The tax shitshow

Public Policy / opinion

Natalia Albert argues nobody is selling the combination of taxes we need. It is by design and it is why the tax debate is stuck, she says

18th Sep 26, 5:00am by Natalia Albert

Photo by Jon Tyson on Unsplash.

By Natalia Albert*

Tax policy is the most important political statement. Everything else is downstream. It is also complex, boring and a nightmare to implement. Capital gains tax, wealth tax, land tax, income tax, inheritance tax, corporate tax, bright-line test, GST, blah blah blah.

And then, ok, more tax, sure, but for what? Off we go into the endless list of possibilities, which is exactly why it is confusing and boring. So, it gets reduced in a way that removes the complexity and it gets oversimplified. The Left wants more, the Right wants less, and it is just not that simple. It is not. No matter how you slice and dice it.

One side will say the wealthy are not paying their share, and we need new instruments to reach them. The other side will say we have a spending problem, not a revenue problem, and that taxing capital will drive it offshore. Neither is reasonable or practical.

And in November we will vote, and the tax system in 2029 will look substantially like the tax system in 2026. I know this because it always does. So how do we solve our problems? And can we?

What we currently have

New Zealand has one of the simplest tax systems in the developed world, and we are oddly proud of this. Broad-based, low-rate. Not many exemptions. A 15% GST that applies to nearly everything, without the carve-outs that make other countries’ systems a mess. The Treasury and Inland Revenue will tell you, with a straight face, that we have the broadest consumption tax base in the OECD.

Here is the shape of it. We tax income. We tax consumption. And we tax the accumulation and holding of assets almost not at all. Neither doing enough for our economy or our projected population growth. And my generation (folks born during the 1980s) and everyone born after that are going to have a dire experience once we start ageing.

We have no comprehensive capital gains tax. No land tax. No wealth tax. No stamp duty. No estate or inheritance duty since 1992. What we have instead is a bright-line test on residential property. It started at two years in 2015, went to five, then 10, and is back at two since July 2024.

Why that is a problem

The obvious objection is fairness. In 2023 Inland Revenue looked at 311 of the wealthiest families in the country and found they paid a median effective tax rate of 8.9% on their economic income, about 9.5% once you add GST. A middle-income earner pays around 20%. When the wealthiest households pay a lower effective rate than a nurse, something has gone grossly wrong that no amount of “broad-based, low rate” can talk its way out of.

But fairness is not the argument I find most persuasive, because fairness arguments are unwinnable. They bottom out in competing intuitions about who deserves what, and nobody has ever been talked out of one of those. We should still aim for equity as far as our capitalist, post-colonial structures allow. But that is not what a democracy is for.

The point of a democracy is stability, not fairness.¹ It is a system for deciding who governs without anyone reaching for a weapon, and for making sure the people who lose accept the result and turn up again in three years. Everything else it delivers depends on that holding. So, the question to ask of a tax system is not whether it is fair, which nobody will ever agree on, but whether people can keep living under it without concluding the whole arrangement is rigged. A system where the wealthiest pay 9% and a nurse pays 20% will not fail a fairness test so much as a patience test. I will come back to this.

In the meantime, there is a more practical problem, which is what our tax system tells people to do with their money. If you tax productive activity hard and asset holding barely at all, you have built a country where the most rational thing an ordinary person can do is put everything into an asset that produces nothing. We then act surprised that our businesses are undercapitalised, our productivity is flat and our housing is unaffordable.

The argument we keep having is the wrong argument

Both sides of the shitshow are arguing about how much money the government can collect. The Left says we need more revenue to fund the services people need. The Right says we cannot afford it and must live within our means. These sound like opposites, but they are the same claim. Both assume the government is a very large household with a very large bank account, and that the money has to come from somewhere before it can go anywhere. I have become increasingly unsure that this is the right question.

Ganesh Ahirao and Morgan Edwards² say there is a government Money Tree. They argue that the household metaphor is not just oversimplified but wrong. They explain that Crown spending flows through the Crown Settlement Account at the Reserve Bank, that government spending creates money rather than dispensing money already gathered, and that spending is therefore not operationally dependent on tax being collected first. That government not only can generate money but has every legal mechanism to do so. True but also not quite that simple.

So, if the government can create the money, why tax at all? To manage inflation. Spending injects money; tax withdraws it. If the state spends into an economy near capacity and drains nothing back, the constraint shows up as prices, not as an empty account. Tax also creates demand for the currency, shapes behaviour, and decides who ends up holding the money once the spending is done. The Money Tree is real; its limit is inflation, not the bank balance.

This is contested. It sits close to the modern monetary theory family, and plenty of orthodox economists think it either understates the inflation constraint or gets the accounting right and the policy conclusions wrong. I am not an economist, and I am not going to pretend the debate is settled. But I do think the household metaphor is dead, and that alone changes what we should be arguing about. A country is not a household or a company and should not be run like one.

The taxes that make sense to me

A land tax, because land is the asset we have most systematically failed to tax and the one where taxing it does the best. You cannot move land offshore. You cannot hide it in a trust structure the Commissioner cannot see. New Zealand taxes work heavily and land lightly, and that is an incentive problem more than a revenue one. A land tax fixes it by making the parasitic use of capital less attractive than the productive one, which is the entire point.³

A higher income tax and a higher corporate tax, but modestly. The top personal rate sits at 39% above $180,000. Take it to 41%, not the Greens’ 45%, and leave the threshold where it is. Company tax sits at 28% for everyone. Move it to 33% for the largest firms only, the banks, the supermarkets and the gentailers, and leave the 28% for the small and medium businesses that actually carry the risk.

Fewer things, done better

I think the state should do a much smaller number of things and do them better.

Health. Housing. Infrastructure. Seniors, children and the disabled community. That is close to my whole list. They are not the only things that matter, but they are the things where failure compounds, where private provision reliably produces worse outcomes at higher cost, and where the state is the only actor with the time horizon to do it.

So that is my combination. Tax land. Nudge the top income and company rates up without pretending it is a revolution. Then spend on fewer things and do them properly. Nobody is selling that box in November. The Left has the taxes and none of the discipline. The Right has the discipline and none of the taxes. Open to suggestions.

1 Yes, this is an unbearably narrow definition of democracy, and I know it. Democracy is also participation, rights, representation, accountability and a dozen other things political scientists have spent careers arguing about. But stability is its primary function, above everything else.

2 Ahirao also publishes as Ganesh Nana and chaired the Productivity Commission until it was disestablished. Edwards is a PhD student at Otago researching the mechanics of government finance in New Zealand. Both write on Substack, and you should read them directly rather than trust my summary.

3 Full disclosure: I stood for TOP in 2023 and land tax is their signature policy. I would make the argument if they had never existed, and the land value tax literature long predates them.

*Natalia Albert is a political scientist specialising in New Zealand politics. She is a regular contributor on RNZ Nights with Emile Donovan, Afternoons with Jesse Mulligan and writes for interest.co.nz. Less Certain is her weekly newsletter. Albert stood as a TOP candidate in the 2023 election.

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82 Comments

by Antares77! | 18th Sep 26, 8:08am 1789675727

The trouble with wealth tax or CGT is that while the wealthy my have to pay more tax, the middle income person will too. The wealthy person will have more assets overall so will not be affected as much as the middle income person who will have saved for a long time to build their measily assets for their retirement or to hand to their children.

by Averageman | 18th Sep 26, 8:22am 1789676531

Agreed. Its a reason why land tax is good. Richer people have larger land assets, so carry more responsibility for tax generation.

by Foxglove | 18th Sep 26, 9:37am 1789681054

The mechanism is already in place courtesy of local government where the more your property is worth, the more you are charged for their rates. That is long established and it compounds proportionately, every time there is a rates increase. Of course that calculation relies on a valuation and that can be contested and often is. A general land tax by central government is not without merit but it will need to address many issues beyond just the local government segment and likely some sort of independent hearing tribunal will need to be established to sort out all the challenges.

by Kate | 18th Sep 26, 11:59am 1789689540

See my post below - I did a calculation of the total amount of revenue collected by local government based on direct land-value taxation. Take a guess before you scroll down and have a read!

by Foxglove | 18th Sep 26, 2:08pm 1789697308

Thanks Kate. The disproportion in charges arises from the rates being charged for goods & service. That allows central government to load GST on top which further compounds it. The distortion arises because it is levied not just on land value but capital improvements to arrive at the rateable value. Consider this. Two properties side by side, almost same sized land, same street frontage, same sized house, same number of occupants. Property A, land value 680k improvements 1,345k. Property B, land value 700k, improvements 350k. Annual rates charges A, $12970 & B, $6,440. Property A is paying twice as much rates as B. Why? That is the sort of anomaly that the introduction of a land tax would need to address and it has arisen because firstly it is not in any shape and form a charge based equitably on goods and services and as soon as the charges, way back, started being calculated pro-rata mostly on value the disproportionate outcomes started compounding. Central government needs to acknowledge, and rectify, that charging GST on rates because as it stands it is a virtual tax on a tax as the base and reason for the charge is no longer appropriate compared to how it was first calculated. If land tax is to be introduced then it has to rest solely on the land itself, so in the examples as above A & B would end up paying about the same. As said in my first post there will not be a small number of issues and complications to address.

by Natalia Albert | 18th Sep 26, 7:07pm 1789715224

Kia ora Kate, thanks for doing the maths. Around $3b a year from land-value general rates, next to roughly $30b in GST and $64b in personal income tax, shows the imbalance better than any adjective I could use. And if anything it flatters us, since rates are partly a charge for council services rather than a pure tax on land. Either way, im not sure the idea that we already tax land heavily doesn't hold up. Nat

by Foxglove | 18th Sep 26, 8:19pm 1789719540

Well first of all it is encouraging that you acknowledge that rates charged on land equates to a tax. But that taxation goes well beyond just land doesn’t it, as exampled in my second post. As said, the concept of a land tax has merit but before it possibly can be implemented, in order to be fair and equitable, the existing unfair and inequitable components need to be addressed and ironed out. You need to be aware that until the 1980s, and funnily enough coinciding with rogernomics, local government rates were predominantly assessed on land value. Once the councils got into taking capital improvements into account, the resultant catchment from that application on its own, simply got strapped to a rocket. Think about it, there are many layers and intricacies involved. As it stands, local government rates are not calculated on goods and services, they are calculated on value and that in itself is more a wealth tax than anything to do with user pays.

by Natalia Albert | 19th Sep 26, 7:22am 1789759324

Kia ora Foxglove, thanks for this, and good history. I didn't know councils rated mostly on land value until the 1980s. You're right that rates are a form of land tax, and your two-property example shows the problem neatly: charging on capital value penalises the person who builds or improves. If we went back to land-value rating locally, we'd be halfway to the idea already. Nat

by Foxglove | 19th Sep 26, 7:55am 1789761323

Yes and when you get to a situation where central government is in reality collecting tax off a tax folk are already paying, something is quite obviously amiss. The thrust of your column is spot on. There has to be a significant overhaul of NZ’s tax structure. It looks something like a small sized building that has had too many stories and balconies added. Reform has to first address the major components. It’s a case of tackling and solving the big issues and then the smaller ones will fall into place. Not the other way round, in other words, tinkering.

by Antares77! | 21st Sep 26, 8:50am 1789937402

The only problem with that is that farmers cannot afford to pay land tax so they end up selling the land to wealthy foreign investors instead of handing it down to the family. So productive land falls out of NZ ownership

by Natalia Albert | 19th Sep 26, 7:12am 1789758726

Kia ora Antares77! In 2023, TOP's land tax was quite different, and I thought it had a better structure: farmland was exempt. The 2026 version taxes rural land at 0.5% (compared with 1.75% for urban land), with the option to defer payments in tough seasons. That helps, but my understating is that farms are land-rich and cash-poor, so to your point, I'd still prefer the 2023 approach. On foreign buyers, selling farmland to overseas investors already needs Overseas Investment Office consent, and it generally has to be offered to New Zealanders first, so that risk is smaller than it sounds. Nat

by interesting1234 | 18th Sep 26, 8:36am 1789677418

Gotta start somewhere as the only other option is to do nothing and let the wealthy continue to accumulate assets at an exponential rate, further squeezing the middle income earners out regardless. At least with a CGT and LVT the wealthy have to pay a bit more tax vs using their assets to avoid and/or minimise them.

by Natalia Albert | 18th Sep 26, 6:53pm 1789714422

Kia ora Antares77, thanks for reading and commenting. That's a fair worry, and it's a problem the Greens' wealth tax is designed around. Their proposal is a 2.5% tax on net assets above $10 million, with the family home exempt, so the middle-income saver you describe wouldn't come anywhere near it. For what it's worth, it's not the tool I'd reach for first. I think a land tax does more of the work with fewer of the problems, but thresholds like that are how you protect people who've spent decades saving. On CGT, the design is what matters. Most serious proposals, including Labour's, exempt the family home, and the tax only bites when you sell and have the cash. For most middle-income savers the house is the main asset, so most of their wealth sits outside it. Where your worry is fair is something like KiwiSaver: the 2019 Tax Working Group version would have caught some gains inside it, and that's the kind of detail that decides whether a CGT lands on the middle or the top. Nat

by Antares77! | 18th Sep 26, 8:00pm 1789718425

I wish we could trust the NZ Greens (or any government) to stick to this. Once introduced it's easily to gradually change the thresholds. It always happens.

by Foxglove | 18th Sep 26, 8:14pm 1789719290

Exactly case in point, GST. Introduced with fair compensatory reduction in income tax by Labour. Increased by same Labour government without the same compensation. Income tax raised by the next Labour government, GST remaining unaltered. GST increased by National with minimal compensation to the income tax take. Once taxes such as GST are established they are simply too easy and tempting for governments to resist upping the take.

by Natalia Albert | 19th Sep 26, 7:26am 1789759578

Kia ora Antares77! Fair. Thresholds drift, and governments rarely give back what they take. It's part of why I think trust is the real issue in this debate, and I'm unsure how we get past it. One idea: we could stop campaigning as though we're still in First Past the Post, then governing under Mixed Member Proportional. Parties promise as if they'll govern alone, then trade those promises away in coalition talks, and that leaves everyone confused. But that's a whole article in itself. Nat

by The_Golem | 18th Sep 26, 6:57am 1789671455

'Fewer things done better' is a pretty good tag line - maybe even a credo.

The idea addresses something important that gets left out of so many debates on tax: the need to responsibly use what's collected.

It's difficult to hold a conversation about taxation when the perception is that much of the money collected is spent to poor effect and with little accountability. It pisses people off and makes them hostile to new ideas.

by Natalia Albert | 18th Sep 26, 7:10pm 1789715452

Kia ora The_Golem, thanks for reading and commenting. I might steal "credo". You've named the bit the Left keeps skipping: people will accept paying more when they can see it working. When they can't, every new tax proposal hits a wall of justified cynicism. A trust deficit is harder to fix than a revenue deficit. Nat

by The_Golem | 19th Sep 26, 7:44am 1789760693

Well, a credo is a statement of belief, and given the incentives against real change baked in to the current political system, I think belief is required!

I'd also like to differentiate trust and belief (in competence). Ideally people should be both for it gives the rare, iron currency of credibility.

But, more commonly...

I may trust people will be consistent and honourable, but may also not believe them to be competent.

I may also believe people to be competent, but don't trust them to be consistent in the face of system incentives.

I'd prefer the latter, even if you have to watch the buggers like a hawk, for not a lot can fix incompetence.

by KKNZ2025 | 18th Sep 26, 7:48am 1789674536

The Magic Money Tree / Ganesh Nana !, envy theft of people' lifetime work to create financial security for their families, using Parkers wilfully biased apples vs oranges tax comparison to claim people aren't paying their fair share when 10% of taxpayers pay more than 80% of income tax, 1% pay more than half & half of households pay net zero, UK colonial era inheritance / death taxes that have driven the UK to kill off self sufficiency in farms / food production & that NZ finally dumped after a century as part of the electoral quid pro quo for the original introduction of GST, increased company taxes when corporates have multiple lower tax offshore options & the global mininimum tax regime is a dead duck that the USA will never support....what could possibly go wrong

A Marxist recipe for guaranteed economic failure, repeatedly demonstrated over the last century. They've no idea how to create an economic pie, only to squabble endlessly over dividing it & eventually they'll run out of other people's money: then what?

by JimboJones | 18th Sep 26, 8:17am 1789676265

You really love the right wing terminology "envy tax" and "virtue signalling" Both are emotive but almost meaningless.

By your definition almost every tax is an envy tax. When they tax the shit out of my income it must be because they are envious of it.

As for virtue signalling, it seems to apply to anything the right doesn't like. Building a cycleway is virtue signalling, building a fancy road is sensible economics. Economically you could probably argue the opposite, many of our cycleways have better cost benefit ratios than roads.

by redcows | 18th Sep 26, 8:58am 1789678736

"When they tax the shit out of my income it must be because they are envious of it. "

Nah they are extremely virtuous and upstanding citizens and would never think like that. Us on the other hand...

Repeating the mash up of figures conflating total tax take , income tax take and the poor 1% has long since gotten old and no amount of pointing out the correct figures seems to help.

by interesting1234 | 18th Sep 26, 8:45am 1789677908

envy theft of people' lifetime work to create financial security for their families

That depends however. If one think s a lifetime of 'work' is the last 30 or so years of asset price inflation, allowing them to leverage this for further gain, then I can't class that as work personally, more so just economically favourable.

Those who have seen, and voted for the top tax rate to fall from ~60-70% 1950's to 39% today, as well as being able to extract from a greater resource pool both in total and per capita, for gain, have had a lifetime of global favourable conditions as well as voting to keep it that way. We will not see this lifetime of opportunity again in terms of resource volume, lowering tax over time, coupled with the increased expectations of services delivered by govt. The bill comes due.

by slowlearner | 18th Sep 26, 9:09am 1789679396

Agreed. I don’t want to pass the problem I created to my grandchildren.

And just taxing income has really distorted our economy.

by Natalia Albert | 18th Sep 26, 7:15pm 1789715729

Kia ora KKNZ2025, that's quite the list! For what it's worth, I didn't propose a wealth tax or an inheritance tax. My actual proposal was a land tax, a two-point rise in the top rate, a higher company rate for the biggest firms only, and a state that does fewer things better. Not quite the Communist Manifesto. Happy to argue about any of those. Nat

by profile | 18th Sep 26, 7:48am 1789674527

Natalie trots out the IRD wealthy survey.

“It also confirms that the wealthy obtain most of their economic income from capital gains that are not taxed. A fifth-form economics student could have told David Parker that.”

“Fundamentally, the report concludes that high net wealth families are only paying 9% of their economic income in tax. But the report shows that most of that economic income is unrealised capital gains. No one in the world taxes that, and it is disinformation to encourage comparisons to those primarily earning PAYE income.”

https://www.scoop.co.nz/stories/PO2304/S00149/what-a-waste-of-time-and-…

by slowlearner | 18th Sep 26, 8:33am 1789677183

Really? To counter quite a good argument from Natalie, you use the extremist tax payers union, funded by those wonderful people who bought you the all new US of A, da dah.

Ffs, we are a failing society, doing more of the same thing that got us into this mess don’t cut it.

Valid objections to what she proposed could include the limits of growth. But not the slop you linked.

by JimboJones | 18th Sep 26, 8:45am 1789677921

It is a good article. Although maybe the title is misleading considering that opportunity are proposing something similar to Natalie.

by middleman | 18th Sep 26, 9:20am 1789680015

Central to the article is an assertion about unfairly low tax rates paid by the wealthy vs others, that the writer knows is false. Including capital gains for only one small segment, the very rich, and not all comparator groups, is misleading.

by Natalia Albert | 18th Sep 26, 7:52pm 1789717936

Kia ora middleman. It's incorrect and unfair to say I knowingly wrote something false. I did not. The 8.9% and 20% are Inland Revenue and Treasury's published figures. But your method point is a reasonable one: comparisons are cleaner when capital gains are counted the same way for everyone, and the headline numbers don't make that easy. I'd still say the underlying point holds. Most of the wealthiest families' income arrives as gains we don't tax, and most of a nurse's arrives as wages we tax in full. Nat

by middleman | 19th Sep 26, 10:00am 1789768817

IRD's numbers are valid but misleading when cited without a qualification that they are not a like for like comparison. The nurses capital gain for investments, including KiwiSaver, should be included if there is to be a fair comparison between their net tax rate and that of a fat cat.

by Natalia Albert | 18th Sep 26, 7:28pm 1789716538

Kia ora JimboJones, thanks for reading and commenting. The Opportunity Party is the closest thing on the ballot, and I did flag that in the footnote since I stood for them in 2023. The difference is that OPP pairs its land tax with a citizen's income and an overhaul of income tax that leaves most people paying less. I'd keep the income tax system as it is and nudge the top rates up. Also, it's Natalia, but I've been called much worse in a comment section 😄

by profile | 18th Sep 26, 9:23am 1789680193

So only slowlearners valid objections allowed on the comment thread?!

More extremists - though Thomas did start out as a dripping wet leftie.

"How are capital gains different from ordinary income?

Ordinary income is usually guaranteed. If you work a certain amount of time, you are legally entitled to the pay that you were offered when you took the job. Capital gains involve risk. They are not guaranteed. You can invest your money and lose it all. Moreover, the year when you receive capital gains may not be the same as the years when they were earned.

...If a country wants investors to invest, it cannot tax their resulting capital gains the same as the incomes of people whose incomes were guaranteed in advance when they took the job.

It is not just a question of "fairness" to investors. Ultimately, it is investors who guarantee other people's incomes in a market economy, even though the investors' own incomes are by no means guaranteed. Reducing investors' incentives to take risks is reducing the jobs their investments are likely to create."

https://www.creators.com/read/thomas-sowell/10/12/capital-gains-taxes&n…;

by slowlearner | 18th Sep 26, 9:48am 1789681690

Been there done that. Nah, your argument that capital is special doesn’t cut it. You need a society around you, that stability that Natalie mentions to create the capital. Try doing that capital creation in (name your favourite hellspot)..Gaza, ok bad choice, Argentina vs say Singapore. Me, I would opt for Singapore. Stability. Natalie makes the argument that just taxing wages/ income will build resentment, instability. Profile, likely we can agree on most stuff, likely we have both created something during our working lives, please engage with the argument, don’t trot out the neolib bs that has plainly failed in some vital respects. Do you remember in business, balancing the core issues with the dynamics of the situation. Those that never change get left behind.

by Natalia Albert | 18th Sep 26, 7:48pm 1789717719

Thanks slowlearner, that's the argument in a nutshell: capital doesn't grow in a vacuum. It relies on the stability that everyone else pays for. Funny you should pick Singapore, too. No capital gains tax, but the state owns most of the land, leases it out, and hits property buyers with steep stamp duties. They tax the land, not the work. Not a bad model for a stable place to build capital. Nat

by profile | 20th Sep 26, 10:58am 1789858688

North Korea is also a place where everyone pays for the stability and where the state owns all the land. State land ownership of land and stability don’t necessarily give you incentive to risk capital.

I think a land tax on unimproved land is a good idea in theory, just not good in practice - when it comes to money grubbing politicians with pet projects like changing the climate back to the Little Ice Age or removal of equality of suffrage.

by profile | 20th Sep 26, 10:54am 1789858453

Nah, your argument that capital is special doesn’t cut it. Capital is special and has nothing in common with zero risk showing up to pull a wage from the employer of your choice. Living in a third world shit holes really crystallises for you that capital is very, very special. Unrealised capital gain is another beast altogether. Natalia tries to make an argument without acknowledging the IRD report elephant in the room “unrealised”. Do you think taxing people's unreleased capital gains will build resentment – especially when they have to sell illiquid assets at a discount to pay tax, tax on inflation effects etc.?

by PostMarketWorld | 18th Sep 26, 1:36pm 1789695388

Property has hardly been risky as you make out - it has had huge tax advantages - and remember rental income - that goes up with existing asset inflation - that is unearned income. Risking investment in a business that produce and supply new goods to the market is what should be encouraged by giving tax breaks.

by profile | 20th Sep 26, 11:14am 1789859642

I wasn't referring to property per se. Completely agree Risking investment in a business that produce and supply new goods to the market is what should be encouraged by giving tax breaks.

by Natalia Albert | 18th Sep 26, 7:43pm 1789717418

Thanks slowlearner, appreciated. I'd rather argue with the point than the source, though, and profile's point about unrealised gains is a fair one, even if I don't think it changes the conclusion. You've raised a better objection than either of us, though: limits to growth. Most tax debates, including mine, quietly assume more growth will pay for everything. That's worth a whole column of its own. Nat

by gibbonsj | 18th Sep 26, 9:47am 1789681654

We do tax income from unrealised gains already. FIF tax. We assume you make a 5% return and you pay income tax on it.

Not a stretch to apply the same to domestic assets like a house or land.

by middleman | 18th Sep 26, 11:18am 1789687092

A deemed rate of return system has some merit (although the design of Cullens FIF tax is bizarre) but there'd need to be many exemptions. Here comes the mansion effect.

by profile | 20th Sep 26, 10:55am 1789858520

That tax is quite specific on some offshore investments and could hardly be described as comprehensive. The 311 would have been paying in in Natalia's IRD example and it didn't move the dial.

by Natalia Albert | 18th Sep 26, 7:41pm 1789717271

Kia ora Profile, thanks for reading and commenting. First, its Natalia. Now, the argument. Sure, I guess its worth being precise. Yes, the 8.9% counts unrealized gains as income, and that is a methodological choice. But it's less a gotcha than the point itself: most of the economic income of the wealthiest families arrives as gains we don't tax, and most of a nurse's arrives as wages we tax in full. You can argue about whether unrealized gains "count", but either way you end up with two very different tax treatments depending on how your income shows up.

"No one in the world taxes unrealized gains" isn't right either. We already do it here through the FIF regime on offshore shares (gibbonsj makes the same point below).

Where I'll give ground: middleman is right that the comparison group matters, and the nurse line is punchy rather than precise. That's partly why I don't rest the argument on fairness. The incentive problem stands either way. Nat

by profile | 20th Sep 26, 11:00am 1789858811

I’m not worried if you are not precise - it is not a lack pr precision that you left out the room elephant about unrealised capital gains or the 311 were paying 30% on their taxable income. Though you are not the first person to do this when sound biting the IRD study.

The FIF with its “deemed” return is a disgrace and could hardly be describes as comprehensive. With our earthquake and volcano riddled isles we should be encouraged to invest offshore not penalised. I’m sure you well know the FIF would have been included in the 30% taxable income figure of the 311 and not in the unrealised and realised capital gains side of the ledger you want to capture. It also highlights what a pack of limp wristed uniparty sooks the National party are that they did not repeal this tax abomination.

If you want to push a land tax, I could be convinced, but no need to mis characterise the IRD study.

by Colin Maxwell | 18th Sep 26, 8:05am 1789675522

Anything other tax model apart from FTT is highly regressive and leaves the productive economy, and Main Street, carrying a completely disproportionate share of the overall burden.

FTT is a major component of "Three Pillar Architecture" solutions-based model, which I believe could end fiscal dominance, eradicate the parasitic economy, and rebuild national/societal wealth within 2–5 Years.

https://sovereignista.com/2026/08/22/the-financial-holy-grail-how-a-thr…

by Averageman | 18th Sep 26, 8:26am 1789676793

Like it. Targets our Financial Parasitic Overlords somewhat, no bad thing.

by slowlearner | 18th Sep 26, 8:35am 1789677316

I also like that you have something to add to a discussion Colin. Thanks

by redcows | 18th Sep 26, 9:02am 1789678920

Thumbs up from me. Seems so simple and suited to our digital world.

by slowlearner | 18th Sep 26, 9:06am 1789679174

We have a couple of huge holes in the economy that Natalie’s article doesn’t cover. Issue 1 is the problem of inflation. First you create some wealth, that’s the easy part compared to trying to hold it. Feel familiar to anyone? Personally I try to keep about 4 years living costs in risk free funds. But they get a caning from inflation and tax. Trying to imagine life for my grandchildren, getting a career going, buying a house, inflation is a big problem for them too. A second issue is the inability of nation states to tax the multinationals such as the providers of AI technology. Should we choose to opt out of the benefits of this technology, should we try to create a coalition of nations who collectively can stand together to achieve something…but this corruption will kill us if we don’t sort it.
Colin has the FTT idea, I think we need to include that in the mix of possible solutions.
Whilst I agree that tax is one of the problems, actually I give it a lower ranking than just simple better management practices. No matter where I look, in the state sector, say FENZ, the private sector, say AirNZ, charities, say St Johns, I see unaccountable management doing incompetent things with no consequences. Perhaps we can’t fire everyone, but we can champion the good ones, and castigate poor behaviour.

by Let me be Frank | 18th Sep 26, 9:20am 1789680030

"The point of a democracy is stability, not fairness.¹ It is a system for deciding who governs without anyone reaching for a weapon, and for making sure the people who lose accept the result and turn up again in three years. Everything else it delivers depends on that holding. So, the question to ask of a tax system is not whether it is fair, which nobody will ever agree on, but whether people can keep living under it without concluding the whole arrangement is rigged."

And we are slowly approaching the question....what is the purpose of an economy?

Well done.

by Palmtree08 | 18th Sep 26, 9:54am 1789682080

"Neither doing enough for our economy or our projected population growth"

Ah, the old growthist paradigm. More growth=>more tax+>more growth=> more tax.......the hamster wheel mentality.

by nktokyo | 18th Sep 26, 11:24am 1789687491

An inflation-indexed CGT should be a no-brainer and I own rental properties. People have made a gain, so they have some money. Shares, farms, orchards, whatever. Ditto for inflation-indexed inheritance taxes, otherwise why would I sell up and pay tax, when my kids can inherit and pay no tax.

Sadly our political parties don't see that gains should be inflation-indexed, so we are being taxed on the deliberate weakening of the currency by our own political overlords. Or I could say that they do see it, did the maths and realised they wouldn't actually make any money that way.

As for land taxes, we have an ageing population who might only have their house and no way to pay a land tax. Or someone might be trying to retire with a small mortgage still to clear. These things need to be phased in veeeeeeeeery slowly because the social implications are huge.

Wealth taxes should be avoided at all costs - we want to attract people who can create wealth and businesses, not push even more of our young to leave. The people capable of creating wealth will usually be capable of creating it anywhere and will naturally choose a locale where they are less likely to be treated as a goose to be plucked each year as they go about it. Damien Grant has a very good piece on this - https://www.stuff.co.nz/politics/361026062/tax-lesson-starts-surf-trip-and-ends-warning-labour - I would be among the first to sit my now-entrepreneurial son down and show him the long term implications of living in a country with a wealth tax and offer to buy a plane ticket if we ever got to there.

by middleman | 18th Sep 26, 11:50am 1789689020

nkt. Much of the commentariat don't understand how very mobile NZs capital and human skills are. My family has a strong entrepreneurial element and my wider friend circle includes a few very successful businesses owners with whom I'm often engaged in evaluating ideas and considering where capital should be deployed. These people think globally. That capital gains are not currently taxed a second time on their realisation, is one of the incentives to invest in NZ. Grandly proposing additional taxes on capital while dismissing the possibility that it might in response head offshore from our not especially attractive investment destination, is displaying ignorance.

by nktokyo | 18th Sep 26, 12:19pm 1789690781

Great points, I always saw CGTs as less of a problem tho if inflation is considered, which it isn’t. Cullens version diring the great working group tsunami of 2017 was 38% without inflation allowances if Inrecsll correctly and he was greatly surprised when others in his own worked group rebelled and Jacinda wound up making her captains call.

by LouB | 18th Sep 26, 3:03pm 1789700585

Personally I think that your opening statement is more fear mongering than reality. It conveys a message that the only reason to live, work and invest in NZ is to get best $ return on money. That is a very sad indictment on what they consider citizenship to mean. It also infers that the majority of working NZers exist solely for the enrichment of those few 'elites'.

I would hazard that should your friends, indeed, duck off overseas to pastures greener, they would not give up their NZ citizenship nor the entitlement to national superannuation in their mature years. Nor when they return and suffer a life threatening event, refuse to dial 111 and take advantage of the ambulance service and public system health care for the about $120 Hato Hone St John medical callout ambulance contribution (zero charge if it was an accident or if a subscribed member of HHSTJ). Sure they may carry private medical insurance, but the premium paid on that factors in that emergency care is essentially cost free in NZ. So your insurer is not covering all medical/injury risk. Unlikely to be the same in those greener pastures.

Would I lose sleep if the headed overseas? I doubt it.

by nktokyo | 18th Sep 26, 3:30pm 1789702232

You wouldn't until the cost of public services were divided among the rest.

by LouB | 18th Sep 26, 5:22pm 1789708926

Is that the best reply you could come up with?

I still wouldn't lose any sleep.

by HGWR | 18th Sep 26, 11:58am 1789689509

That's a very long-winded way to say "we shouldn't tax ME"...

by middleman | 18th Sep 26, 12:12pm 1789690378

Thats a very short-winded way of saying 'I'm unwilling to engage in the argument'.

by nktokyo | 18th Sep 26, 12:14pm 1789690499

Huh?

by middleman | 18th Sep 26, 12:51pm 1789692662

was in response to HGWR

by nktokyo | 18th Sep 26, 3:49pm 1789703371

So was I!

by middleman | 18th Sep 26, 11:25am 1789687546

Albert mocks us for being proud of our uncomplicated tax system. In the real world of business its a characteristic we celebrate for its comparatively low drag effect on business efficiency.

by Natalia Albert | 19th Sep 26, 8:14am 1789762496

Kia ora middleman, It was more of a tongue-in-cheek comment. I said in the piece that our GST works without the carve-outs that make other systems a mess, and I meant it. Simplicity is a strength. My point is that simple isn't the same as balanced: we tax income and consumption well and barely touch assets. (And Nat's fine!) Nat

by Kate | 18th Sep 26, 11:54am 1789689288

One of the arguments in favour of a land tax is that we do not tax land enough presently - hence our productivity failures. The opponents always raise the issue of the taxation of land via rates is bad enough already.

I decided to do an AI exercise to extrapolate from rates across the country, the cumulative sum of all the direct land taxes. I only looked at the land-value component of the General Rate. Some councils use land-value only to calculate the General Rate, others use Capital Value (a combination of land value plus value of improvements). Many other rating instruments (such as fixed charges) may have an element of land value in their calculations - but these rating tools are normally associated with a specific service (such as reticulated services) and can also combine an element of user-pays. So, I had AI ignore those for my purposes.

The number is around $3 billion per annum collected solely as a direct tax on land-value via the General Rate. I qualify that by using "around" in that, given the time of year many budgets were still being finalised and we were working on extrapolating data from Financial Impact Statements, rating databases and a few other sources. So the data was not definitive - i.e., apples to apples - for every one of the 79 local authorities.

Compare that to the Opportunity Party's $24 billion per annum estimate at their 1.75% LVT proposal. And compare that to the $30 billion in GST revenue in 2025/26 and the $64 billion collected from individual income taxes.

My conclusion too - reform is desperately need - we are by no means taxing land 'too much' already via the local government system.

by nktokyo | 18th Sep 26, 12:21pm 1789690882

I don't understand this. We aren't paying as much in rates as TOP proposes we tax, nor are we paying as much as we collect in GST, so therefore we should increase land taxes?

by Kate | 18th Sep 26, 12:37pm 1789691833

No. Just made the comparisons as a means to better understand whether there is a balance in the mix. And there is not. The same point made by the author (and every tax review group since I can recall). We are not (by any metric) a broad-based tax system.

Does that make sense?

by interesting1234 | 18th Sep 26, 1:50pm 1789696218

Everyone can have a play around with this site which has some interesting figures relative to council debts, costs etc.

by Natalia Albert | 19th Sep 26, 9:34am 1789767299

Kia ora nktokyo! On their own, the numbers aren't an argument for anything. The argument is about what each tax does. Tax income and spending, and you get a bit less work and spending. Tax land, and you don't get less land. The supply is fixed, which is why economists generally see it as the least damaging tax going. Kate's numbers show we lean heavily on the taxes that discourage the things we want and barely touch the one that doesn't. For me that's the case for shifting the mix, not just adding more. Nat

by slowlearner | 18th Sep 26, 12:33pm 1789691609

As I get ever older, I find a deep affection for the FACTS and less patience for the reckons. Thanks Kate.

by Kate | 18th Sep 26, 12:39pm 1789691964

Thanks! I do enjoy using AI - as it makes this kind of quantitative research so much easier.

by Colin Maxwell | 18th Sep 26, 1:16pm 1789694166

Why Should the Financial Casino Be Treated As Some Sort Of Sacred Cow?”

I think Kate's figures are hugely useful because they illustrate the sheer scale of the question.

She estimates that local-government land-value taxation through general rates raises around $3 billion a year, while TOP's proposed 1.75% land-value tax has been estimated at around $24 billion. GST brings in roughly $30 billion, while individual income tax is around $64 billion.

So let's try turning the question around.

What would happen if, instead of taxing the productive economy ever more heavily, we placed a very small tax on the enormous financial flows circulating around it?

At 0.25%, every $1 trillion of taxable financial turnover generates $2.5 billion of revenue. To replace $30 billion of GST would therefore require about $12 trillion of taxable turnover. To replace roughly $64 billion of individual income tax would require about $26 trillion.

And if someone really wanted to replace something approaching the entire $125 billion Core Crown tax take, the arithmetic points to roughly $50 trillion of taxable turnover.

Those numbers sound enormous until you remember what we are actually talking about - turnover, not GDP.

The financial system moves the same underlying claims on wealth and income around again and again. Shares are traded, currencies exchanged, bonds bought and sold, derivatives rolled over and financial positions constantly rebalanced. The resulting turnover can therefore be many multiples of the underlying productive economy.

That is precisely why I think the distinction between the real economy and the financial economy matters so much.

The real economy produces the food, energy, houses, machinery, transport, software and services that ultimately provide the goods and income with which we pay our way as an economy.

Finance is necessary to support that activity. But a substantial part of modern finance is essentially a casino — trading claims on the productive economy rather than producing anything itself.

We have no great philosophical difficulty taxing casinos. In fact, gambling is routinely regarded as an entirely legitimate tax base, and so why should the financial casino be treated as some sort of sacred cow?

That doesn't mean taxing every bank payment or every financial transaction indiscriminately. That would simply turn an FTT into a cascading tax on the real economy as money passes from manufacturer to wholesaler to retailer to consumer.

The design is therefore critical.

Transfers within the same entity could be excluded. Central-bank and settlement plumbing could be excluded or taxed minimally. Genuine productive financing and ordinary economic payments could carry a very low rate, while the enormous volumes of securities, foreign-exchange and speculative trading could carry somewhat higher rates.

And this is where the rate becomes interesting.

At 0.10%, $10 trillion of taxable turnover produces $10 billion.

At 0.20%, it produces $20 billion.

At 0.25%, $25 billion.

At 0.30%, $30 billion.

So the question isn't whether a 0.25% FTT magically replaces the entire tax system. We need to establish how much genuinely taxable turnover exists after exclusions, behavioural changes and avoidance - and, crucially, how much of that turnover represents the financial economy rather than repeated transactions in the productive economy.

But that is a very different question from simply assuming that the only way to raise more revenue is to tax wages, consumption, profits and productive investment more heavily.

There is also an important difference between taxing the stock of wealth and taxing the flow of financial activity.

A land tax taxes an asset because you own it.

An FTT taxes a transaction because you move money or a financial claim.

Get the rate and design wrong and you create a cascading turnover tax that ultimately hits the productive economy.

Get it right, however, and we have the possibility of shifting at least some of the tax burden away from the part of the economy that actually produces things and towards the gigantic financial apparatus that trades claims upon it.

That, to me, is the truly fascinating, and fundamental, tax-reform question.

Why continually tax the economy that produces the wealth, when a very small tax on the financial flows circulating around that wealth could potentially provide another enormous tax base?

by Colin Maxwell | 18th Sep 26, 1:18pm 1789694335

My apologies for the block-bolding - as I load it, I only have the headings bolded, but as soon as oit is opened via "read more" it bolds the entire comment.

by nktokyo | 18th Sep 26, 3:29pm 1789702141

I believe there is a predictability requirement. We have to be able to pay teachers and policemen while changes ripple through.

by LouB | 18th Sep 26, 1:21pm 1789694482

When income tax was introduced into NZ in 1891, my understanding was that it only kicked in when earnings exceeded £300pa, and was paid as a lump sum. That meant the averag worker paid no tax. PAYE introduced in 1958.

In 1931/32 government introduced the unemployment amendment act that levied 1.25% income tax to fund depression relief measures.

In 1938/39 the Social Security Act was introduced levying 5% on virtually all wages, salaries and other income earnt to fund comprehensive welfare and health.

My point is that tax is an evolving beast. The status quo as we know it today is not set in stone. The tax system should continue to evolve.

by Jack Lumber | 18th Sep 26, 3:41pm 1789702868

I have many friends who are very successful and pay a lot of tax already.

Discussing with them about paying more tax and most aren't against it - the problem they have is the people they are giving it to. No one trusts them to do sensible things with it as the current round of hair brained ideas coming forth this election prove yet again.

by unaha-closp | 18th Sep 26, 4:17pm 1789705074

If your basis is to create societal stability there is an aspect of land tax that doesn't seem to get talked about much - it is tax upon the native population to subsidise new immigrants.

by unaha-closp | 18th Sep 26, 4:10pm 1789704620

Land tax has been done before in NZ - Native Lands Rating Act 1882. A land tax law that freed up about 1.2 million hectares of New Zealand for productive use.

by gibbonsj | 19th Sep 26, 8:22am 1789762937

Newcomers generally. Young NZ born citizens would have the most to gain. Mostly it depends on how widely you distribute the proceeds.

Partially this also is a framing or status quo bias thing. People argue if we were to decrease or means test the pension we are taking away something that belonged to them. Taxing away some of the proceeds of the country’s greatest natural resource (land) and redistribution it to her citizens. It’s pretty well established and agreed that we do this for other resources, oil, minerals etc. Why not land?

Looking at the emigration and birth stats…. Maybe some transfers going to the young would help a bitt.

by nigelh | 18th Sep 26, 7:03pm 1789714995

The whole idea of OP's tax reset policy is to obtain income from land tax to pay for most (nearly all?) UBI. According to OP it goes hand in glove. I'd prefer to see some real land only financial amounts that Councils collect but not generated by AI. If NPDC is anything to go by the rates take does separate targeted sewerage, potable water, storm water, roads and a fixed uniform annual general charge (uagc). Looking at NPDC accounts for 24/25 you can't isolate the land portion from the UAGC out of the annual financial report. I'm not sure how AI managed that. It can be done but I'd suggest it would require an LGOI request to each council in NZ. Maybe Local Government NZ have this but I doubt it. They seem more of a local govt political style organisation or at worst club for Council CEOs.

by Marcus Traddles | 19th Sep 26, 10:21am 1789770096

Observing as a bod from another nation in need of some form of tax reform, I do find it interesting to observe comparisons. Major stand out points: NZ's relative low tax take on higher earners, and an absence of a tax free allowance.

$0 - $15,000 10%

$15,601 to $53,500: 17.5%
$53,501 to $78,100: 30%
$78,101 to $180,000: 33%
Over $180,000: 39%

Personal Allowance (0%): Up to £12,570
- Basic Rate (20%): £12,571 to £50,270 [1]
Higher Rate (40%): £50,271 to £125,140 [1]
Additional Rate (45%): Over £125,140 [1]

As someone coming across from the UK, the big no-no for me is the lack of a tax free band.

I wonder why that is not proposed by any Party. I think it preferable to TOP's basic income as it provides an incentive to work, and in that sense it helps those on low incomes.

I heard the leader of TOP say that no one can survive on their proposed income of circa $20,000. I would dispute that having lived across Europe where many youngsters living at home do just that, as in living on around 10,000 Euros a year thanks to mom and pop, a smartphone, and the odd cash job.

As with all tax measures, one has to ask what incentive it provides, and for me free money seems to provide the wrong message.

Side note - I am currently travelling around NZ and talking with people. Many of those in business talk of poor trading conditions, while many not in business say Government should do more.....and tax the rich!

As with the UK, there are no easy answers.