in cities? That Labour supported?
Portraying the government as 'do nothing' when there's a huge chunk of quality-of-living standards getting worse under their watch is duplicitous at best, and it's great that you don't feel you are personally affected, but there's a huge chunk of people who aren't that comfortable and definitely are affected. But then again it comes down to whether that actually matters or not, or whether projecting your existence over an entire population to justify your own political identity is more important than actual, positive change, like the kind of thing that Labour promised to get elected.
...like the bipartisan accord on housing development in cities? That Labour supported?
Er, no, not like that at all. That was a policy that Labour came up with and managed to get National to agree not to repeal, unlike everything else National is promising to repeal, while simultaneously claiming Labour hasn't done anything.
Sorry, National don't get bonus points for agreeing not to wreck something.
Portraying the government as 'do nothing' when there's a huge chunk of quality-of-living standards getting worse under their watch is duplicitous at best
How is it "duplicitous at best"? That's exactly what happens under "do nothing" governments.
or whether projecting your existence over an entire population to justify your own political identity
Er, what? I want Labour to do more than they are, not less. Just because I choose to berate National and am anti-National, doesn't mean I must also berate Labour - there are plenty enough commenters on this website bashing Labour already (usually on totally unreasonable / imagined / myopic grounds).
It’s a lazy discussion piece.
I would favour a universal CGT exempting the family home. I’d want a threshold of gain before tax kicked in and possibly a discussion about tinkering with family homes with huge value to avoid hiding wealth and gains in the family home.
Folks work hard to generate an income and they are productive. Don’t punish them for that.
If you factor in inflation to the increase perhaps - otherwise the govt and Cbankers are incentivized to create inflation, giving them the opportunity to tax your assets as you try to maintain your wealth though cap gains (or more correctly cap maintenance of values).
There is no gain if you assets only rise with inflation.
No, I read that but don't believe that inertia is a good enough reason to dismiss it. You sight two governments time. I do not know how long a CGT would take but I haven't read anything with an explanation about what the lag would look like and why. Until then I believe it should be in the mix.
"We're all in this together" - where was that sentiment over the past 5 years when young kiwis couldn't afford to buy their own homes as the older generations continued to snap everything up and drive up property prices. No one on the side that benefitted then gave a dam about those adversely affected...
Noting the valid comments about tax bracket creep, why can't most people accept that the business of government is a business just like any other?
Their costs have suddenly increased so they need to raise revenue and/or lower costs. More tax is a valid solution, just not one we love. Someone else should always have to pay more first.
Indeed, the business of government is infinitely harder because they often find themselves as the funder of last resort paying for the negative externalities caused by private businesses - be that forestry slash, damage to roads from oversized trucks, regulatory non-compliance & pollution cleanups. There's also the cost of pandemics and the desire to pay wage subsidies to employers so we don't have 20% unemployment.
Then you have all those complicated "social" factors that don't fit neatly into double-column accounting caused by homo-sapiens not being logical utility maximisers. Personally I blame the aged for being old & infirm /s
The business of both Central & Local Govt is not a business like any other, its a legalised monopoly with no competitive pressures & captured by their bureaucratic jobsworths who do not know who their customers are: the historical & textbook expected results of this structure are both obvious & evident. At around 40% of GDP, there is a fair question that your strawman distractions ignore.
Their costs have suddenly increased so they need to raise revenue and/or lower costs. More tax is a valid solution, just not one we love.
Go ahead and dust off your trusty spreadsheet software of choice, and work out how much income tax a person pays for any given income level. Then work out how much tax they would pay if their income rose by 10% for inflation, and we adjusted the tax brackets by 10% for inflation. Now compare those two numbers. Notice anything? As if by magic, the government has collected 10% more tax revenue.
You make the argument that government costs increase with inflation just like any other, and if they indexed the tax brackets their income would increase in line with inflation to deal with that. What the government is actually doing is double dipping, which is what people are upset about.
Their costs have suddenly increased so they need to raise revenue and/or lower costs
Their costs have increased more so because they balooned out of control with excessive staff numbers, initiatives that were unwanted but progressed etc, then with the shortage of labour due to lockdowns that they themselves imposed, staff were demanding higher wages or shifting to where the money was. This exacerbated the shortage with such a loss of skilled workers from departments that they needed to offer more to get anyone n the door and further increased salaries. Now this is only one reason they have excessive costs, and yes there are externalities that cannot be avoided such as cost of fuel or travel for parliamentary members, but overall it is the decision makin of this government that has caused their costs to be so high, which has come out of all of our pockets. Not sure about you but I don't pay tax dollars for the governemtn to frivolously blow it on useless ideologies and PR campaigns.
Indeed consecutive governments have painted themselves into a corner by not having a broad tax base. The only thing they can do is put ever higher taxes on productivity instead of speculation taxes. The time for LVT or capital gains taxes was quite some time ago, but better late than never? No reason they can't borrow the money short term, then pay it back later.
The time for LVT or capital gains taxes was quite some time ago, but better late than never?
Capital Gains Tax only works when there are capital gains, if we implemented it now we might as well call it the Capital Loss Credit. It won't do the governments books any good.
Considering the property price increases of the last 3 years compared to the more minor fall it is still capital gains and can still be captured when considering short term sales of property. Even a sale within less than a few years would be enough to make more in profit than the median wage earned in those years. Tragic that actual hard work is undervalued while sitting and hording property using artificial equity gets many multiples in real income that can be realized and they would not even need to sell often or have a huge portfolio to have enough to live off comfortably. Those more wealthy are actually proven to work less than many roles which actually use the definition for hard work correctly e.g. compare the CEOs of many government entities like Te Pūkenga versus nursing, manufacturing, trades, line work, hospitality, stock work etc. You know the often absentee managers who collect a paycheck but expect those beneath them to do the work then act surprised in media that people ridicule them for not bothering to turn up to the job for months while collecting a paycheck.
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