Glad they are finally doing it and this should hopefully get much needed funding for our healthcare system. Whats shocking to me is that even with all the controversial bits taken out its still unpopular. I swear nz has the most hardheaded people out there.
RNZ-Reid Research poll last month found 43 percent in support of a CGT on investment properties
What is left for people to whine about?
No because the shares (in theory) have value behind them. If they went up overnight, it was because the value of the company changed not because the purchasing power of money changed. If they went up from 5K to 10K from 1996 until now, yes you could say it was inflation. But you also wouldn’t pay any tax because we don’t have a CGT.
I… don’t know. Maybe it would?
Here’s another question though. That old lady/man everyone knows of that owns dozens or hundreds of houses, do you think they ever sold any? They can still accumulate wealth without paying tax by simply hoarding it like a dragon.
That’s where a wealth tax works better. Because this tax only applies if you sell, if you have enough assets and lenders are confident they’ll continue to grow in value you can just keep buying more and then borrowing against them to cover your expenses year on year.
Yeah, so a wealth tax would be that every year you have to declare your net worth and pay a percentage of that as tax?
I wonder what the administration and enforcement cost of that would be. This very narrow CGT has on benefit in that there isn’t really much extra admin since most of the relevant parts are already done in one way or another.
Yep CGT is a simpler system to apply I think, but doesn’t address the real problem which is that once a certain amount of wealth has accumulated wealth begets wealth and the vast disparity ends up with a small class of people fully insulated from the problems their horading causes.
So does property.
House prices go up because the value goes up too. The value is the neighbourhood, the schools in the area, proximity to public transport or shopping etc. Shops could be built someplace and the value might go up. A highway could be built nearby and the value would go down.
That would be tackled with a wealth tax not a capital gains tax. I do think an argument could be made for a wealth tax for sure.
But if I had my way I would scrap all those taxes and replace with a financial transaction tax. This would be simply done by adopting a digital currency and taking a tiny cut on every transaction automatically. No muss, no fuss, no IRD, no nothing. Just a premined currency that the government controls the supply of.
When we are talking about a change in value, I’m going to have to disagree with you. A house doesn’t have more value over time, unless you change the house.
I disagree. House values go up over time because we incentivise people to buy rentals but have a lack of supply, leading to people borrowing as much money as they can to be able to get a house at all. House prices are tied to how much people are able to borrow, more than they are tied to anything of value.
I’m curious about the details of this. Most importantly, is it regressive? People hoarding wealth probably don’t make a lot of transactions with that wealth, it’s just shares sitting there being worth a lot. Where as people without much wealth have to spend all their money so end up paying more tax as a proportion of their wealth.
Value has a different meaning economically and it’s pretty vague. Economically the only way to measure value is via the price of things. If you value a thing more you will pay more for it.
It’s a complicated formula but in the end it’s supply and demand curves. What is the supply of housing in a place you want to live in? What’s the supply of money and credit available for you to buy it.
Theoretically yes but in practice no. The fact is most people don’t conduct repeated transactions. They earn money and then spend almost all of it. They don’t shuttle money back and forth, do high frequency trading or anything like that. The bulk of the taxes will be paid by sophisticated actors with excess money to move around.
True but it’s rare when that property is not leveraged. You buy some land and you pay a transaction tax. Then you borrow against that land and you pay a transaction tax, you spend that money and you pay a transaction tax etc.
Wealthy people are constantly moving money around. They are constantly buying and selling shares, businesses, assets etc. They are also constantly borrowing money and paying it back. Also high frequency traders may make thousands of transactions every second.
I guess my concern with one tax that covers everything, is that weathly people will just change what they do. And in butterfly effect style, we probably can’t predict the true impact. My suspicion would be wealthy people pay accountants lots of money to work out how to collect wealth with fewer transactions, and continue paying minimal tax compared to their wealth.
I don’t think they are going to stop moving money around. In any case I don’t thing “they might do such and such” is a good excuse to not do something. If they do something we’ll so something too.
tax evasion is technically a crime but the tax is based on a percentage so it doesn’t matter if you do ten transactions or one, if it’s the amount of money.