What’s driving TOP in the polls has nothing to do with them being ‘centrists’, offering a measured alternative to Labour or National and claiming to be willing to work with either of them, it is simply that TOP are offering free money, and who can resist that?
Do the sums. If you’re a renter you pick up a Universal Basic Income (UBI) of $19,400 tax free per annum, no questions asked. If you’re a homeowner who will be paying TOP’s land tax, the answer is more complicated but still positive.
The average house in NZ sits on land worth $510,000, so the tax per house will be around $9,000 every year. Offsetting that is the free UBI, so even if you’re a single person homeowner, you’re still $10,400 per year better off. As a married couple that increases to $29,800. What’s not to like? (1)
Nothing, until the moment you pass 65. At which point the UBI is subsumed into the pension, not as an addition, but as a substitute for $19,400 of that pension. But you’re still expected to find the land tax payment on your family home.
AI analysis gave me the following information. 750,000 Kiwi pensioners are owner-occupiers, some as singles, others as couples. Around 450,000 of these have only their pension, or pension plus a few dollars from other sources, as their sole income to live on.
Recognizing on the one hand that the UBI part of the pension will be tax free, but on the other the bottom tax rate increases to 28%, when you crunch the numbers, it shows: -
Single homeowner pensioners will have to find $8,084 per year in extra land taxes.
Married couples will, between them, have to find $5,694 per year in extra land taxes.
How any pension-dependent pensioner will be able to make these payments is not addressed by TOP. “Just look at the free money, don’t focus on the details” seems to be their mantra.
But hang on you say, can’t these pensioners simply let the land tax build up as a deferred charge against the house when sold, or bequeathed to their children? And the answer is yes, but again at what cost?
Firstly, TOP doesn’t specify if this deferral will attract interest, but when has the opportunity to charge more tax ever been denied by a politician, so let’s assume that 5% interest will be levied.
Secondly NZ life expectancy stats show that at the age of 65, the average Kiwi will live for approximately 21 more years.
Thirdly, even conservative estimates of land value increases suggest the average accumulated land tax charge against the house, by the time today’s 65 year old reaches their use by date in 2047, will be half a million dollars! (2)
To summarize then. We have a political party, TOP, committed to further impoverishing that half of the homeowning pensioner population who rely primarily on their pensions as their sole income.
Alternatively, TOP will, when you die, interpose themselves between you and your heirs to siphon off half a million dollars in deferred taxes. A death tax on the asset value that parents have worked all their lives to accumulate in their family home.
There is also a gaping fiscal hole in TOP’s calculations. Assuming all pensioners who can’t find $9,000 per year to pay the extra taxes out of an unchanged pension or other retirement savings – which is likely to be pretty much all of them – defer the tax, then that deferred land tax in year one is approx. $6 Billion, rising to $13 billion per year in 2047.
But the UBI still gets shoveled out of the door from day one, even though the taxes aren’t coming in to fund it. (3)
Flooding the economy with free money has a precedent in NZ – Covid funding – and we know what that did to inflation.
But if you are under 65, should you care? And the answer is maybe not – unless you have pensioner parents, a great many of whom are likely to be hastened to their graves by the stress and worry of dealing with this draconian new tax regime.
In any case why does the government need to get involved in this wealth transfer at all? Over the next 20 years, the baby boomer generation, where this accumulated wealth lies today, will find the Grim Reaper’s scythe winnowing their ranks, passing this wealth, frictionlessly and in its entirety, to Gen X and the Millennials. Unless of course TOP gets its hands on the money first
Ronald Reagan’s famous warning - “The nine most terrifying words in the English language are: I’m from the government, and I’m here to help” will, under TOP, be only partially true.
The new quote will read “I’m from the government, and I’m here to help spend your inheritance better than you can.”
TOP are not centrists, a cursory analysis like the above reveals their Socialist colours as they sing that siren song. It’s never worked before, but next time it will.
Calculations and Footnotes.
(1)Examples abound. Four students in a Dunedin flat, “Here’s $77,600 extra to spend on parties and beer lads”.
A professional couple in their $3 million Remuera McMansion, perhaps not so much, but even after land tax, “Here’s an extra $4,000 per year to spend on caviar for the cat folks”.
Kim & Mrs Dotcom in his rented mansion, “Here’s an extra $38,800 per year to help fund your extradition fight Kimmy boy”. The list is infinite.
(2) Assuming TOP’s 1.75% annual land tax, with every unpaid annual charge deferred against the property:Land value in 2026: NZ$510,000
Land value growth: 4% a year
Estimated land value by end of 2047: about NZ$1.162 million
Land tax in 2026: NZ$8,925
Land tax in 2047: about NZ$20,338
Over the 22 years from 2026 through 2047, the actual land-tax charges total about NZ$305,700. Once 5% annual interest is added to each outstanding charge, the accumulated debt by the end of 2047 is approximately: NZ$496,000
This assumes each year’s tax is added at the end of that year. If interest is charged immediately during the year in which each tax bill arises, the balance would be closer to NZ$520,000.
Bottom line: an average house with NZ$510,000 of land value in 2026 could carry a deferred land-tax debt of roughly half a million dollars by the end of 2047.
(3) Using the same assumptions:650,000 pensioner owner-occupied properties
Average land value in 2026: NZ$510,000
Land values rising 4% annually
Land tax rate: 1.75%
All pensioners defer the tax
By the end of 2047, the average land value would be approximately NZ$1.162 million.
The annual land tax per property would therefore be:
NZ$1,162,172 × 1.75% = about NZ$20,338
Across 650,000 pensioner properties:
NZ$20,338 × 650,000 = approximately NZ$13.22 billion a year
Bottom line
By 2047, the annual value of pensioner land-tax deferrals would be about NZ$13.2 billion per year, assuming all 650,000 properties remained liable and all owners deferred payment.
This is the new tax deferred in 2047 alone. It does not include interest or the accumulated deferred balances from earlier years.
In year one:
NZ$510,000 × 1.75% = NZ$8,925 per property
Across 650,000 pensioner owner-occupied properties:
NZ$8,925 × 650,000 = NZ$5.80 billion
So the total land tax deferred in 2026 would be approximately NZ$5.8 billion, before any interest is added.
John Denton, a retired Australasian Marketing Director of an American multinational, now pursues the hobby of addressing ill-informed opinions with hard facts.
14 comments:
Not to worry. If you are say 45 now then in 20 years the same policy will be applied to you then....anyone willing to take that on is like turkeys voting for future Christmas. Best you sell up to your heirs to be and rent it back from them but then TOP will have a tax 'fix' for that too no doubt.These types of policy are never tax neutral they always creep and what is the additional cost of administration?
The only people that support taxing the elderly or increasing the super age are the envious young or the comfortably off elderly. There are many seniors who are living frugally as they just don't have the income. Somehow these days the average senior is blamed for all the ills in the country. Many of these people didn't have "working for families" or a myriad of support systems like today. Maybe NZF serves a useful purpose?
TOP = Communists. So mass exodus of sensible people. And as Klaus Schwab, globalist and ex- WEF : "You will own nothing and be happy.".... that is, as long as other people's money lasts.
There are many pensioners living in our area. And during the election campaign, our residents' association usually hosts a candidates' meeting, at which residents can ask questions.
It'd be the brave (or foolhardy) TOP candidate who stands up in front of us and puts this proposal forward. A verbal slaughtering awaits....
My first question to pollies who trumpet this sort of policy is: where's the money coming from? The mythical rich? This stuff is just plain dumb.
What's worse, Kayla Kingdon-Bebb is TOP's Wellington Bay's candidate. As a co-author of He Puapua, a promoter of 'indigenous' rights, and being reasonably young and female in trendy leftie Wellington, she has good chance of gaining traction. In bed with Labour, where do you think her He Puapua aspirations will lead?
That, and the UBI, will undoubtedly be the end of NZ as we know it. But, I suppose, as they say about every cloud having a silver lining - the departing airlines and shipping will at least be busy.
Top are communists or Fabian’s - both are evil, both remove the incentive for people to provide for themselves and improve the world around us because the government will be in charge of us all and provide for us all…..and look how that worked out for Venezuela- Cuba, Argentina, China, Russia, eastern Germany….you name it - communism doesn’t work, socialism doesn’t work.
The most successful countries with the broadest base of wealthy and middle class citizens have been those with the lightest government intervention. And the more government has intervened to “level the playing field” for poorer citizens the bigger the gaps between rich and middle class and poor have become and the bigger percentage of the population has become poor.
Top are evil plain and simple - they just don’t realise it themselves
MSM eager to back top and I see Stuff wheeling out Ian Taylor, the new go to rich gult-tripper who replaced Morgan as their guilt icon
This is not a tax directed at superannuitants, as charged by some here. But because superannuitants in general have lower incomes than those in the workforce, they will find it harder to pay the tax out of their pension and other income.
So the Opportunity Party says 'no problem', defer the payment. In the article above it is alleged there is likely to be an interest rate and charged on this, and uses 5% as an example.
The Opportunity Party says nothing about an interest rate and until they do I suggest it be ignored as a 'straw man' argument against the policy.
What the policy does is confront us all (I am a pensioner) with the fact that our (owned) house is the equivalent of money in the bank. We've saved for it by paying back a mortgage - saving. Now will be the time to spend some of it. Without the bogey interest misdirection, there will be (including the house on the land, conveniently overlooked here) plenty of money in it left for inheritance etc.
The same policy looks after the young and unfortunate so much better than we are now, leaving them with more after tax to buy food etc and substantially lowering the tax disincentive now there for those on a benefit to re-enter the workforce. It's a 'holistic' policy and would, if implemented, dissuade us from using land as our bank account.
Re the "Calculations and Footnotes" - I had wondered what would be the consequences of not requiring regular drug testing or non-alcoholism as a requirement for receiving their "Citizens" income.
So the government will have to borrow the money and pay interest to fund the UBI until enough pensioners actually sell to fund it. Most total sense to the senseless.
@clive you are forgetting a lot of things in your argument that the deferred payment may or may not be taxed.
The incentives to buy a home, pay it off and grow your wealth are wholly driven by the desire to have and grow your family and support them into the future- if there is no incentive or advantage that can be gained by taking on a mortgage and risk and costs of home ownership then people will stop buying houses!
For the current and near future crop of pensioners who decide to defer payments until their estate can pay back the state after they’re dead - they also have to fund their retirement and any advanced nursing home care from that same house…so they sell the house and go into a home which costs nearly as much as their house is worth now and then there is nothing in the estate left to pay the deferred taxes.
Then what?
Top are commies pure and simple and communism is against humanity
Among the resentful, I have nothing why should you, somehow you got it and it is not my fault brigade, Top is a tempting up you to the current govt. Stuff et al over the past ten years or so have pitched their identity as being with the ''young'' against those greedy oldies who mare screwing you. Pics of anti national super and talk of 100,000 plus salaries with a pic of a smiling old couple clinking wine glasses on a yacht send a subliminal message. Oh and I see we get told it is a benefit and if oldies are having it tough they should have saved. That DELIBERATELY overlooks the fact that unlike the UK our pension contribution is an unspecified amount rolled into general tax. I can see Nat super being unravelled in a negative way that will leave the young up and comers even worse off. Initially they may be happy to see changes and ''those greedy old so and sos '' get their day but in time the young too will suffer. Funding pensions via the state is a worldwide issues for wealthier western nations. So let's say we have private funds and you do not get a state top up until they have declined to a certain level as in Australia. Jack retires with a 1.6m pot as he was a higher income earner. Jo has 600,00. I can see our equalisation activists saying that is unfair and let's take a chunk of Jack's CAPITAL and give it to Jo. Hence Jack is robbed and penalised in the name of fairness. Private capital is not safe.
Why create a welfare/tax system that immediately benefits those that contribute nothing to society - just mere existence is sufficient to warrant an income and no matter how much of a burden your are already on society? (Consider all those with severe disabilities.) And then fund it all on those that own property. Whatever happened to user pays?
If you want to raise taxes and get the economy spinning, an easier solution is death duties. The more the duty, the more incentive to spend and die with nothing. How good is that?
TOP - young, shortsighted nincompoops that will destroy this country.
Removing all incentives to grow wealth over your lifetime results in two things:
1 - those that want to profit from their labour or grow wealth will leave
2 - those that want to be supported by the state stay…and suck from the public teat.
Both results are predicted and both results will result in absolute poverty of the country and its inhabitants.
It might take 2 or 3 generations- but it is the guaranteed outcome and will probably happen in the second generation
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