Tale of Two Houses

Yesterday I posted the tale of two houses. House A and House B are both shitters and only 2 square meters different in size. According the financial genius fiscal fool at Kiwiblog these buildings almost always go up in value. Here is where fantasy-land of the financial genius’s fiscal fool come crashing down and also destroys the argument for capital gains tax.

House A: Capital Value of $345,000,  Made up from Land at $325,000 and Improvements (buildings for the terminally stupid) of $20,000.

House B: Capital Value of $875,000, Made up from Land at $855,000 and Improvements (buildings for the terminally stupid) of $20,000.

The houses (buildings) according to the government are the same value. The dirt under them however is vastly different in value. One of these houses is just around the corner from my place and a stones throw (by DPF) from the beach. The other is in Whangaparoa. The House in Howick is House B, and is on a street that has houses ranging in value from this one to over $4 million dollars.  On this street this is the last shitter, over the last five years as oldies popped their clogs and the houses got sold the shitters have all uniformly been bowled. Quite literally they weren’t worth anything, in other words they were valueless, not going up almost always in value. The land however is where the value is and to pay $1.5 million for a property on Marine Parade and then bowl the shitter and spend $800,000 on a new house making the whole package worth about $3 million is worth it.

So how do you measure capital gains in that scenario. You have gone from $875,000 to perhaps a little under $2 millionin the time it takes to build your new mansion, and the property doesn’t even look the same. One the numbers alone the IRD would say that is a capital gain, now do you charge that on the realised value or the non-realised value. You can’t do either is how. Too freaking hard, and that is but one example.

Far more rational if you want to be a pinko wealth stealer and try and grab more cash is to have a Stamp Duty on housing transactions and match it with the same on shares. If you are a real Pinko then have the Stamp Duty on the Buy and the Sell and pretend they are two separate transactions.

The Tax Working Group should have been bold, instead they were like Speedo Weldon skinny dipping in the Antarctic. What we need is a Tax Working Group made up of advisors that have no financial interest in scoring big government contracts or feathering their own nest who can take a holistic view of our system and start with a blank piece of paper. The group I would have would be analysts from Hong Kong and Singapore and their brief would be design a tax system that assists in generating wealth of individuals and Companies and rewards hard work. That is it.

But no, what we have are mealy-mouthed platitudes from dicky-licking, pocket pissers trying to score contracts for their firm or tossers like Speedo Weldon who wants his shitty little Exchange to be a mover and shaker in the world instead of a flea on the gnats proverbial. Wake up New Zealand our economy is rounding figures compared to economies like China and the US and the EU.