The party’s website offers a calculator. You enter your income and land value, and it reveals how much better off you will be under its radical tax proposal. Their so-called ‘Tax Reset’ promises a cash payment of $19,400 a year to every adult, the ‘Citizen’s Income’, funded by a 1.75 percent annual tax on land.
I tried to invent someone who would pay more net tax under the scheme. I failed.
Tenants would be way better off. They would receive the free cash but pay no land tax. That is one way of cooling the housing market.
Retirees could defer the tax until they die.
Farmers would pay just 0.5 percent, with conservation exemptions and weather deferrals.
And homeowners? Most would be better off, TOP explains, once their Citizen’s Income is factored in.
But I was determined to find a net loser. I invented a couple TOP could not possibly love, each earning $500,000, with their house on a million dollars of urban land.
Still, the calculator awarded them a net tax cut of $5,455 a year.
Why? It had charged them more income tax (because TOP wants to increase it for top earners), yet their land tax of $17,500 was no match for their $38,800 of free cash.
The tax falls only on land, not on buildings. By TOP’s own rule of thumb, land makes up 70 percent of an average freestanding home’s value. That means few couples’ land tax would outrun the free cash until their house passes around $3 million. And once introduced, land prices would fall, so the new land tax raises even less revenue.
Yet, the scheme must somehow raise $24 billion a year to pay for the ‘Citizen’s Income’. The party estimates one in ten New Zealanders will pay more.
The scheme seems to punish families with multiple earners or high land value, while rewarding those who shift their resources elsewhere. But given how seldom the calculator produces a tax increase, even that seems a stretch.
Milton Friedman warned there is no such thing as a free lunch. Indeed, the oldest lesson in economics is that somebody, somewhere, always pays. Still TOP, the party of ideas, has built a shiny policy and calculator that cheerfully disagree with him.
Perhaps they know something that Friedman missed. Or maybe it is just a policy that is not properly costed?
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was sourced HERE
Retirees could defer the tax until they die.
Farmers would pay just 0.5 percent, with conservation exemptions and weather deferrals.
And homeowners? Most would be better off, TOP explains, once their Citizen’s Income is factored in.
But I was determined to find a net loser. I invented a couple TOP could not possibly love, each earning $500,000, with their house on a million dollars of urban land.
Still, the calculator awarded them a net tax cut of $5,455 a year.
Why? It had charged them more income tax (because TOP wants to increase it for top earners), yet their land tax of $17,500 was no match for their $38,800 of free cash.
The tax falls only on land, not on buildings. By TOP’s own rule of thumb, land makes up 70 percent of an average freestanding home’s value. That means few couples’ land tax would outrun the free cash until their house passes around $3 million. And once introduced, land prices would fall, so the new land tax raises even less revenue.
Yet, the scheme must somehow raise $24 billion a year to pay for the ‘Citizen’s Income’. The party estimates one in ten New Zealanders will pay more.
The scheme seems to punish families with multiple earners or high land value, while rewarding those who shift their resources elsewhere. But given how seldom the calculator produces a tax increase, even that seems a stretch.
Milton Friedman warned there is no such thing as a free lunch. Indeed, the oldest lesson in economics is that somebody, somewhere, always pays. Still TOP, the party of ideas, has built a shiny policy and calculator that cheerfully disagree with him.
Perhaps they know something that Friedman missed. Or maybe it is just a policy that is not properly costed?
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was sourced HERE
14 comments:
This guy didn’t try very hard. Couples earning very high incomes while owning multiple high value properties will pay more tax under this system. And the calculator shows that correctly. And those in the highest 5% in society are happy to pay a bit extra for a better country. Like we used to in the 80s.
The question goes begging: why would a guy from the New Zealand Initiative write a misleading opinion piece about a party they don’t support?
So renters will not find their rent going up by the same amount as the land tax?
And what happens when the 'land value' rating and the ' improvements ' ratings change? There are about 6 different 'land values', the councils, the banks, the insurance companies, the govt and stats....i have no doubt that manipulation will occur to extract more money when tops policy doesn't work or these lefties need more money to fund their 'everyone on welfare' policies.
CXH, no they won’t, because rents are market driven, not input cost driven.
This ridiculous policy reminds me of Walter Nash's infamous election bribe in 1953 promising 100 pounds cashback for every voter. Do you want the money or not he bellowed. And the suckers believed him. Even those who were not actually paying 100 pounds in tax in the first place . Which drives home the reality that, when any polly promises tax cuts, it's your own money they are bribing you with. And that's before you even analyse the alternatives on offer. Like wealth taxes that history show are too expensive to administer, are too easy to avoid and may require the asset being taxed to be sold to pay the tax, thereby achieving the socialist obective of destroying wealth. The only folk that benefit are the valuers.
The free handout is included in the nat super payment, not on top of. The goal is to gradually force people to sell their houses and then what. rent? or go to rest homes? If the levy is allowed to accumulate and collected when a property is sold maybe properties will gradually be acquired by councils ( more of less a state owner). Long term this is an anti private ownership move....you will own nothing but be happy. WEF style. Policy of free handouts will appeal to more than a few. Hey I am 17 bum out of school and off with the boys and sheilas to sun and surf, pool our handouts for a pad, booze, drugs etc great time. And we feel justified because some parties say we are victims of bad old greedy folks.
And pensioners? Every homeowner pensioner (all 650,000 of them) will be as much as $8000+ per year, on average, worse off, because The UBI is only a substitute for part of their pension, not an addition to it.
AI analysis tells me this wealth transfer from the elderly will amount to $2 billion or more per year.
But the old are such a drain on society anyway they probably deserve another kick in the guts.
Hartwich economics is wrong = again. His own ACT party that he personally advises has proposed no ways to address our fiscal blowout other than faster economic growth rates. When technology improves everyone can get better off and Hartwich's own no free lunch soundbite becomes irrelevant. A free lunch fuelled by mythical NZ productivity gains that he promotes is intellectually equivalent to Opportunity Party's mythical policies. One myth maker calling out another myth maker.
Anon 1248 that tax is deferrable until death or sale and you know it. What about the massive transfer of wealth to baby boomers over the last 30 years while they paused funding their fair share of public infrastructure? The endless misframing of debt and wealth is shocking.
As the saying goes "no taxation without representation" - so surely the reciprocal should also apply? Or, is it okay that those that have or contribute bugger-all can fairly demand a revised system of taxation, after the event, to their advantage?
Both Labour and TOP's policies will lead to property market volatility and will very unlikely produce the "Eden" they claim.
For starters, they are diametrically opposed. TOP's taxation of land will result in anything not maximised to fall in value (the majority of property), while Labour's fiscal policies will only work when there are capital gains. How will that work? It won't - but cause mayhem it most certainly will. (Valuers and Real Estate Agents will likely love you for it.) But then every time in recent history a Labour Govt gains fiscal control, we end up in significant debt and the face-value (ignoring inflation) of NZ property more or less doubles. That is NOT a long-term satisfactory proposition.
I note that the good, Prof MacCulloch has also entered the fray. While he has maligned the author of this article and the party he reputedly advises, perhaps he could tell us which political party makes the most sense in this taxation area, for it surely can not be the two I've just mentioned? Although, according to The Jones Boy, I'll be one of those that does alright.
On that, and for the record, I'm not at all impressed by the prospect, as I want to see all of NZ prosper - that is those that are prepared to work and contribute to its overall wellbeing and its reciprocity.
In that regard, JFK certainly got that right, "ask not what your country can do for you - ask what you can do for your country."
Given that we hear so much about 'equity' these days, maybe it's time we went fully to 'user pays' and poll taxes - after all, its not land or property that uses the services, it's the people that occupy it. Or, is that envy tax should win out? Which in the longer- term, it most certainly won't.
Top are leftist socialist commies at best - their policies don't stand up to genuine scrutiny - and as with everything under communism...no one is actually better off, living standards decline (could NZ's standards actually decline any further? The real erosion started under aunty helen and continued under key and accelerated sharply under ardern....the current mob have just arrested the decline, but haven't really gotten things running again).
No more socialism or communism or burecrats - this country can't take it any more.
No more "the government should do something" statements - the best thing the government could do for this country is get out of the way!
"Socialist commies" contains a redundancy because communism is by definition a form of socialism.
It's certainly not true to say that nobody is better off under communism - look at the Beverley Hills lifestyles of the political bigwigs in Beijing and Pyongyang! Communism pays, man - for the ratbags at the top!
New Zealand is a democracy under a kingdom. What is up with the low education folks jumping at every shadow, proclaiming “communism” at every thing they don’t like or don’t understand? It’s hella weird, yo.
Better off doesn’t apply to the current government and our massive productivity problem.
It’s our productivity not increasing that has made our wages so low relative to other countries. Surprise surprise, Luxon’s regime of job cuts and Seymour’s regime of regulation cuts have not improved things. In fact this metric might imply they’ve made things worse. Which tends to happen when you tell construction an and the most employable workers to go find a new job to prevent themselves and their colleagues getting the sack.
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