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  Reply # 1045575 15-May-2014 14:39
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SaltyNZ:
MikeAqua: The trouble with wealth tax is that wealth isn't always liquid. 

If someone owns substantial non-cash wealth but has low income how do they pay their tax?  They would have to borrow to pay it, or sell those assets.



I thought the government was actively trying to discourage having lots of wealth tied up in non-liquid assets, like, for instance, having 5 rental properties, because it would be better invested in something that generates benefits to the economy. So in that respect, such a tax would move things in the direction our nominally right-wing government wishes things to go, no?


A capital gains tax is paid when profits are realised, e.g. when you sell your securities or investment property and make a profit. I really feel it's a no brainer, as it would also help cool down the housing market- currently one of the main causes of inflation in NZ and therefore interest rates.

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  Reply # 1045597 15-May-2014 14:57
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CGT in NZ is urgently needed and I strongly support it.

I don't have an opinion if it should also apply to the family home (simply because I don't know much about the merits for/against).

I will look favorable upon any party that supports the introduction of CGT.




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  Reply # 1045605 15-May-2014 15:09
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ajobbins: CGT in NZ is urgently needed and I strongly support it.

I don't have an opinion if it should also apply to the family home (simply because I don't know much about the merits for/against).

I will look favorable upon any party that supports the introduction of CGT.


A capital gains tax is a bad idea, it will stifle investment something NZ needs lots of.




Mike
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The views stated in my posts are my personal views and not that of any other organisation.

 

 It's our only home, lets clean it up then...

 

Take My Advice, Pull Down Your Pants And Slide On The Ice!

 

 


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  Reply # 1045607 15-May-2014 15:19
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KiwiNZ: A capital gains tax is a bad idea, it will stifle investment something NZ needs lots of.


This gets said a lot, but in countries that have it, there isn't any evidence to support the theory.

Chart below shows there is no real correlation between CGT rates and investment.

People in a position to invest, want to grow their investment regardless. The fact they may get less return, doesn't suddenly stop them investing. Even Warren Buffett agrees






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  Reply # 1045611 15-May-2014 15:29
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ajobbins:
KiwiNZ: A capital gains tax is a bad idea, it will stifle investment something NZ needs lots of.


This gets said a lot, but in countries that have it, there isn't any evidence to support the theory.

Chart below shows there is no real correlation between CGT rates and investment.

People in a position to invest, want to grow their investment regardless. The fact they may get less return, doesn't suddenly stop them investing. Even Warren Buffett agrees




For a chart to be relevant to NZ it would have to show a market prior implementation and post implementation of a CGT.

I would rather a Government established incentives for venture capital investment and investment in general  as opposed to walls to investment.




Mike
Retired IT Manager. 
The views stated in my posts are my personal views and not that of any other organisation.

 

 It's our only home, lets clean it up then...

 

Take My Advice, Pull Down Your Pants And Slide On The Ice!

 

 




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  Reply # 1045616 15-May-2014 15:39
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KiwiNZ:

A capital gains tax is a bad idea, it will stifle investment something NZ needs lots of.



While I am not totally against CGT - I do believe it should only apply to investment properties and not the family home.
If it applied to the family home, I can see a whole nightmare of problems.
 - does CGT take into account inflation?  i.e. the house price could have increase in $ terms but has lost value when inflation taken into account
 - why fix or maintain your house if you are only going to be taxed for it
  - what happens if a child lives with the parents and the parents die, will they be forced out by having to pay the CGT during ownership change  = death tax.

If it was applied to investment properties - you will just get a return the pre-1950's.
In the past people used to take in boarders or rent out their sleepouts as there wasnt a large pool of rental properties.
If you introduce CGT,  landlords wont buy investment property (as the rents rarely cover the borrowing cost) which means reduced number of places to rent and rents will have to rise to cover all the rental property costs incl CGT.

So this green policy that is aimed at the asset wealthy will only hurt the poorer renters in the long run.

Personally I'd prefer a Ban on overseas resident buying property or land in this country.  That would have a bigger impact on property prices and lending rates.

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  Reply # 1045620 15-May-2014 15:44
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D1023319: 
If it was applied to investment properties - you will just get a return the pre-1950's.
In the past people used to take in boarders or rent out their sleepouts as there wasnt a large pool of rental properties.
If you introduce CGT,  landlords wont buy investment property (as the rents rarely cover the borrowing cost) which means reduced number of places to rent and rents will have to rise to cover all the rental property costs incl CGT.


Except that's not what actually happens, based on data from countries where CGT has been implemented (refer the graph above for an example of this).  Foreign investment is actually a small piece of the puzzle, also.  Just about every civilised country has CGT levied, why not us?  Also it would not apply on a home used as a primary residence, of course.

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  Reply # 1045622 15-May-2014 15:45
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With purchasing of home virtually out of the hands of first home buyers it would be a very big mistake to suppress investment in rental properties. If that were to happen the rental stock availability would drop thus making rental rates rise dramatically, the result over crowding and
shanty towns etc , does NZ really want that?




Mike
Retired IT Manager. 
The views stated in my posts are my personal views and not that of any other organisation.

 

 It's our only home, lets clean it up then...

 

Take My Advice, Pull Down Your Pants And Slide On The Ice!

 

 


gzt

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  Reply # 1045629 15-May-2014 15:59
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KiwiNZ: With purchasing of home virtually out of the hands of first home buyers it would be a very big mistake to suppress investment in rental properties. If that were to happen the rental stock availability would drop thus making rental rates rise dramatically, the result over crowding and shanty towns etc , does NZ really want that?


If investment were going into new construction I would agree with that. I'm beginning to think bringing in a property CGT (slowly in stages) and exempting new construction (at least until we reach some kind of equilibrium) is the way to go. Another option is requiring all overseas related buying to be new construction only. Then it is really true investment and not a simple rent seeking.

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  Reply # 1045630 15-May-2014 15:59
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KiwiNZ: With purchasing of home virtually out of the hands of first home buyers it would be a very big mistake to suppress investment in rental properties. If that were to happen the rental stock availability would drop thus making rental rates rise dramatically, the result over crowding and
shanty towns etc , does NZ really want that?


Again, countries who have a CGT also have the first home buyer problem. I live (and rent) in Melbourne. I'm not in a position to buy a house for the time being, but there certainly isn't any issue here with rental stock. Ultimately, if investors think there is a buck to be made, they will still invest.

Someone still has to own the houses, so what happens is they start to become more affordable again (as house price inflation slows with demand), and more people are able to move out of renting and into ownership. 

It's not like by introducing a CGT houses suddenly start to sit empty with no owner or tenant while people are out on the street living under a bridge.

As we have seen, the RATE of CGT doesn't seem to have any effect on investment, so even if there was an initial hit upon the introduction of one, the (mostly) free market will quickly equalize. Perhaps that means a bit of a housing bubble burst....which is probably inevitable at the rate in which house price growth is outpacing income growth.

If you bring in a CGT in a phased way, and/or with a differed lead in, this will allow the economy to more smoothly adjust to the change. IMHO, a CGT is coming one way or another.




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  Reply # 1045634 15-May-2014 16:11
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ajobbins: CGT in NZ is urgently needed and I strongly support it.

I don't have an opinion if it should also apply to the family home (simply because I don't know much about the merits for/against).

I will look favorable upon any party that supports the introduction of CGT.


I am more for NZ becoming a richer country, so we don't need to introduce new taxes. But if it does come in, I think it should apply to all houses, as all will be harder for people to hide assets, and easier to administer. That is one of the benefits of our gst system. Otherwise you will get people buying houses under the name of other family members, and they will say that is their primary house. There is already CGT if you buy a property for the intention of selling for a profit, where many people have not paid taxes on.
The thing is that we are getting pre conditioned to thinking NZ needs these additional taxes like CGT and raising the super age. But if NZ was a richer country in the first place, we could afford without them without introducing new taxes, which are always a slippery slope. I think that is what nationals policy is too, but they aren't really doing that much to increase our wealth, they are just plodding along. That is possibly a good thing in the wake of the GFC, and they have had a lot of bad luck including the huge costs of the chch earthquakes.  
The price we pay for building materials in one major problem in NZ, as it affects the price we pay and borrow for houses.  I was speaking to someone in the US, and houses over there are so cheap. You can get good houses for between 75-150k in reasonable areas of the US. You couldn't build a small extension on a house in NZ for that , especially with all the compliance and consent costs. We are being taken for a ride in that area.

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  Reply # 1045637 15-May-2014 16:16
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gzt:
KiwiNZ: With purchasing of home virtually out of the hands of first home buyers it would be a very big mistake to suppress investment in rental properties. If that were to happen the rental stock availability would drop thus making rental rates rise dramatically, the result over crowding and shanty towns etc , does NZ really want that?


If investment were going into new construction I would agree with that. I'm beginning to think bringing in a property CGT (slowly in stages) and exempting new construction (at least until we reach some kind of equilibrium) is the way to go. Another option is requiring all overseas related buying to be new construction only. Then it is really true investment and not a simple rent seeking.


I am all for blocking foreign buyers buying NZ existing housing stock, and instead requiring that they build a new house. Or if they buy land, they must build a new house on that property. I believe they have this policy in states of Australia. That is one way around not blocking foreign buyers, but instead making them invest in the NZ by creating new housing stock.

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  Reply # 1045640 15-May-2014 16:20
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ajobbins:
alasta: It would be really interesting to know what proportion of national wealth is controlled by the top 1% in NZ.

When people talk about the 'rich getting richer' they really need to clarify who they consider to be rich. I personally don't know anyone who I would consider to be rich, or even well off. I earn enough money to pay the bills and have a few simple luxuries like owning a car and occasional travel, and most people I know are either in the same position or struggling. It seems to me that NZ has a general standard of living problem rather than a distribution of wealth problem.


Some stats here.

Top 1% hold 16.4 percent of the wealth.

Bottom 50% hold only 5.2% of the wealth



Harking back to High School economics, I believe this is called a Lorenz curve.
It actually doesn't look so steep - Have you got curves for other countries? I'd like to see the US (very Steep I imagine), UK, Australia, South Korea, Japan.
I imagine, in fact, that the curve shown above would be no steeper than any of the countries we'd like to measure ourselves against. Maybe some of the Nordic countries have a flatter curve, but maybe not too.

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  Reply # 1045656 15-May-2014 16:43
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trig42: Harking back to High School economics, I believe this is called a Lorenz curve.
It actually doesn't look so steep - Have you got curves for other countries? I'd like to see the US (very Steep I imagine), UK, Australia, South Korea, Japan.
I imagine, in fact, that the curve shown above would be no steeper than any of the countries we'd like to measure ourselves against. Maybe some of the Nordic countries have a flatter curve, but maybe not too.


I think part of the reason it doesn't look so steep is there is no data points between 50 and 90%, so it assumes it's linear, when in fact it probably very much isn't. Get's pretty steep in the last 10%




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Ultimate Geek
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  Reply # 1045966 16-May-2014 01:47
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One point I'll raise is that due to human nature, being in the 'top 1%' increases your happiness very little above someone at the median (or even further 'down' than that).  Basically, above a relatively low threshold of 'comfort' or 'sustenance' more money has bugger all impact on how happy you are (because your expectations and aspirations increase in step with your means).

I'll let people put a bent on it either way, but its an interesting factor of human nature.

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