Parker reverses GST move on KiwiSaver after brutal 'tax grab' backlash; Short term failure highlights much longer-term failure to complete pure 'broad-based, low rate' tax net in 1989 with CGT
I am going to have to listen at least twice to this. But am thinking if only there would be backlash against today’s bill limiting money donated to political parties & lowering the voting age if Labour votes against it? Also if only such a backlash against more roads being built & still no tramlines yet in our biggest city.
Actually Bernard in what way does the earlier failure to adopt a CGT cause all the problems with inadequate income for families today? I am in favour of a comprehensive CGT (but realise if there is a downturn the tax paid will come to less than zero) but I don't really see how a CGT could instantly rid NZ of poverty by ensuring that all people receive an adequate income for their needs.
Any calls for the government to implement a new taxation regime before the next election will fall on deaf ears Bernard. While personally I would support tax reform and new ways to tax those who got rich during the covid emergency, the Labour party not unreasonably takes seriously its manifesto promise prior to the last election not to change tax rates (other than the signaled increase to those earning over $180,000 a year) or to introduce new forms of taxation. (The GST tax that was withdrawn wouldn't have started until 2026!). I guess to revisit the policy would open them up for greater criticism. So no matter how much we could want wealth, land, windfall, property or capital gains taxes, there is no way they will change, no matter who the prime minister is.
The period after 2023 is a different story. I believe that the Labour party should –
1. Make all income up to $14,500 free of tax. To compensate, taxation on all other income should increase by 3 cents per dollar earned. In effect all those earning below about $50,000 per year will pay less tax.
2. Introduce a land tax on unimproved residential land. If the intending government was brave it would tax all unoccupied dwellings as well, with perhaps a basic monetary figure that is tax free. (Unoccupied dwellings would include holiday homes).
Whether they will do so or not is the question. National and ACT certainly won’t, so pressure from people such as you Bernard should be applied before the next manifesto is produced next year. Even if you' through necessity' don't support a Labour government, we are bound to get a government that is either National or Labour based.
failure to adopt a CGT in the 80s has resulted in, among other things, too little investment into productivity and innovation. It's led to lower wages and higher rents than a counterfactual world where we had a CGT this whole time, and that's why families' incomes are being squeezed.
I don't think anyone is claiming that introducing a CGT today would fix the problem overnight, though.
Definitely, but that would have to take a different form than a CGT (or at the very least, would have to include the family home whether by sale or inheritance).
Everyone needs a home so I don’t see why it should. Whose creaming it? Banks a FTT would solve a lot on transfers over 10 or 20k. A high windfall tax on obscene corporate profits and disaster Vapor Italian. Making polluter pay would take a burden of citizens. Redistributing income as per PRA and Child Support Act would unburden citizens under the oppressive regime of MSD and a gauaranteed minimum income before clawback income tax at higher rates for 200k individuals would simplify and be appropriate to lift all boats and not disincentive working. Something like that is way simpler and targets correctly and legally and as per human rights obligations surely?
Everyone does need a home. That's exactly why it's terrible to allow some people to get given them for free due to their birth, and others to never have access to one. Taxing inheritance and redistributing it is a fairer option.
Taxing the family home is fine, inheritors will just have to contribute something to the public good in the process. And if they can't afford the tax, then I just bet they'll find a bank which is happy to loan them the money they need. They just got given the greatest security against that loan in the world, a New Zealand property...
A No-CGT regime is now an institutional part of the Aotearoa political economy and at least directly irreversible as Ardern et al quickly learned to their public embarrassment. The matter needs to be dealt with “indirectly” now with a massive public housing investment that will undercut the cornerstone of financial gambling here. We need to distinguish between the real estate market, Ponzi Central, and housing for people. Only publicly funded ( and publicly built) community housing can provide a framework for this severance. Such a mission will not be led from parliament.
As I wrote yesterday: - "the government needs to annually drop the highest fee charging default manager and replace it with one with lower fees. Each year there are more funds being managed but the marginal cost of managing those new funds is very close to zero."
To that I would add that only a fund manager who charges GST on their fees can be a default provider.
People joining Kiwisaver today and going into a default fund is pretty low as it is effectively only new entrants to the work force who haven't chosen their fund manager. So probably not much effect, but if you can't fix the problem, just back it more convoluted.
And then there is the issue of secondary tax, which predominantly penalises low income earners with multiple jobs. I've heard no plans to dispense with that?
I don't understand what the deal with secondary tax is - maybe you can explain what you think it is? My understanding is it doesn't cost you more than if you earned that amount from a single source, yet people often talk about how unfair it is?? (I do understand you could give your employer the wrong tax code and get taxed more, but then you will get it back as a refund - it seems like it's no different from any other tax code in that respect?)
My experience of secondary tax saw my income from my second job reduce to below the minimum wage after secondary tax. Tax codes were checked and I received sympathy but "that's that rule" from the IRD when I queried it. Effectively went to work for the bus fare for that job, 18 months ago pre transport cost reduction. Most folk working two jobs would find waiting till the end of the tax year for a refund difficult .Happy to have the fairness of this explained.
Sure - obviously I understand waiting for a refund is a bad option for many. I've personally worked multiple jobs in the past, and used 'S' tax codes, but just never hit the same snags that people who talk about the 'problems' with secondary tax seem to run into.
Having said that, I actually would be interested to hear how else we could tax someone's 'total' income (from multiple jobs) in a more fair way.
You are correct, Tim, in that it doesn't cost anyone any more in tax than if they earned the same total income from one source. But, that all gets worked out at the end of the tax year, not in real time.
My guess is that secondary tax predominantly impacts low (total) earners who have multiple part time jobs more than high (total) earners who typically have a single source of income. For low earners, it makes a big difference to their day to day finances that the IRD takes more $ at the time, and gives back the correcting amount at year end - they typically don't have the buffer of savings and cash in the bank that high earners do.
The goal of secondary tax as I understand it, is to reduce the number of people that earn through the PAYE system and because of multiple income sources, end up paying too little tax for their total income, and at the end of the year, get a tax bill that they are generally poorly placed to pay, because they generally don't (or can't) work out what extra cash from their 2nd, 3rd etc jobs they should put aside for tax.
So the big issue with secondary tax is the timing difference. In the short term, earners see a high(er) tax impost on their 2nd and subsequent incomes, and have to wait for the end of tax year refund for it all to balance out, which is hard for most in this situation. Its better than getting a bill at the end of the year, but its a case of bad compared to worse is good.
Add to that, a general lack of understanding of what is going on with secondary tax, and you've got a system that is deeply hated by most of those who are affected by it.
It's a difficult outcome of a progressive tax system. The only really elegant solution to multiple sources of PAYE income is a flat tax rate, which is unpalatable for many other reasons.
Thanks for the explanation - I think where I get flustered is when people talking about this describe the problem as the 'IRD' taking money. Because, of course, the IRD don't decide how much to withhold, your employer does - based on the tax code you give them.
I'm not wanting to victim blame time-poor people, stuck having to work multiple jobs, but getting overtaxed in a second job PAYE is a private payroll issue. It's an issue we need to resolve with education, and probably some enforcement, but it's not the 'regressive tax policy' that some people seem to position it as.
I feel for David Parker. He is a very smart man but he has the most boring of portfolios and he is as charismatic as a cold fish. And this man has to "sell" detailed & sometimes complicated tax policies to people that can't be botherec reading beyond the NZ Herald headline on Twitter.
Many a times I had to explain CGT to people that only read headlines at the last round when the idea floated. The lack of understanding and of interest to understand is mind boggling.
This one was simply a PR disaster but also Labour stubbornly refusing to give anything back. So many punishing policies National inflicted on us could have been reversed to sweeten this deal. But no, they chose to shoot themselves in the foot just so they can claim to continue being fiscally responsible.
Bernard, was I imagining it or did I read David Parker saying at some point yesterday that it wasn't a tax on kiwisaver because the providers would be the ones who were being charged for it, or something to that effect?
I thought when I read that that it was a huge red flag for David's competence for the role, it would imply that he didn't understand the incidence of tax, who would end up paying it.
If all this illegality and incompetence and bias is built into automated systems )which many many people don’t want or can afford or are able to use as Government charges in with assumptions they can or will, impossible security aside, we will be in an entirely unaccountable and hidden environment at the top where rather than lawful conduct, which we don’t have yet even, will me inequities and injustice will be built in because “computer says no”. Totally unaccountable for all the human cogs working in that machine. Nightmarish.
I don’t know about that being the sole cause I suspect IRD have broad based income or easy pickings off most NZers and are incompetent at collecting or distributing anything else they are legally obliged too. So they do the least possible for as long as possible and as badly as possible. Except up taxes without accounting for ensuring they get ti where they are meant to, which is just basic legal and financial ethics unfortunately assumed by the public.Revenue Minister and Ministers of successive Governments seemed to use the consolidated fund and suchlike simply out of laziness not based on evidence. Do they collect tax from the wealthiest? Evidence overseas suggest not. Do they perform their function local )usually women with children here) will give evidence not (they’re taken away and/or flogged off into Government bulk funded institutions cheaply to abuse) rather than pay and resource their carers to perform that function while also expected to perform another to pay tax and work as well (using expensive childcare …more tax…free labour.,,exploitation…to support more tax or the children get no caring at all. My view is we’re in a meeting ch worse state and because of bad design. With no accounting for the invisible work (to men) by women has caused a useless and unhealthy system more tax won’t address the fundamentals of just mask them a bit longer at best. Oops. That’s embarrassing. 😂A wealth tax has to be imposed on the really wealthy and possibly via windfall taxes. None with kids or elderly on 21k should be paying tax at all. A because they’re performing a public good and service to the economy and should have adequate resources to do a good job, and B Superannuitants have already paid over a whole lifetime one way or another. Obviously this needs generous means testing for millionaires and squillionaires. Another role the IRD should be able to do…but can’t. Targeting the poor and middle class is venal and vile.
When I was born in 1948 my mother received a child benefit of eleven shillings a week for my care. At the time my father earned four pounds a week (8 times the child benefit) as a skilled trades person. The family, including several other children, lived on one income. Taxes were graduated in Aotearoa, there were no billionaires here. Anti-unionism was rife in the midst of McCarthyism but working class people did slowly secure benefits for themselves. They weren’t the good old days. They sure were better than these for the average worker.
Peter Dunn’s article is showing Labour a way to consider participating in the spin war with a timely reference to the Bête Noire of the ongoing rugby debacle to demonstrate the vacuousness of National party policy. National’s 33 remaining “hollow men” may not have yet evolved from their “blue blood” trenches, but they are definitely winning the Spin War – apparently mostly by association with views of the disparate Freedom party’s claim that Labour is all about spin and control of normal people’s rights. This morning’s example of National’s hypocrisy, a classic application of right wing misinformation amplified on the front page of Granny Herald, accused the Govt of wanting to dampen demand for Kiwi retirement saving. The reality was that the Govt wanted GST to be fairly applied on the 1-2% fee being overcharged by Kiwi wealth advisors (i.e. 15% on 2% = 0.3%) on mostly middle class savers contributions. Perhaps Jacinda needs to water down her “relentlessly positive” strategy and start to play the game under the emerging rules of the political game.
They also need to start spending the ACC fund on what it is meant to cover including illness and as was envisioned originally and promised by labour. That would help the Health system and with Child Support collected properly and handed over and ACC paying those with entitlements about 3/4 of WINZ “clients” would be gone. It’s not an “investment fund” it’s meant to go to the public as insurance for everyone as we all pay into it. Government triple dipping and flogging money again.
It might sound a bit weird but the only way to straighten up the mess might be to allow wages to treble and to slash the value of the dollar proportionately - basically we need to allow the rest of the market to inflate/deflate proportionately to property. A key part of the problem is that real value of wages have been shrunk over the past 30 years. We now have an awful array of closet subsidies to support "cheap" labour disguised as things like "working for Families" and accommodation supplements to try and compensate for the fact that we are trying to maintain a high living cost/low wage economy. As with all subsidies - you can only keep juggling a large mass of balls for so long - and I think were at the point where the juggler is losing focus.
A CGT tax is really only a tax on market distortions created by bad government policies and there are a whole raft of them that have made this mess we are in not just a lack of CGT but a lack of a sane population (migration) policy, a lack of infrastructure investment a lack of central govt leadership on urban and environmental planning policy. And maybe its time that all "income" was treated as income - and if buying a home was treated as a taxable expense and and selling a home as taxable income the two would balance out for home owners. But for all others buying and selling property of any kind would be a simple business transaction so return on sale minus purchase costs and expenses would be taxable.
And David Parker is a child of the Douglas/Caygill school of thought - he still thinks the market will do a better job of governing than a wise government.
Winter heating, working for Families, etc are ways of subsidising employers, landlords and other parasites. Our neoliberal political economy privatises the benefits and socialises the losses.
Yes. Several examples from countries with CGT still have had significant property price rises. Currently in Switzerland- 2 bedroom apartment 400k CHF in 2011 now just under 900k CHF. I think the interest payments are tax deductible-pursuing a better understanding
I am going to have to listen at least twice to this. But am thinking if only there would be backlash against today’s bill limiting money donated to political parties & lowering the voting age if Labour votes against it? Also if only such a backlash against more roads being built & still no tramlines yet in our biggest city.
At least it wasn't a sidestep ...
https://www.youtube.com/watch?v=AALREbJZEZk
Speaking of which, after a week full of condemnations
https://twitter.com/NZheretic/status/1564883702450008064
FINALLY! National's Christopher Luxon rules out joining with Brian Tamaki-led Freedoms NZ coalition
https://www.nzherald.co.nz/nz/nationals-christopher-luxon-rules-out-joining-with-brian-tamaki-led-freedoms-nz-coalition/6W6HTIJFSMT5BSMURZYC6A7XLI/
Abet in language not too dissimilar to the above Youtube clip.
Thats a beautifully crafted note today Bernard, would be great to see it published more widely. Love your work.
Actually Bernard in what way does the earlier failure to adopt a CGT cause all the problems with inadequate income for families today? I am in favour of a comprehensive CGT (but realise if there is a downturn the tax paid will come to less than zero) but I don't really see how a CGT could instantly rid NZ of poverty by ensuring that all people receive an adequate income for their needs.
Any calls for the government to implement a new taxation regime before the next election will fall on deaf ears Bernard. While personally I would support tax reform and new ways to tax those who got rich during the covid emergency, the Labour party not unreasonably takes seriously its manifesto promise prior to the last election not to change tax rates (other than the signaled increase to those earning over $180,000 a year) or to introduce new forms of taxation. (The GST tax that was withdrawn wouldn't have started until 2026!). I guess to revisit the policy would open them up for greater criticism. So no matter how much we could want wealth, land, windfall, property or capital gains taxes, there is no way they will change, no matter who the prime minister is.
The period after 2023 is a different story. I believe that the Labour party should –
1. Make all income up to $14,500 free of tax. To compensate, taxation on all other income should increase by 3 cents per dollar earned. In effect all those earning below about $50,000 per year will pay less tax.
2. Introduce a land tax on unimproved residential land. If the intending government was brave it would tax all unoccupied dwellings as well, with perhaps a basic monetary figure that is tax free. (Unoccupied dwellings would include holiday homes).
Whether they will do so or not is the question. National and ACT certainly won’t, so pressure from people such as you Bernard should be applied before the next manifesto is produced next year. Even if you' through necessity' don't support a Labour government, we are bound to get a government that is either National or Labour based.
failure to adopt a CGT in the 80s has resulted in, among other things, too little investment into productivity and innovation. It's led to lower wages and higher rents than a counterfactual world where we had a CGT this whole time, and that's why families' incomes are being squeezed.
I don't think anyone is claiming that introducing a CGT today would fix the problem overnight, though.
They could just tax wealth properly and leave the rest of the poorer population alone.
Definitely, but that would have to take a different form than a CGT (or at the very least, would have to include the family home whether by sale or inheritance).
Everyone needs a home so I don’t see why it should. Whose creaming it? Banks a FTT would solve a lot on transfers over 10 or 20k. A high windfall tax on obscene corporate profits and disaster Vapor Italian. Making polluter pay would take a burden of citizens. Redistributing income as per PRA and Child Support Act would unburden citizens under the oppressive regime of MSD and a gauaranteed minimum income before clawback income tax at higher rates for 200k individuals would simplify and be appropriate to lift all boats and not disincentive working. Something like that is way simpler and targets correctly and legally and as per human rights obligations surely?
Everyone does need a home. That's exactly why it's terrible to allow some people to get given them for free due to their birth, and others to never have access to one. Taxing inheritance and redistributing it is a fairer option.
Taxing the family home is fine, inheritors will just have to contribute something to the public good in the process. And if they can't afford the tax, then I just bet they'll find a bank which is happy to loan them the money they need. They just got given the greatest security against that loan in the world, a New Zealand property...
A No-CGT regime is now an institutional part of the Aotearoa political economy and at least directly irreversible as Ardern et al quickly learned to their public embarrassment. The matter needs to be dealt with “indirectly” now with a massive public housing investment that will undercut the cornerstone of financial gambling here. We need to distinguish between the real estate market, Ponzi Central, and housing for people. Only publicly funded ( and publicly built) community housing can provide a framework for this severance. Such a mission will not be led from parliament.
As I wrote yesterday: - "the government needs to annually drop the highest fee charging default manager and replace it with one with lower fees. Each year there are more funds being managed but the marginal cost of managing those new funds is very close to zero."
To that I would add that only a fund manager who charges GST on their fees can be a default provider.
People joining Kiwisaver today and going into a default fund is pretty low as it is effectively only new entrants to the work force who haven't chosen their fund manager. So probably not much effect, but if you can't fix the problem, just back it more convoluted.
And then there is the issue of secondary tax, which predominantly penalises low income earners with multiple jobs. I've heard no plans to dispense with that?
Exactly. All smoke and mirrors it starts to look more like distraction and conspiracy rather than incompetence and misogynistic cock up every day.
I don't understand what the deal with secondary tax is - maybe you can explain what you think it is? My understanding is it doesn't cost you more than if you earned that amount from a single source, yet people often talk about how unfair it is?? (I do understand you could give your employer the wrong tax code and get taxed more, but then you will get it back as a refund - it seems like it's no different from any other tax code in that respect?)
My experience of secondary tax saw my income from my second job reduce to below the minimum wage after secondary tax. Tax codes were checked and I received sympathy but "that's that rule" from the IRD when I queried it. Effectively went to work for the bus fare for that job, 18 months ago pre transport cost reduction. Most folk working two jobs would find waiting till the end of the tax year for a refund difficult .Happy to have the fairness of this explained.
Sure - obviously I understand waiting for a refund is a bad option for many. I've personally worked multiple jobs in the past, and used 'S' tax codes, but just never hit the same snags that people who talk about the 'problems' with secondary tax seem to run into.
Having said that, I actually would be interested to hear how else we could tax someone's 'total' income (from multiple jobs) in a more fair way.
You are correct, Tim, in that it doesn't cost anyone any more in tax than if they earned the same total income from one source. But, that all gets worked out at the end of the tax year, not in real time.
My guess is that secondary tax predominantly impacts low (total) earners who have multiple part time jobs more than high (total) earners who typically have a single source of income. For low earners, it makes a big difference to their day to day finances that the IRD takes more $ at the time, and gives back the correcting amount at year end - they typically don't have the buffer of savings and cash in the bank that high earners do.
The goal of secondary tax as I understand it, is to reduce the number of people that earn through the PAYE system and because of multiple income sources, end up paying too little tax for their total income, and at the end of the year, get a tax bill that they are generally poorly placed to pay, because they generally don't (or can't) work out what extra cash from their 2nd, 3rd etc jobs they should put aside for tax.
So the big issue with secondary tax is the timing difference. In the short term, earners see a high(er) tax impost on their 2nd and subsequent incomes, and have to wait for the end of tax year refund for it all to balance out, which is hard for most in this situation. Its better than getting a bill at the end of the year, but its a case of bad compared to worse is good.
Add to that, a general lack of understanding of what is going on with secondary tax, and you've got a system that is deeply hated by most of those who are affected by it.
It's a difficult outcome of a progressive tax system. The only really elegant solution to multiple sources of PAYE income is a flat tax rate, which is unpalatable for many other reasons.
Thanks for the explanation - I think where I get flustered is when people talking about this describe the problem as the 'IRD' taking money. Because, of course, the IRD don't decide how much to withhold, your employer does - based on the tax code you give them.
I'm not wanting to victim blame time-poor people, stuck having to work multiple jobs, but getting overtaxed in a second job PAYE is a private payroll issue. It's an issue we need to resolve with education, and probably some enforcement, but it's not the 'regressive tax policy' that some people seem to position it as.
I feel for David Parker. He is a very smart man but he has the most boring of portfolios and he is as charismatic as a cold fish. And this man has to "sell" detailed & sometimes complicated tax policies to people that can't be botherec reading beyond the NZ Herald headline on Twitter.
Many a times I had to explain CGT to people that only read headlines at the last round when the idea floated. The lack of understanding and of interest to understand is mind boggling.
This one was simply a PR disaster but also Labour stubbornly refusing to give anything back. So many punishing policies National inflicted on us could have been reversed to sweeten this deal. But no, they chose to shoot themselves in the foot just so they can claim to continue being fiscally responsible.
You just saved me some typing, cheers Merav!
I find it fascinating but I’m weird like that as well.
Bernard, was I imagining it or did I read David Parker saying at some point yesterday that it wasn't a tax on kiwisaver because the providers would be the ones who were being charged for it, or something to that effect?
I thought when I read that that it was a huge red flag for David's competence for the role, it would imply that he didn't understand the incidence of tax, who would end up paying it.
If all this illegality and incompetence and bias is built into automated systems )which many many people don’t want or can afford or are able to use as Government charges in with assumptions they can or will, impossible security aside, we will be in an entirely unaccountable and hidden environment at the top where rather than lawful conduct, which we don’t have yet even, will me inequities and injustice will be built in because “computer says no”. Totally unaccountable for all the human cogs working in that machine. Nightmarish.
I don’t know about that being the sole cause I suspect IRD have broad based income or easy pickings off most NZers and are incompetent at collecting or distributing anything else they are legally obliged too. So they do the least possible for as long as possible and as badly as possible. Except up taxes without accounting for ensuring they get ti where they are meant to, which is just basic legal and financial ethics unfortunately assumed by the public.Revenue Minister and Ministers of successive Governments seemed to use the consolidated fund and suchlike simply out of laziness not based on evidence. Do they collect tax from the wealthiest? Evidence overseas suggest not. Do they perform their function local )usually women with children here) will give evidence not (they’re taken away and/or flogged off into Government bulk funded institutions cheaply to abuse) rather than pay and resource their carers to perform that function while also expected to perform another to pay tax and work as well (using expensive childcare …more tax…free labour.,,exploitation…to support more tax or the children get no caring at all. My view is we’re in a meeting ch worse state and because of bad design. With no accounting for the invisible work (to men) by women has caused a useless and unhealthy system more tax won’t address the fundamentals of just mask them a bit longer at best. Oops. That’s embarrassing. 😂A wealth tax has to be imposed on the really wealthy and possibly via windfall taxes. None with kids or elderly on 21k should be paying tax at all. A because they’re performing a public good and service to the economy and should have adequate resources to do a good job, and B Superannuitants have already paid over a whole lifetime one way or another. Obviously this needs generous means testing for millionaires and squillionaires. Another role the IRD should be able to do…but can’t. Targeting the poor and middle class is venal and vile.
When I was born in 1948 my mother received a child benefit of eleven shillings a week for my care. At the time my father earned four pounds a week (8 times the child benefit) as a skilled trades person. The family, including several other children, lived on one income. Taxes were graduated in Aotearoa, there were no billionaires here. Anti-unionism was rife in the midst of McCarthyism but working class people did slowly secure benefits for themselves. They weren’t the good old days. They sure were better than these for the average worker.
Peter Dunn’s article is showing Labour a way to consider participating in the spin war with a timely reference to the Bête Noire of the ongoing rugby debacle to demonstrate the vacuousness of National party policy. National’s 33 remaining “hollow men” may not have yet evolved from their “blue blood” trenches, but they are definitely winning the Spin War – apparently mostly by association with views of the disparate Freedom party’s claim that Labour is all about spin and control of normal people’s rights. This morning’s example of National’s hypocrisy, a classic application of right wing misinformation amplified on the front page of Granny Herald, accused the Govt of wanting to dampen demand for Kiwi retirement saving. The reality was that the Govt wanted GST to be fairly applied on the 1-2% fee being overcharged by Kiwi wealth advisors (i.e. 15% on 2% = 0.3%) on mostly middle class savers contributions. Perhaps Jacinda needs to water down her “relentlessly positive” strategy and start to play the game under the emerging rules of the political game.
The media should be crawling all over IRD and GOVERNMENT income, collection and expenditure to find the gaps. Line by line.
They also need to start spending the ACC fund on what it is meant to cover including illness and as was envisioned originally and promised by labour. That would help the Health system and with Child Support collected properly and handed over and ACC paying those with entitlements about 3/4 of WINZ “clients” would be gone. It’s not an “investment fund” it’s meant to go to the public as insurance for everyone as we all pay into it. Government triple dipping and flogging money again.
‘Reverse ferret’ as a description is a stroke of genius. Worth all the embarrassment of yesterday just to learn this new term
It might sound a bit weird but the only way to straighten up the mess might be to allow wages to treble and to slash the value of the dollar proportionately - basically we need to allow the rest of the market to inflate/deflate proportionately to property. A key part of the problem is that real value of wages have been shrunk over the past 30 years. We now have an awful array of closet subsidies to support "cheap" labour disguised as things like "working for Families" and accommodation supplements to try and compensate for the fact that we are trying to maintain a high living cost/low wage economy. As with all subsidies - you can only keep juggling a large mass of balls for so long - and I think were at the point where the juggler is losing focus.
A CGT tax is really only a tax on market distortions created by bad government policies and there are a whole raft of them that have made this mess we are in not just a lack of CGT but a lack of a sane population (migration) policy, a lack of infrastructure investment a lack of central govt leadership on urban and environmental planning policy. And maybe its time that all "income" was treated as income - and if buying a home was treated as a taxable expense and and selling a home as taxable income the two would balance out for home owners. But for all others buying and selling property of any kind would be a simple business transaction so return on sale minus purchase costs and expenses would be taxable.
And David Parker is a child of the Douglas/Caygill school of thought - he still thinks the market will do a better job of governing than a wise government.
Winter heating, working for Families, etc are ways of subsidising employers, landlords and other parasites. Our neoliberal political economy privatises the benefits and socialises the losses.
Better a backflip or a flip flop than proceeding with a very dumb policy.
A Fosbury Flop?
This is a fantastic analysis, Bernard.
Honest question here (I might just be being naive):
Doesn’t Australia have CGT and stamp duty, and yet also some of the most unaffordable housing?
Yes. Several examples from countries with CGT still have had significant property price rises. Currently in Switzerland- 2 bedroom apartment 400k CHF in 2011 now just under 900k CHF. I think the interest payments are tax deductible-pursuing a better understanding