The polls might show support for the broad idea of taxing excess profits and capital gains, but when you dig into detail on asset classes, like shares and property, that diminishes.
It’s an aspiration paradox: people vote for the wealth they want rather than the lifestyle they have.
Or put simply: voters resent new taxes. Presented with a choice only a year ago, the electorate plumped for tax cuts.
This is correct. A CGT always falls down on the details as people realise it will affect their lifestyle block, their bach, their shares etc.
In theory a comprehensive CGT (no exemptions) which was offset by significant income tax cuts would be economically desirable. But politically a comprehensive CGT will never fly, and one with exemptions just leads to rorting.
And so, Labour has been sucked back into the capital gains tax doom loop. It’s an issue it has failed to resolve over four successive elections.
Next time around, whatever form it takes, the policy will be even harder to sell.
First, Hipkins will have to find the political courage that deserted him last year — and the two leaders before him.
He will have to explain why he changed his mind, without stating the bald, cynical truth that a new tax was undesirable.
Labour will also have to dissolve the prevailing narrative that in government the party wasted and mismanaged vast amounts of public money.
Exactly. They increased spending by $1 billion a week and made almost indicator go in the wrong direction as so much of it was wasted.
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders.
5 comments:
As you say, a CGT with corresponding cuts to income tax makes economic sense. Limited exemptions would be necessary, eg. family home, and some rorting would occur. But it’s a nonsense that my gains from stocks and shares, and real estate investments, go untaxed while my children pay excessive income tax to compensate.
A case can be made for a cgt or windfall tax. But to be fair it has to be hopelessly complex. All taxed at the top rate at time of realisation is not reasonable; it needs to be a flat rate. Capital expenditure must be offset; requiring complex and expensive annual accounting. Exclusion of family home is illogical. But persons must not be discouraged from moving for work etc. The liability needs to be postponed; a recovery nightmare made to be rorted. If Labour had introduced a few years ago when eager, vast numbers of citizens would now qualify for a cgt credit, as some will under the bright line test.
There is a simple answer to the concern that existing assets will be taxed on sale, and that's to exempt all assets owned on day one. The CGT would only apply to assets acquired after implementation, meaning it would phase in over a number of years. That approach would also remove the massive task of valuing all qualifying assets as of day one needed to lock in the amount of the deduction available on sale. That's precisely the approach adopted by Australia when they introduced CGT, and it worked.
Before creating a new tax avenue, the Government does need to prove it's not mismanaging and wasting its current income. But, realised capital gains (just like losses) from other revenue/investment streams, for equity's sake, should come within the ambit of taxation. And, then if you want to economy to really come alive and assist wealth redistribution, dare I say it, there perhaps should be some duties at some level payable on death. Of course, with companies and trusts etc, and international movements of monies that will be a legal minefield, but not insurmountable. It just depends on what you want to achieve, but a hard sell in any event.
Other countries have cgt but it is difficult for the ordinary person to find how these work. Generallyit is not in th einterests of many and esp the more able who clearly understand, to make all known, and such research is way beyond the abilties or inclination of current msm.
Post a Comment