Capital gains tax – a way to manage the rich/poor gap
Eeny meeny miny mo, catch a contender by the toe. Which party or political aspirant to vote for? Decisions, decisions. You might want to take a look at the people involved after Nicky Hager’s revelations. Certainly check out the policies. Not a lot to choose from in terms of major standout differences. They all claim they’re offering the best for New Zealand but in slightly divergent ways.
But there are a couple of stark polarities that separate the sheep from the goats in this coming election. Pro mining verses anti mining. Smaller classroom numbers verses bigger pay packets. Capital gains tax versus not on my watch.
I remember clearly mentioning once to a senior class I was teaching the merits of capital gains tax in terms of basic fairness, and the furore of antagonism that arose from usually mild-mannered students, mostly girls, was an astonishing sight to behold. And the thing is this: they couldn’t logically defend their stance on any rational grounds.
It just seemed blatantly self-evident to me that people who earn a living from buying and selling property should be paying tax on their earnings like everyone else. Why shouldn’t they? It was a shock to me that they weren’t. It’s only recently that the tax man has been given instruction and money to chase people up and try to prove the rather nebulous matter of ‘‘intention’’ to sell simply to make a profit.
Capital gains tax is an idea whose time has come (with appropriate exemptions). It’s more than that; it’s an idea long overdue. We used to think that New Zealand was a fair and equitable place to live, where every man and woman was treated equally and everyone got a fair shake of the sauce bottle. We’re now forced to change our perception given the reality of this ‘tax break’ for property speculators playing roulette with the housing market.
Houses here are the most overpriced in the world which prevents ordinary New Zealanders from obtaining a home and getting ahead.
What’s wrong with not having CGT? Let me count the ways.
The most obvious one, already alluded to is the fact that you and I earn our money from the sweat of our collective brows and pay our tax to support the running of hospitals, schools, etc, but Mr Flush-pockets, making his money buying and selling properties, pays nothing on his earnings. No tax! Free and gratis. How come these high-ballers get a free ride?
And since most of those lining their jackets are loaded in the first place, it contributes to the growing rich/poor gap in this country. They are not paying their share, so you and I on modest incomes have to shoulder the burden and pay more tax to keep the country running.
Because it’s such a cushy number, investors flock to the housing sector for easy tax free pickings which in turn distorts the economy. That investment capital could be redirected into more worthy enterprises.
All this buying and selling of property simply to make a tax free buck has undoubtedly contributed to the obscene rise in house prices that have shut out many first time homeowners in this country. Houses here are the most overpriced in the world which prevents ordinary New Zealanders from obtaining a home and getting ahead.
What has been the government response to this dilemma? In order to dampen down the market they’ve made it harder to buy your first home by increasing the deposit, penalising young families instead of punishing the fat cats who helped create the problem in the first place. Go figure.
The OECD has taken New Zealand to task for refusing to introduce CGT, specifically stating that it ‘‘exacerbates inequality’’. All other developed countries in the world have this tax. Why are we so out of step?
What this situation does is concentrate wealth in the hands of a few. About 12 per cent of the population account for 45 per cent of all residential real estate sales. And we’re talking big money. We’re talking something in the area of $120 billion.
This relatively recent turn of events is why the idea of introducing a capital gains tax has come of age. From being one of the countries with the least inequality, New Zealand has moved in recent years to being one associated with those who exhibit the worst inequality.
So while you have your candidate by the toe, ask them about CGT. If he/she squeals, maybe let them go and look elsewhere to place your vote.