By Trevor Ammundsen.
Election Traps for the Unwary
The General Election date creeps closer with people having differing views of how quickly they want that date to be upon us. The Government would like it to be ages away, giving them time to learn how to run an economy; National would like it to be next week such is their enthusiasm; and Winston is just biding his time, he doesn’t want to start work too early.
Once the election is over it looks like the minor parties will have more power than they have in previous Governments. When considering how to cast your vote you should therefore consider what mutated policies are likely to come out of the post-Election dance. For this editorial I thought I would focus on one that is dear to us all, taxes.
The trap here is on the left of the political spectrum. No contending party on the left, being Labour, The Green Party and The Maori Party has a policy of tax reduction even though the Government tax take and spending is at record levels. On the contrary, they all want more tax, and they all want to spend it on what is important to them. I have yet to see any policy from this bloc which will involve productive spending, the emphasis being on benefits or reduction in costs for certain groups.
They are unified on the increase in taxes though the names have changed. A Capital Gains Tax is still favoured by the Maori Party whereas the Greens and Labour have moved onto a Wealth Tax, which really means a land tax. You need to be aware that these are different. A Capital Gain is only made when you sell a property so while it is not a pleasant concept at least there should be some income to cover it. A Wealth Tax on the other hand is a tax on the value of a Land Holding. For example, if your house is worth a million dollars you would pay tax on that million dollars, if you are deemed wealthy.
The definition of wealth seems to be taking shape as any Trust and any entity that owns property of $2 million or more. There are over 200 thousand trusts in New Zealand that have net property assets of approximately $309 billion, which would indicate that at the proposed 1.5% tax rate extra taxes of over $4.5 billion will be raised from Trusts that generally have no income to pay it. The argument of “Why pick on Trusts” will be loud which will undoubtedly move the left into taxing land for everybody that has a net value of real estate above the two million level. The likely tax take is therefore going to far exceed the $4.5 billion from Trusts yet there is no proposal to lower income taxes or to channel this money into productive areas.
The trap for the unwary in our community is to not be aware of the potential hit you could take. Any superannuant with a home and possibly a rental property, which together have two million or more equity are likely to find their annual tax bill increasing by $30,000 if the Coalition of Chaos has its way.
If the left was to win the election it is likely that the Maori Party will be required if they are to govern. The Maori Party differ slightly from the Greens and Labour in that they are adamant they want a Capital Gains Tax, not a Wealth Tax. To re-iterate; Capital Gains tax is on the profit from sale, Wealth is on value of assets with no sale being required. It is interesting to consider why the Maori Party has not joined the rush away from Capital Gains Tax to a Wealth Tax but really the answer is quite simple. Maori own significant blocks of land throughout New Zealand and are tending to accumulate rather than sell land. What reason would they have for taxing the land they own, far better to tax the land others are selling and buying. Perhaps this difference in opinion can help the majority who are being targeted.
On the other side, a likely National / Act coalition involves two parties who want to lower taxes and get the economy growing. No traps there mate.