Gareth Morgan is a genius

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#1686355 12-Dec-2016 09:37

jonb: My general point is as a country we seen to spend about the same proportion of income on housing regardless. I would rather a higher proportion of that spend, which we will be spending anyway, went as tax rather than mortgage/rent ( soneone elses mortgage) to the banks. Similar to parts of US where houses are cheaper but property taxes are higher.

The US does have some anomalies that contribute to that such as much longer fixed mortgage rates than we have. It is common in the US to fix your rate for 25 or 30 years, which obviously has a significant effect on household budgets - the rates are usually quite low. My brother in the US has a fixed rate less than 4% for 25 years IIRC and I can find 3.99% fixed for 30 years on line right now.

Additionally, mortgage costs and property taxes, repairs and so on are tax deductions from your annual income tax calculations for Federal tax.

Taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is $500,000 if married and filing separately). Property taxes (i.e. rates) are given as a tax credit on your income tax calculations too.

Geektastic

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#1686358 12-Dec-2016 09:49

JayADee: Here is a paper on the idea of UBI in NZ, worth a read: https://d3n8a8pro7vhmx.cloudfront.net/nzlabour/pages/4208/attachments/original/1461211267/Background_Paper_-_A_Universal_Basic_Income_for_New_Zealand.pdf?1461211267

Another issue is this:

Person A receives his basic income and wastes it. He and his family are starving with 2 weeks to go until the next payment.

Society wishes to shield him from the consequences of his actions. He therefore gets 'emergency payments' to feed his children and himself.

Therefore UBI has not succeeded in banishing other welfare payments, one of the stated benefits of having one.

I still think a better option is $x amount free of tax as a Personal Allowance. This allows the low paid to work tax free in effect but has the advantage of actually requiring work for pay in order to take advantage of the concession.

Geektastic

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#1686359 12-Dec-2016 09:49

JayADee: Here is a paper on the idea of UBI in NZ, worth a read: https://d3n8a8pro7vhmx.cloudfront.net/nzlabour/pages/4208/attachments/original/1461211267/Background_Paper_-_A_Universal_Basic_Income_for_New_Zealand.pdf?1461211267

Another issue is this:

Person A receives his basic income and wastes it. He and his family are starving with 2 weeks to go until the next payment.

Society wishes to shield him from the consequences of his actions. He therefore gets 'emergency payments' to feed his children and himself.

Therefore UBI has not succeeded in banishing other welfare payments, one of the stated benefits of having one.

JayADee

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#1686546 12-Dec-2016 14:04

Wow, Ontario, Canada is going to do a trial in 2017 of Basic Income:
http://bigthink.com/natalie-shoemaker/canada-testing-a-system-where-it-gives-its-poorest-citizens-1320-a-month

Geektastic: people don't do that on the pension now and trials of UBI suggest they don't do it on UBI either.

Geektastic

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#1686551 12-Dec-2016 14:25

JayADee: Wow, Ontario, Canada is going to do a trial in 2017 of Basic Income:
http://bigthink.com/natalie-shoemaker/canada-testing-a-system-where-it-gives-its-poorest-citizens-1320-a-month

Geektastic: people don't do that on the pension now and trials of UBI suggest they don't do it on UBI either.

But someone will. Especially if there are few other benefits etc available and GM suggests canning a fair few of them.

You need some kind of response when it happens.

Ramjet99

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#1686553 12-Dec-2016 14:31

Seems a long winded way to restore equity in taxation - why not just get rid of the exemptions around property taxation and be done with it. Put every investment onto the same level playing field or whatever jargon is used today. If your rental can't return a profit in the way a normal business would without using tax exemptions, it's a bad investment and you should get rid of it. Simplifies tax regime and no capital taxation needed.

shk292

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#1686554 12-Dec-2016 14:36

Ramjet99:

Seems a long winded way to restore equity in taxation - why not just get rid of the exemptions around property taxation and be done with it. Put every investment onto the same level playing field or whatever jargon is used today. If your rental can't return a profit in the way a normal business would without using tax exemptions, it's a bad investment and you should get rid of it. Simplifies tax regime and no capital taxation needed.

Any business that borrows money can offset the interest on this loan against profit and so reduce tax; interest is a legitimate business expense. Are you saying this should be different for a business that is providing rental accommodation?

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JayADee

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#1686565 12-Dec-2016 15:09

Geektastic:
JayADee: Wow, Ontario, Canada is going to do a trial in 2017 of Basic Income:
http://bigthink.com/natalie-shoemaker/canada-testing-a-system-where-it-gives-its-poorest-citizens-1320-a-month

Geektastic: people don't do that on the pension now and trials of UBI suggest they don't do it on UBI either.

But someone will. Especially if there are few other benefits etc available and GM suggests canning a fair few of them.

You need some kind of response when it happens.

Isn't the current response a loan which is then paid back plus budgeting advice?

Fred99

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#1686573 12-Dec-2016 15:31

shk292:

Ramjet99:

Seems a long winded way to restore equity in taxation - why not just get rid of the exemptions around property taxation and be done with it. Put every investment onto the same level playing field or whatever jargon is used today. If your rental can't return a profit in the way a normal business would without using tax exemptions, it's a bad investment and you should get rid of it. Simplifies tax regime and no capital taxation needed.

Any business that borrows money can offset the interest on this loan against profit and so reduce tax; interest is a legitimate business expense. Are you saying this should be different for a business that is providing rental accommodation?

That is a suggestion I believe. Not mine.

Tinkering has consequences. I guess you could say that if removal of negative gearing impacted negatively on investment residential property, the money might be put to better use (productively) elsewhere. But counter to that, there really isn't money, as the offset works when you're highly geared, buying "investment" property with cash is nuts. If they make borrowing to buy investment property nuts as well - by eliminating negative gearing - then they'll kill dead the already inadequate investment in apartments etc.

The real answer is that there isn't going to be a painless answer. What's coming - be it by legislative change, collapse of a bubble if that's what our ludicrous home prices turn out to be, or some economic shock which puts the brakes on credit globally - it's going to hurt.

Interest rates in particular, that several billion taken directly out of the local economy and shipped offshore with every 1% rise in mortgage rates. Landlord investors (with other income) might think that's okay as some of that can be clawed back against income, but I bet Bill E is well aware that even though the bulk of debt is private, they'll be clawing back much of it directly from govt coffers.

Apart from negative gearing, the taxpayer is also subsidising landlords by a couple of billion $$ PA, as tenants can't afford rental prices, so get accommodation supplements - which is a crazy thing for govt to do.

It's no wonder there's a "but you can't lose" attitude by the multitudes of mum and dad investors expecting endless ongoing free money.

MikeB4

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#1686576 12-Dec-2016 15:43

Fred99:

Apart from negative gearing, the taxpayer is also subsidising landlords by a couple of billion $$ PA, as tenants can't afford rental prices, so get accommodation supplements - which is a crazy thing for govt to do.

would you prefer to see folks homeless?

MikeAqua

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#1686585 12-Dec-2016 16:22

It's quite common in overseas jurisdictions to tax capital at the point of sale - death duty, stamp duty, capital gains tax etc.

It seems to be uncommon to tax base capital during a person's ownership of it.

I can see couple of reasons why it might be a bad idea: -

1) The person may have equity in a fixed asset, but that doesn't mean they have the the requisite cash available to pay an equity tax.

2) What is an asset actually worth? Rateable value or insurance value are not market value. They are nominal values. Someone's guess at what a buyer might pay. Probably why most taxes on capital occur are calculated on purchase prices - because those are real values.

Mike

Fred99

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#1686594 12-Dec-2016 16:56

MikeB4:

Fred99:

Apart from negative gearing, the taxpayer is also subsidising landlords by a couple of billion $$ PA, as tenants can't afford rental prices, so get accommodation supplements - which is a crazy thing for govt to do.

would you prefer to see folks homeless?

No - of course I wouldn't. I wouldn't like to see the government force landlords to reduce rent either.

But accommodation supplement has wormed it's way from being an occasional top-up to being something which seems to be a normal expectation or entitlement - and it's now costing a lot of money.

It's one part of a picture where despite economic growth, something's out of balance. I presume a lot of it's going to working people who can't afford to rent where they're working and can't get work where housing is more affordable. That combined with wages which are IMO far too low - especially in the cities / Akl.

Even the socialists who were crying out "upskill", playing Springstein's "The River" as an anthem while sipping chardonnay missed a point - that there are many people who just can't make it, for a multitude of reasons. There's no dignity being poor in NZ, nobody wants to live like that. It destroys souls.

MikeB4

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#1686606 12-Dec-2016 17:05

Fred99:

MikeB4:

Fred99:

Apart from negative gearing, the taxpayer is also subsidising landlords by a couple of billion $$ PA, as tenants can't afford rental prices, so get accommodation supplements - which is a crazy thing for govt to do.

would you prefer to see folks homeless?

No - of course I wouldn't. I wouldn't like to see the government force landlords to reduce rent either.

But accommodation supplement has wormed it's way from being an occasional top-up to being something which seems to be a normal expectation or entitlement - and it's now costing a lot of money.

It's one part of a picture where despite economic growth, something's out of balance. I presume a lot of it's going to working people who can't afford to rent where they're working and can't get work where housing is more affordable. That combined with wages which are IMO far too low - especially in the cities / Akl.

Even the socialists who were crying out "upskill", playing Springstein's "The River" as an anthem while sipping chardonnay missed a point - that there are many people who just can't make it, for a multitude of reasons. There's no dignity being poor in NZ, nobody wants to live like that. It destroys souls.

AS was not an occasional top it has for a considerably long been an additional supplement to income tested benefits and those meeting the income/asset test for low income and pensions.

Rikkitic

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#1686607 12-Dec-2016 17:05

In Holland accommodation supplements are quite normal. Many people are 'poor' and it doesn't destroy their souls. Holland would also be considered a socialist country by many people here and there is nothing wrong with that.

Plesse igmore amd axxept applogies in adbance fir anu typos

MikeAqua

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#1686861 13-Dec-2016 09:23

Rikkitic:

In Holland accommodation supplements are quite normal. Many people are 'poor' and it doesn't destroy their souls. Holland would also be considered a socialist country by many people here and there is nothing wrong with that.

The Netherlands is a useful country to compare with, partly because it is right after us in alphabetised tables.

The Netherlands has the wealth to support a high level of social spending. Their tax take is only about 40% of GDP and ours is about 35% of GDP, not that big of difference in %. But .... the Netherlands' GDP per capita is five times NZ's GDP per capita (yet still have poverty). So it's 40% of a shed load more per person. They have the cash to do things well.

The Netherlands has a very large productive economy, high productivity and massive investment in innovation, with a very large market within the EU and substantial export markets as well: Food (dairy), electronics, oil, industrial products, expertise, financial services. Largely sectors a big chunk of kiwis love to hate ...

What interests me is how we could move NZ to a similarly productive economy that can afford a higher level social spending on a reasonable tax rate?

Mike

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