Doomed from the start

Any policy idea that is soft launched with:

“It’s going to be bold, it’s going to be about producing a real step change in the economy,”

…is doomed from the get go.

The policy is doubly doomed if it is Phil Goff launching it.

Labour has so far promised more than $7 billion in additional spending and hasn’t yet told us how they are going to pay for it. If they describe jacking up taxes on the taxpayers as a step-change then they are well rooted.

If they have put as much though into their capital gains tax plans as they did into Axe the Tax which morphed into Not Axing the Tax, which then morphed into GST off fresh fruit and Veges as well as their silly $5000 tax free threshold then they are in for a world of hurt.

Still miracles happen, maybe they have thought it through.

 


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  • grizz

    I think Labour are deluded as to how much they can make from such a capital gains tax. Only a few investors are in a position to buy and sell properties on an annual basis. Most are 1 or 2 property landlords and tend to hold on for years. Furthermore people that flip/trade properties are already liable for capital gains tax. Slapping a tax on capital gains will initially deflate property prices and with property values down from their highs, it is hard to see this tax yielding much in the first few years anyway. It certainly is not “billions”.

    “It has also said it will crack down on tax dodgers by closing loopholes in the law that allow wealthy people to hide their incomes.”
    Again I think Labour are deluded in this claim. You would think they believe everyone who votes National is wealthy and hides assests which is far from the truth. Very few New Zealanders will ever fit into this target audience and I am not sure what they a referring to as hidden income. Last time I looked, trusts and companies pay tax. Also the IRD are looking into this already and I cannot see any new initiatives squeezing out anymore than a few extra million.

    On the whole, the tax free threshold will be more expensive that what any of these new initiative are likely to yield. Not a plan for success.

  • Adopt sums it up at No Minister:

    According to TVNZ some unnamed ‘tax expert’ reckons the tax will yield $4.5 billion.

    When? Just in time for John Key’s son to be elected leader of the National Party and Prime Minister?

    • Whoops; that should of course be Adolf; stupid predictive text on the iPad!

  • reid

    If all you ever focus on is one thing, that’s all you’ll ever see and Liarbore make this fundamental mistake, all the time, that MIDDLE CLASS PEOPLE ARE “RICH PRICKS.”

    Just cause their base is poor as a church mouse – awwwwwwwwww – doesn’t mean ours has to be as well and newsflash you big sillies, we’ve got a say coming up very soon indeed.

    Looks like Silent-T’s plan is to sink Liarbore thereby sinking Goff through a massively unbelievably optimistic revenue-gathering strategy that unfortunately involved most of Hulun’s old supporters paying a whole hell of a lot in future.

    He’s probably looking at a map right now.

    Clever, isn’t he.

  • titanuranus

    Perhaps LayBore should just change its name to the “Tax,Tax and more Tax Party”
    I suppose it`s too much to ask ,that the political parties in this country come up with policies that get this country working rather than just taxing those of us that work into an early grave?

    • thor42

      Agreed! Yeah – I’d say grizz is spot-on, and that they’d be lucky to make several hundred million at the most out of a capital-gains tax. There is NO f**king way in the world that that will come even *remotely* close to paying for all of Liarbore’s promises. But hey, that doesn’t really matter (to **them**) because their voters are people who can barely find their way out of bed in the morning. People who can barely operate an ATM to withdraw their dole money.

  • In all honesty, with the criminal rents that landlords are charging these days i don’t see what is wrong with intrucing a capitol gains tax on investment properties.

    It works in America, and so what – you pay a bit of tax on INCOME that you make when you sell the dump that you have been charging some poor bugger 500 bucks a week to live in.

    Boohoo.

    Bring. It. On.

    • grizz

      I personally am not against a capital gains tax if it is designed to make the tax system fairer. However if it were to be introduced there would have to be a tax reduction elsewhere. The thing is Labour has 3 years for this policy to start bringing in the extra revenue in quantities it needs to pay for its spending promises. Now if the initial effect of a capital gains tax is to reduce property sales and hence prices (I would expect over time things to even out) it will reduce the said capital gains liable for taxation. I cannot see this ever offsetting the tax free threshold they want to introduce by the time the next election cycle comes around.

      The thing about the 500 bucks a week rent is that this is set by the supply and demand of the renatl market. It may have to come down if middle class renters have to pay more tax (you bet they will be asked for more so they can be bribed with more of their own money) and have less discretionary spending. It will not come down on the basis of a capital gains tax alone. On the flipside, with a capital gains tax investors will be reluctant to invest in new properties which ultimately could reduce the housing supply driving up the cost to rent an absolute dump.

      As for a land tax, go speak to a ratepayer about their annual land tax.

      • I have been a home owner. I have been a landlord. I know how much rates are.

        I made $80,000 on one property after owning it for less than a year. I didn’t have to pay any tax on that money. Should i have? Yes – it was income.

        Would i have been happy to do so if it was in exchange for say GST free fruits and vegetables so that people who were worse off than me could afford to make healthier choices? Yes.

        People on the ‘Right’ are the first to jump up and down and scream about people worse off than them making “bad choices” yet they are happy to sit there and take and take off those people that are making those choices, and make it darn near impossible for them to make the right choices.

        The number of investment properties available for rent is not going to go down just because the owner of that property might have to pay a bit of tax on the free money that he earns due to the increase in value of that property – when he sells it.

        Greed is ugly, and landlords in this country are effing greedy.

        • dyannt

          Now Jacqueline, did you follow your heart and tax yourself and use that money to top up the shelves of the Food Banks?
          Yes? well done. Our world used to be filled with people helping each other, until the power-hungry Governments of the day decided to take our money and try to do the job themselves (badly).
          No? Shame. Woman speaks with forked tongue methinks.

  • davidw

    Hmmm, I wonder if the Labour policy will make government of the day share in any capital losses (in which case it could be revenue negative), or allow for an inflation adjustment. Perhaps also it is only a precurser to a response to the calls for “investment equity” and CG tax on shares are the next logical step. What does that do to “Mom and Pop”?

  • cadwallader

    The Party which promises the least will tax the least and win! Deservedly so. The loonies at Labour will never learn this very simple equation. Goof should STFU!

  • abjv

    I wonder if this one has been thought through.

    I buy a rental property as an investment, something to make a return over time. Part of that return is the surplus of rental income over outgoings, part is the ability to offset the interest costs against unrelared income. The rest is a capital gain, which Phil now wants to tax at 15%. If I make less return there, I will want to make more return somewhere else.

    Ask a higher price when I sell it? That won’t work; price set by market forces. Ask more for rent? Quite possible, with all investor landlords in the same position. But let’s say Phil sees this one coming and constrains my ability to do this e.g. by putting a load of public sector houses on the rental market at cheap rent.

    Once the return maths don’t stack up, I’ll want to get out of residential investing for somewhere with a more secure return. Not necessarily a bad thing across the economy, particularly now the finance company sector doesn’t exist. To get out of residential investing, I sell the house. Lots of landlords in a similar position do the same. House prices drop, further assisted by fewer investors coming into the market becuase the returns now aren’t as good.

    House prices dropping is real nice if you are a battler trying to save for a deposit. It is not real nice if you are a battler who has managed to buy your first house and are sitting on a 90% mortgage. I don’t think you will be too happy if there are fewer buyers out there, and house prices fall by 5 to 10%. It is your equity that Phil is wiping out, not the bank’s. And if you are a battler and ‘only just there’, and the house price drops and puts you close to negative equity, even if you are completely solvent and have been meeting all mortgage obligations, there’s nothing to stop the bank calling the loan in. They’ve been doing this to farmers for about 18 months now.

    I completely agree that these investments need some sort of tax regime on them – capital gains is but oneoption; ring-fencing the activity to stop losses being offset from unrelated income is another – but it has to be eased in to avoid collapsing the housing market. And if they ease it in, its not going to cough up the $$ that Phil needs to fund his spending programme. They should should have done it in the 9 years they were in government – oh, I forgot, Hulun had a string of investment properties.

    • abjv

      Two thoughts.

      What say IRD then slaps an accruals regime on this capital gains tax? They’ve done this with everything else. I can’t imagine IRD waiting 10 years to get their hand on the tax. Maybe this is how Phil intends the capital gain tax to boost the coffers from day 1.

      Each 31 March, you would need to value your investment property (not a GV as these don’t change annually, but a market valuation by a registered valuer – hopefully deductible) and then pay tax on the year’s unrealised capital gain? And get this calculation correct, a year in advance, when you work out your provisional tax.

      I wonder if capital losses would be deductable at 15%? I can think of a number of Christchurch landlords in the ‘red zone’ who are about to take a significant capital loss. If they weren’t insured, this could be a total loss. 15% of $450K as a tax credit anyone?

  • johnqpublic

    Phil is relying on the fact NZers don’t know care for any other type of investment other than housing, so will just suck it up at pay his CGT. Sadly, he’s right.

  • stevewrathall

    Mum and Dad have a family home and an investment property. They pay CGT.
    Mum and Dad split. Now they have two family homes. Yay, no CGT!
    And more taxpayer subsidisation of relationship breakdown from Labour.

    • royaloaks

      Herr Helen in NY would be loving it. Taxpayers subsidizing relationship breakdowns would be right up her alley.

  • rouppe

    Liarbore will never give a refund on losses.

    Remember the Overseas Investment Income regime? If you bought $10,000 of USA shares and they were revalued after a year 1 at $11,000 you paid tax on the $1,000. If at the end of year 2 they were revalued at $10,000 you paid no tax but got no refund. If at the end of year 3 it was back to $11,000 you paid tax on $1,000 again.

    Assholes the lot of them

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