Tax strife

David Parker has startled the pigeons again with his move to find out who pays what in taxes. Mr Luxon, as expected, disingenuously tells us that high income earners already pay a good proportion of the country’s taxes and so there is no point in looking further. You only need to look at the tax tables to see that, completely ignoring the fact that high wealth individuals don’t just sit on their hands. They actively rearrange their finances to legally minimise their tax payments. The system has enough holes in it to make that a moderately profitable exercise. Good for them, but those at the bottom of the heap are generally trapped by a PAYE system that has much less wriggle room so they are forced to follow the tax tables whether they like it or not.

Every now and then the curtain is parted and capital gains re-enter the discussion only to be told to stay out of it. Jacinda said ‘‘No way !’’ and presumably meant it. Maybe she could see more clearly, even then, that swords often have two edges. Capital gains are measured on a continuum. You buy an asset for $100 and then sell it later for $110. Your marginal tax rate is applied to the $10 profit. But what if you can only sell it for $90? Do you get a tax rebate for your loss of $10? When prices were only going up the argument was very one dimensional. You should pay tax on your capital (unearned) gains. But now the markets are finally beginning to move back to their long term averages, would we be happy, as long suffering taxpayers, to pay for all the possible tax rebates?

I suspect our learned muppets in Wellington would distort the system again by pulling a similar gormless trick to the one where they broke a long