by Simon Gibbs
I saw the announcement about The Opportunities Party’s first policy idea – one which aims to make our tax system fairer. Good on Gareth for thinking outside the square, but I have some real concerns about how it is all meant to work. I also have some concerns about how he has redefined things to fit into his economic word view which differs completely from my own. Ideologies aside, though, here are some questions/concerns for him. Here is the link to the policy document for people to read for themselves – I will be referencing this so would pay to have a read.
In no particular order:
1) A house being lived in isn’t a productive asset it is a liability – the equity is only realised if borrowed against which will be with additional interest costs from a bank holding a mortgage, or if it is sold. This is like arguing that a person who owns a car and then charging them as if they were operating a taxi business when there is no equivalence. A homeowner is a homeowner, a landlord is a landlord. One is using a thing to produce an income, the other is not.
2) The housing market could experience a downturn – if this equity disappears on a grand scale – would that mean tax is paid back from the NZ government or will PAYE on the poorest rise back up? It’s stated that this policy would be tax neutral so can only assume that’s what this means.
3) One of the main reasons for people wanting to own a home is safety. We aren’t all investors and people want something to call their own and pass on to their kids, which brings me to 4.
4) The FAQ says over 65’s can just mortgage their homes to pay tax to the government upon their assumed death or going to a retirement home, that is asking the IRD to speculate and expose themselves to the property market as who’s to say that house prices will always rise. This is surely a death or inheritance tax on top. Read more »