Richest will pay more tax under Morgan
Economist releases new policy he says will make revenue system fairer
Prime Minister John Key would pay about $150,000 extra a year in tax on his Auckland home under an equity tax suggested by Gareth Morgan’s new Opportunities Party.
In a policy release staged opposite Key’s Parnell mansion, Morgan said his own asset portfolio would incur an extra $350,000 tax a year under the flagship policy aimed at making the revenue system fairer.
The plan, first proposed in a Morgan Foundation report on tax in April, proposes expanding the definition of annual taxable income to include a minimum rate of return an equity owner gets from productive assets, including houses, farms, equipment, cars and even intellectual property in a business. Those who already declare at least that level of income won’t be affected and those who don’t will pay more.
The only exemption would be financial assets such as shares, deposits and bonds which already have tax paid on them. It’s an extension of what the Government already does under the Fair Dividend Rate regime for New Zealanders who own shares overseas, Morgan said. “Government is already doing this policy but only to a select few. No one wants to go near housing.”
The wealthy economist stressed the policy wasn’t a tax grab. Overall, the fledgling party’s package would be tax neutral, with every extra tax dollar collected given back via income tax cuts, which Morgan said he would make bottom-ended so those on lower incomes get more.
When questioned whether the policy would be a hard sell to house-owners, Morgan said: “I’m going to give you more money back in tax cuts than you have an increase in rates. You’re better off. Only 20 per cent of people won’t be better off and they will hate me.”
The level of the minimum rate of return would be up to the Government of the day, but in his view, 5 per cent, the same rate paid on foreign shares, would be appropriate.
Morgan said persuading the public rather than politicians that the tax policy is a good idea would give his new party leverage if it gets sufficient votes in the next election. “We want to be the tail that wags the dog, whoever the dog is in Parliament,” he said. “We want to stay on the cross benches and we’re for sale basically to the highest bidder in terms of who makes the most of the seven policies we’ll be putting out.”
Morgan says the current tax system is biased, with wage earners paying too much of the tax bill, while the radical policy he’s proposing addresses the fact the trickledown promised under Rogernomics still hasn’t happened 30 years later. Income inequality in NZ has gone up markedly
HWatch the video of the announcement at nzherald.co.nz since the early 1980s. Key’s legacy “will be inequality went up yet again under his reign.” And the biggest cause of inequality of late had been the increase in housing costs.
“When my wife and I bought our first house the average house price to income was about three to four times — it’s now seven times and it’s a hell of a lot higher in [Auckland].” The new tax would immediately take out excess demand for property and deter people from land-banking and “holding Auckland to ransom”.
It would change the way businesses perform.
It would also see less money going into property speculation in favour of savings and investment that would reduce New Zealand’s reliance on foreign capital to help businesses grow, he said.
The policy would have to be phased in to avoid a collapse in house prices, Morgan said.
The party said further tax policy following Britain and Australia’s lead in dealing with tax avoidance by foreign corporations immediately would be released in the leadup to Christmas.