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 (The GST tax that was withdrawn wouldn't have started until 2026!).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.
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 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.
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.
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.
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.
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.
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 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.
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.
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.
‘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.
Better a backflip or a flip flop than proceeding with a very dumb policy.
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?