IRD minister says we're not measuring all wealth & not measuring the overall progressiveness of our tax system; He also proposes outlawing unfair tax changes, but doesn't propose a wealth tax. Yet.
This all sounds very promising, although collecting info to inform the future shape of the tax system is not going to bring any immediate relief to those suffering hardship. It really beggars belief that we haven't kept a closer eye on the super wealthy to date. I was chosen for the Household Economic Survey 4 years ago. It was eye opening! We live a pretty simple financial existence with a mortgage but no other debt. Most of my answers were no, as in no hire purchase, no credit card debt, no personal loans etc. It became clear to me how many people come unstuck. I asked the surveyor for any general comments on our situation compared to others (seeing we finished the survey in half an hour with an hour and a half to spare). She said we were unusual in that we knew the state of our finances, had everything organized (most of the time is apparently taken by people rummaging through drawers for their credit card statement) and didn't have any financial complexity. A lot of people it seems would prefer not to think about this stuff, but it has such a huge impact on your wellbeing that it seems crazy not too.
Obviously, Labour is well on its way to pushing a bigger culture war which sounds good but will become bad news for the working class. A wealth tax means it will become law and at some point, everyone will be subject to it. If Labour is serious about taxation they would follow Adam Smith's principle to tax land and rents. But we know that is not going to happen. The people running the government are big property owners themselves so they are not going to harm themselves. When we need a boogeyman why not blame the uber-rich for our problems rather than bad government policy? Oh, yeah, the sheepish media and poorly educated economists will play their role in spewing 'tax the rich' gibberish we see from the USA. If anyone cares to see how a wealth tax functions in real life they should migrate to The Netherlands. Those making over 25K euros pay it.... and it is onerous. It started as taxing the rich but now the poor Dutch are hit. Welcome to dystopia.
The other serious flaw the government is trying to engineer is to present the government's balance sheet as the problem. What government operatives want to avoid discussing is the private sector balance sheet, which is the more serious problem. This means more private income is put into more debt servicing which means there is no money for other areas of the economy. Debt rises faster than income. I've asked several ministers to forgive debt owed to the government like what was done pre-Roman times. They are not interested. The government has its own printing press and can never run out of money. The private sector does not have that capability and in reality, the government does not need our money to keep the government running. But who cares? We have a European centred mindset on debt, income and taxation and as Margret Thatcher stated: There is no alternative.
So good Covid is now a non issue we can see a real political contest of ideas. Please can you get Max Rashbrooke on a Friday hoon?
Almost spat out my rooibos when I heard GR talking about the government providing quality public services for the squeezed middle as opposed to tax cuts. He couldn’t have been talking about public safety, school standards or hospital staffing levels in Nz.
There seems to be a belief that the vast majority of kiwi voters are opposed to a CGT. I haven't seen research on this, but Jacinda certainly believes this as shown by her ruling out a CGT while she is PM. I believe Luxon would have the same view. Given that New Zealand is one of the few OECD countries not to have a well defined CGT is an oddity driven by politicians view of vote maximisation. We effectively do have a CGT on residential property but the IRD has never had the Guts to implement this. Tax payable being determined on a purchaser intention to hold long term or not was a nonsense. The Brightline test implemented to provide some clarity has almost cemented no CGT after 2, 5 or 10 years. The current 10 year Brightline has the unintended consequence of not freeing land for development given the tax consequence of selling land to a development next door.
It's hard to see how a CGT would be implemented in NZ. Its time for the CGT sacred cow to be put out to pasture. Just look across the Ditch for a fairer more logical system on CGT. It wouldn't be that hard. But lets apply a CGT to all currently held Investment Property, Baches etc. Its is morally hard to argue it is unfair to pay tax on significant gains made over the last couple of decades or recent years.
Firstly, we need to agree what the problems are and for whom. Is it wealth inequality? The size of the gap between the rich and poor? The squeezed middle? Poverty? Inequity or inequality? Once we’ve answered those questions, then we can consider possible solutions and determine which are the most effective and sustainable real world solutions.
Perhaps the remedies don't lie in taxation reform but in modifying income policies. "Tax the rich" is too simplistic and will create unintended and detrimental consequences such as wealthy people leaving the country or sending their money offshore.
I think the solutions lie in introducing fit for purpose income-related policies such as:
Make the living wage the minimum wage and put the onus on the employer, rather than the employee, to go to Work & Income for a wage subsidy. They would have to make the business case to qualify. If we're honest, Working For Families is a subsidy for employers who know they can pay lower wages because taxpayers will top them up.
Paying less than the living wage is theft. No employee should be expected to subsidise someone else's business plan.
The same argument could be made about the Accommodation Supplement - this is a subsidy that goes to landlords and keeps rents higher than they ought to be.
Introduce wage to salary ratios to prevent the gross imbalance that occurs between the factory floor and management. Perhaps we need to think about maximum work incomes not just minimums.
Worker shareholding is also another way to have the workforce share in profits.
The pandemic caught us all unprepared. The arguably generous wage subsidy was helpful as income support and to tether people to jobs rather than have many more business go under.
Perhaps the time has come for a GMI guaranteed minimum income (a nuanced universal basic income) to be considered for everyone, not just those 65+ as it is now. This could be easily increased as required in times of crisis.
A GMI could be phased in, starting with ALL primary caregivers of dependants e.g children, the aged, disabled and unwell. This is work and, as such, it should be recognised, remunerated and included in GDP. These primary caregivers could decide to subcontract this work.
I would also like to see a GMI paid to everyone who is learning i.e. tertiary students and apprentices. This would encourage a better educated workforce.
We ought to look at how people's net incomes can be increased by saving money e.g. improve the building code to something like the hyper energy efficient Passive House standard and people's power bills will plummet thereby leaving them with more disposable income. We should have a mindset of building up to a standard, not down to a price. The ongoing cost of a home is overlooked when doing the sums. e.g. a heat-pump hot water cylinder costs a little more to buy but you save much more in reduced power costs. No builders considering the bottom line are putting these in as standard. Make them standard, same with thermally-broken double glazed windows.
Individualise the income support and taxation systems. This is fairer and would help address the power imbalances that can accompany relationships which can complicate income support.
We know what it costs to raise a child. This should be the starting point for assessing child support for those in or out of a relationship with the other parent.
Where there are children from a relationship that ends, income sharing ought to continue until the youngest child is 18 or no longer at dependant, whichever comes first. Where additional income support is required, either parent should be able to seek it to help meet their shortfall, not just the primary caregiver, as is currently the case.
Property transaction levy on all property and business sales payable by the vendor at settlement. Make it a small percentage of the sale price - this would be way less than an estate agent's commission.
While we're at it, let's change how we buy and sell real estate - make this a fee for service, like conveyancing, not a % of the sale price which is totally unrelated to the service provided. Keep marketing costs separate, too.
Tax income-earning “charities” like Sanitarium.
Tax income from lotteries. Why aren't these winnings taxed? And why, when the jackpots get so big, don’t they break up the jackpot into increments of a maximum of $1m each e.g. have 5 families and communities benefit from $1m instead of one getting all $5m.
As Benjamin Franklin once said, “…in this world, nothing can be said to be certain, except death and taxes.” What about reintroducing an inheritance tax (a.k.a. death duties) - this would be a tax on money the beneficiaries of a deceased estate didn't earn. It's a windfall, like winning a lottery, and could be an (almost) pain-free source of income for the government to redistribute for the common good.
None of us chose to be born but from that day, we are all focused on having enough to avoid hunger, to be comfortable, to feel joy and avoid pain and discomfort.
Whether it’s to buy a food, clothes, a pint at the pub or a house, an EV or to see us through our dotage, we are in a cycle of earning, spending and, for some, saving to spend later or to leave in our will to others.
There are so many unknown variables and that’s why people fret, even rich people.
For an increasing number of people, stress has become distress and there isn’t nearly enough for the basics — to house, clothe and feed themselves or their family - and not even a Labour government seems to want to address their needs and National seems focused on punishing the poor and further enriching the well-off.
This is why we need to address these matters with an urgency this Labour Government hasn’t grasped and, I strongly suspect, a National led Government won’t either.
Nothing changes if nothing changes. We shouldn't wait until the majority is at crisis point and are ram-raiding grocery stores before we address these underlying systemic issues. Good governments have foresight and plan for longer than the next electoral cycle. They make choices for those in crisis today and to rectify systems so they are sustainable for generations to come.
Thanks for the excellent summary, Bernard. I have to say this is one of the more encouraging speeches I've heard from an NZ politician in a long time. How can we develop a sustainable solution without truly understanding what problem we are trying to solve so I whole-heartedly support this data-driven analysis approach to understand where efforts need to be focused on we can really tackle this issue. I only hope it doesn't take too long and we can get started on solutions before too long.
This all sounds very promising, although collecting info to inform the future shape of the tax system is not going to bring any immediate relief to those suffering hardship. It really beggars belief that we haven't kept a closer eye on the super wealthy to date. I was chosen for the Household Economic Survey 4 years ago. It was eye opening! We live a pretty simple financial existence with a mortgage but no other debt. Most of my answers were no, as in no hire purchase, no credit card debt, no personal loans etc. It became clear to me how many people come unstuck. I asked the surveyor for any general comments on our situation compared to others (seeing we finished the survey in half an hour with an hour and a half to spare). She said we were unusual in that we knew the state of our finances, had everything organized (most of the time is apparently taken by people rummaging through drawers for their credit card statement) and didn't have any financial complexity. A lot of people it seems would prefer not to think about this stuff, but it has such a huge impact on your wellbeing that it seems crazy not too.
Obviously, Labour is well on its way to pushing a bigger culture war which sounds good but will become bad news for the working class. A wealth tax means it will become law and at some point, everyone will be subject to it. If Labour is serious about taxation they would follow Adam Smith's principle to tax land and rents. But we know that is not going to happen. The people running the government are big property owners themselves so they are not going to harm themselves. When we need a boogeyman why not blame the uber-rich for our problems rather than bad government policy? Oh, yeah, the sheepish media and poorly educated economists will play their role in spewing 'tax the rich' gibberish we see from the USA. If anyone cares to see how a wealth tax functions in real life they should migrate to The Netherlands. Those making over 25K euros pay it.... and it is onerous. It started as taxing the rich but now the poor Dutch are hit. Welcome to dystopia.
The other serious flaw the government is trying to engineer is to present the government's balance sheet as the problem. What government operatives want to avoid discussing is the private sector balance sheet, which is the more serious problem. This means more private income is put into more debt servicing which means there is no money for other areas of the economy. Debt rises faster than income. I've asked several ministers to forgive debt owed to the government like what was done pre-Roman times. They are not interested. The government has its own printing press and can never run out of money. The private sector does not have that capability and in reality, the government does not need our money to keep the government running. But who cares? We have a European centred mindset on debt, income and taxation and as Margret Thatcher stated: There is no alternative.
So good Covid is now a non issue we can see a real political contest of ideas. Please can you get Max Rashbrooke on a Friday hoon?
Almost spat out my rooibos when I heard GR talking about the government providing quality public services for the squeezed middle as opposed to tax cuts. He couldn’t have been talking about public safety, school standards or hospital staffing levels in Nz.
There seems to be a belief that the vast majority of kiwi voters are opposed to a CGT. I haven't seen research on this, but Jacinda certainly believes this as shown by her ruling out a CGT while she is PM. I believe Luxon would have the same view. Given that New Zealand is one of the few OECD countries not to have a well defined CGT is an oddity driven by politicians view of vote maximisation. We effectively do have a CGT on residential property but the IRD has never had the Guts to implement this. Tax payable being determined on a purchaser intention to hold long term or not was a nonsense. The Brightline test implemented to provide some clarity has almost cemented no CGT after 2, 5 or 10 years. The current 10 year Brightline has the unintended consequence of not freeing land for development given the tax consequence of selling land to a development next door.
It's hard to see how a CGT would be implemented in NZ. Its time for the CGT sacred cow to be put out to pasture. Just look across the Ditch for a fairer more logical system on CGT. It wouldn't be that hard. But lets apply a CGT to all currently held Investment Property, Baches etc. Its is morally hard to argue it is unfair to pay tax on significant gains made over the last couple of decades or recent years.
Firstly, we need to agree what the problems are and for whom. Is it wealth inequality? The size of the gap between the rich and poor? The squeezed middle? Poverty? Inequity or inequality? Once we’ve answered those questions, then we can consider possible solutions and determine which are the most effective and sustainable real world solutions.
Perhaps the remedies don't lie in taxation reform but in modifying income policies. "Tax the rich" is too simplistic and will create unintended and detrimental consequences such as wealthy people leaving the country or sending their money offshore.
I think the solutions lie in introducing fit for purpose income-related policies such as:
Make the living wage the minimum wage and put the onus on the employer, rather than the employee, to go to Work & Income for a wage subsidy. They would have to make the business case to qualify. If we're honest, Working For Families is a subsidy for employers who know they can pay lower wages because taxpayers will top them up.
Paying less than the living wage is theft. No employee should be expected to subsidise someone else's business plan.
The same argument could be made about the Accommodation Supplement - this is a subsidy that goes to landlords and keeps rents higher than they ought to be.
Introduce wage to salary ratios to prevent the gross imbalance that occurs between the factory floor and management. Perhaps we need to think about maximum work incomes not just minimums.
Worker shareholding is also another way to have the workforce share in profits.
The pandemic caught us all unprepared. The arguably generous wage subsidy was helpful as income support and to tether people to jobs rather than have many more business go under.
Perhaps the time has come for a GMI guaranteed minimum income (a nuanced universal basic income) to be considered for everyone, not just those 65+ as it is now. This could be easily increased as required in times of crisis.
A GMI could be phased in, starting with ALL primary caregivers of dependants e.g children, the aged, disabled and unwell. This is work and, as such, it should be recognised, remunerated and included in GDP. These primary caregivers could decide to subcontract this work.
I would also like to see a GMI paid to everyone who is learning i.e. tertiary students and apprentices. This would encourage a better educated workforce.
We ought to look at how people's net incomes can be increased by saving money e.g. improve the building code to something like the hyper energy efficient Passive House standard and people's power bills will plummet thereby leaving them with more disposable income. We should have a mindset of building up to a standard, not down to a price. The ongoing cost of a home is overlooked when doing the sums. e.g. a heat-pump hot water cylinder costs a little more to buy but you save much more in reduced power costs. No builders considering the bottom line are putting these in as standard. Make them standard, same with thermally-broken double glazed windows.
Individualise the income support and taxation systems. This is fairer and would help address the power imbalances that can accompany relationships which can complicate income support.
We know what it costs to raise a child. This should be the starting point for assessing child support for those in or out of a relationship with the other parent.
Where there are children from a relationship that ends, income sharing ought to continue until the youngest child is 18 or no longer at dependant, whichever comes first. Where additional income support is required, either parent should be able to seek it to help meet their shortfall, not just the primary caregiver, as is currently the case.
Property transaction levy on all property and business sales payable by the vendor at settlement. Make it a small percentage of the sale price - this would be way less than an estate agent's commission.
While we're at it, let's change how we buy and sell real estate - make this a fee for service, like conveyancing, not a % of the sale price which is totally unrelated to the service provided. Keep marketing costs separate, too.
Tax income-earning “charities” like Sanitarium.
Tax income from lotteries. Why aren't these winnings taxed? And why, when the jackpots get so big, don’t they break up the jackpot into increments of a maximum of $1m each e.g. have 5 families and communities benefit from $1m instead of one getting all $5m.
As Benjamin Franklin once said, “…in this world, nothing can be said to be certain, except death and taxes.” What about reintroducing an inheritance tax (a.k.a. death duties) - this would be a tax on money the beneficiaries of a deceased estate didn't earn. It's a windfall, like winning a lottery, and could be an (almost) pain-free source of income for the government to redistribute for the common good.
None of us chose to be born but from that day, we are all focused on having enough to avoid hunger, to be comfortable, to feel joy and avoid pain and discomfort.
Whether it’s to buy a food, clothes, a pint at the pub or a house, an EV or to see us through our dotage, we are in a cycle of earning, spending and, for some, saving to spend later or to leave in our will to others.
There are so many unknown variables and that’s why people fret, even rich people.
For an increasing number of people, stress has become distress and there isn’t nearly enough for the basics — to house, clothe and feed themselves or their family - and not even a Labour government seems to want to address their needs and National seems focused on punishing the poor and further enriching the well-off.
This is why we need to address these matters with an urgency this Labour Government hasn’t grasped and, I strongly suspect, a National led Government won’t either.
Nothing changes if nothing changes. We shouldn't wait until the majority is at crisis point and are ram-raiding grocery stores before we address these underlying systemic issues. Good governments have foresight and plan for longer than the next electoral cycle. They make choices for those in crisis today and to rectify systems so they are sustainable for generations to come.
Thanks for the excellent summary, Bernard. I have to say this is one of the more encouraging speeches I've heard from an NZ politician in a long time. How can we develop a sustainable solution without truly understanding what problem we are trying to solve so I whole-heartedly support this data-driven analysis approach to understand where efforts need to be focused on we can really tackle this issue. I only hope it doesn't take too long and we can get started on solutions before too long.