Last week I looked at misdirected investment. This week it is that dreaded term that has been bandied around as both a miracle cure and a poison that will slowly destroy and unduly punish Kiwi investment. Yes, it’s Capital Gains Tax.
If there has been one thing that has got New Zealander’s collective backs up over the housing crisis it would have to be a Capital Gains Tax. Labour campaigned on it last election and failed. John Key is adamant that it will not benefit the nation. However, as Duncan Garner pointed out quite clearly in two blogs last year, politicians from across the floor have a vested interest in not introducing some type of tax on property. That vested interest is that many of them own more than one property. Why own more than one? Because we as a nation don’t treat property the same as any other asset or capital. Therefore, in order to pay as little tax as possible, people invest in property. This helps fuel the housing price bubble, particularly in Auckland and isn’t the best thing for the country.
And this isn’t about revenue gathering. It is about trying to bring balance and fairness into our current tax system. At the moment it is heavily sloped towards investing in property and the ones who end up paying the most tax proportionally are salary and wage earners. We need to bring some balance back to the field. In researching for this particular blog I discovered that perhaps one of the fairest and balanced ways of correcting the faults in our tax system is something that the Morgan Foundation propose - a Comprehensive Capital Income Tax. It brings balance to our tax system and would see less money invested in property and more money invested elsewhere (This would help solve the issue I raised last week of misdirected investments).
Whichever way we go, the point is we can’t keep doing the same thing as we will always get the same results. No tax on property = heavy investment in property. Introducing a fair tax on all income (basically introducing tax where there isn’t tax currently) = a balanced investment in property and shares and local businesses (in other words, diversification).
And whilst a change in the way we collect tax isn’t the silver bullet, having it as part of a raft of ideas would cool the housing balloon without it going pop. It would bring balance and generate tax revenue that could be used for the benefit of all New Zealanders in areas like health, education, the environment (increasing what DOC gets would be a great start there) and even a reduction in the income tax people pay.
It’s a win win for the nation. We just need our politicians to stop serve their own and their mate’s interests and do more to look after the interests of we the people who voted them in and have the power to vote them out again.
If there has been one thing that has got New Zealander’s collective backs up over the housing crisis it would have to be a Capital Gains Tax. Labour campaigned on it last election and failed. John Key is adamant that it will not benefit the nation. However, as Duncan Garner pointed out quite clearly in two blogs last year, politicians from across the floor have a vested interest in not introducing some type of tax on property. That vested interest is that many of them own more than one property. Why own more than one? Because we as a nation don’t treat property the same as any other asset or capital. Therefore, in order to pay as little tax as possible, people invest in property. This helps fuel the housing price bubble, particularly in Auckland and isn’t the best thing for the country.
And this isn’t about revenue gathering. It is about trying to bring balance and fairness into our current tax system. At the moment it is heavily sloped towards investing in property and the ones who end up paying the most tax proportionally are salary and wage earners. We need to bring some balance back to the field. In researching for this particular blog I discovered that perhaps one of the fairest and balanced ways of correcting the faults in our tax system is something that the Morgan Foundation propose - a Comprehensive Capital Income Tax. It brings balance to our tax system and would see less money invested in property and more money invested elsewhere (This would help solve the issue I raised last week of misdirected investments).
Whichever way we go, the point is we can’t keep doing the same thing as we will always get the same results. No tax on property = heavy investment in property. Introducing a fair tax on all income (basically introducing tax where there isn’t tax currently) = a balanced investment in property and shares and local businesses (in other words, diversification).
And whilst a change in the way we collect tax isn’t the silver bullet, having it as part of a raft of ideas would cool the housing balloon without it going pop. It would bring balance and generate tax revenue that could be used for the benefit of all New Zealanders in areas like health, education, the environment (increasing what DOC gets would be a great start there) and even a reduction in the income tax people pay.
It’s a win win for the nation. We just need our politicians to stop serve their own and their mate’s interests and do more to look after the interests of we the people who voted them in and have the power to vote them out again.
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This is part 3 of a 6 part series. See Are We Really Serious About the Housing Crisis
for the summary. Next week, the importance of Financial Education and why we all benefit through learning even the basics of investment. In later blogs I'll look at increasing the current housing stock and
finally why I believe we should be focusing more on going up rather than
out, particularly in Auckland.
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