Archive for capital gains tax
Why the left is doomed to fail.
Posted by: | CommentsAn economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.
The second test average was a D! No one was happy.
When the 3rd test rolled around, the average was an F.
As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
To their great surprise, ALL FAILED and the professor told them that SOCIALISMwould also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.
It could not be any simpler than that.
These are possibly the 5 best sentences you’ll ever read and all applicable to this experiment:
1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.
Get going and Stay Safe ~ Dean Letfus
More on CGT
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GRA NZ's leading accounting and asset protection coneheads
It is rare that I ever simply copy an article but my friend, advisor (and official conehead) Matt Gilligans recent “rant” on CGT is too important not to share with you here.
“Labour intend to ring fence property losses to future property income. This will send thousands of investors broke fast. Take investors tax refunds away, property values crash. This is well documented overseas. Sweden property values dropped 35% when they ring fenced losses and the following govt reversed the policy, with values immediately there after recovering.
Accountants would get a mountain of pre change planning work and we would have years of work to do. While lots of New Zealanders will go broke with ring fenced losses and insolvency revenue will grow to. I’m not going to sit by and have to charge my clients for work that is going to make them go broke. Labour are you thinking this through?
I would not want to be a banker though with losses ring fenced…will make an already difficult environment treacherous and property investors would want to be selling sooner than later.
This really is playing with fire by labour with little short term upside, given the global backdrop of deleveraging, and capital growth prospects in NZ with higher interest rates on their way, – next year or sooner, and potential for major problems globally as Asia and Aussie come off the boil and Europe and the USA choke on their indebtedness. This must put pressure on interbank lending rates within 2 years, especially if we see sovereign default in the PIIGS or USA.
The massive bureaucracy they built and squandered our money on, the buy back of kiwi rail, now CGT, to name but a few blunders.”
And so say all of us!
Get Going and Stay Safe ~ Dean Letfus
It was in the Herald, it must be true??
Posted by: | CommentsSo another fascinating CGT article in the Herald that defies my belief, so I am forced to comment again 
.Labour have found themselves an academic to bolster their cause so let’s look at some of this professors statements.
“Myth: Capital gains are fundamentally different to wages or salary.
Reality: Capital gains tax simply closes the largest single exemption from the income tax.
To economists, and to most people, a profit from buying and selling property is plainly income, just like salary or wages earned from labour.”
This is of course completely true, ONLY if you ignore inflation. These gains are not taxed because they are not and will never be income. If they were income, that is profits from trading property, then traders ALREADY PAY income tax on the profit. Increased values through inflation is not income OK!
“Myth: CGT would discourage savings and capital investment.
Reality: CGT could level the playing field for investment.”
Riiiiight. So by making taxes less equal by penalising the so called rich will level the investment playing field. It is anti wealth policies and poor financial education, both hallmarks of Labour that discourage savings. We had a decade of Helen to make as many people as possible dependent on the government and not take responsibility for themselves so now that those willing to plan their own futures are an even smaller minority let’s tax them more to make everything seem fair.
“Myth: International investors will flee New Zealand and/or rich professionals will leave.
Reality: New Zealand should be trying to attract those who will invest and work in the productive economy, rather than using the country as a tax shelter.
Over time a CGT will improve efficiency and productivity.”
The most alarming thing about such an error riddled statement is that there is not one example given by the professor to show that this has worked anywhere else.
Countries that have CGT for example, like Australia, are watching their investors pour billions of dollars into the USA right now partly to escape the CGT net. They also invest heavily in NZ for the same reason. The above statement presupposes that you can make a national sport die off through legislation. Kiwi’s love property, always have and always will. Saying we should force people to invest in other things is both ridiculous and covert communism. Deal with reality, we will go offshore with our money and many professionals leave our shored daily now because our INCOMES ARE TOO LOW, simple as that. CGT will only send more of them off shore.
“Myth: We already have CGT on some property and land transactions, so we don’t need one.Reality: CGT would plug gaps and simplify those rules.
The rules that effectively tax some limited types of capital gains are complex, and based on fuzzy concepts such as a purchaser’s “intention” when they buy property.”
This probably takes the cake for me. Current rules on property are very clear. If you are a dealer in land or property your gains are taxable. Gee that is so fuzzy it is amazing.
“Myth: The impact on the housing market would be disastrous.
Reality: The change to house prices will likely be modest, home ownership rates are likely to increase, and rental increases can be mitigated.
Some opponents say CGT will gut the housing market; others say house prices may skyrocket. Evidence suggests neither is true.
Modelling indicates
Home ownership rates are estimated
Rents will likely”
Indicates, estimates and likely……., how about some facts. CGT has driven house prices up almost everywhere it has come in, look next door at Australia.
Make no mistake, taxes like this virtually ALWAYS affect the people who it is intended to protect. Tenants, first home buyers and low income families will be whacked around the head. Investors will charge more to compensate or go offshore. I mean this is not me bashing this policy it is common sense. What else would investors do? Absorb these costs themselves? They have a fiduciary obligation as directors and business people to make money so they have to pass these costs on.
Myth: CGT makes accountants and lawyers gleeful.
Myth? Obviously this man has never spoken to an accountant. Look through companies created a goldmine for accountants, they are laughing all the way to their Porsches. This new tax would give them so much more leeway to make money as they can charge based on how much they can save you
“We can also learn from South Africa: when it introduced CGT 10 years ago,”
Yes let’s do that. What impact did CGT have on house prices since 2001……
OK so CGT ushered in the highest growth in property prices in South Africa’s history, stopped only by the global recession. Yes you are right Mr Professor, we can and should learn from South Africa. If we want to make NZ housing even more unaffordable we should tax housing more and penalise those trying to house other kiwi’s.
If this gets in watch the money leave our shores in droves…..
(and if I am scare mongering, well it’s my blog . And I care about people’s futures, taxing ourselves as a solution to a global recession is well, the sort of thing only Labour would do IMHO.)
Get Going and Stay Safe ~ Dean Letfus
Point, Aim, Shoot yourself :-)
Posted by: | CommentsWell I must say it was a pleasure to see Mr Goff confirm his partys fate by introducing additional capital gains taxes into an election year.
I am sure that no one who reads my blog will need an explanation on why this is unfair, unnecessary and would be another nail in our ever expanding coffin.
What we need is to increase wages and that is not a magic wand solution but it needs to consume our politicians minds. Instead Phil says let’s tax property investors yet again.
Of course their focus is to make all the poor(er) people “hate” the rich so by offering CGT and an increase to the upper tax scale they will be hoping they get enough kiwi’s to believe them and vote for them.
I’ll get very unpleasant if I comment further so just remember at election time, Labour wants to attack capitalism, wealth creation and financial independence, DON’T LET THEM!!
Right we've rogered everybody else, let's start on these guys next. Smile for the nice man with the big knife!
Get Going and Stay Safe ~ Dean Letfus
Capital Gains Tax, (again).
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Capital Gains Tax
So the news last night has Bernard Hickey being interviewed and labelled as a “Property Commentator”. So good on Bernard for being cleverly marketed but he is no more a property commentator than I am a Ballerina. And this is confirmed by the nonsense he was saying about Capital Gains Tax. I have talked about this this before but the only way to try and stop the foolishness is to keep it out there in the hope that enough of you with influence do something about it.
So first of all CGT was being promoted as the solution to housing affordability. The only problem with that is as soon as you accidentally look up any stats at all you discover that Capital Gains Tax in every country that has it has done zero to slow growth as I explained in detail HERE.
So the argument is so fallacious it seems to have been dropped. Now the so called experts like Bernard are saying it will release funds into businesses which we desperately need. I can hardly believe he could keep a straight face while he was saying it. Think about it for a minute. Property Investors fall into 2 broad groups:
A: Professional multiple owning investors like me, which make up a small minority of total investors and
B: Mum and dad investors who have been shown how to use the equity in their home to buy a second property as a retirement fund.
So the first group will work with Capital Gains Tax and enjoy the UPWARD pressure more tax puts on housing. None of us will move out of property into business lending, hello??
And the second group would no more put money into businesses than fly. Businesses are risky. 90% of them fail. These people, the vast majority of the 190,000 investors will simply keep the property they have or sell it and leave the money in the bank. Neither group is going to create business funding. And if either group did exit housing who on earth is going to house everybody in this country.
It never ceases to amaze me watching people comment on things they know nothing about because they are not actively involved in an industry.
So the only viable reason why the Government is cultivating this drivel can be that they simply see it as an opportunity to increase the tax take and who cares whether it is reasonable or not. I hope I’m wrong about that but I’m struggling to see any other possible reason why such stupid arguments are being raised to introduce something that doesn’t achieve the desired goals.
If we want to control house prices in New Zealand and increase lending to businesses then the Government either needs to legislate directly, (which would be communist in nature but effective) or realise that in a free market economy we don’t always get what we want and we don’t have t pander to every minority nutcase voice demanding to be heard.
I guess if we are willing to ignore the 90% of the population who think the anti smacking bill is wrong and listen to a handful of unqualified zealots try to bring in unworkable taxes I shouldn’t be surprised really.
Rant over. If you have any influence anywhere please get this Capital Gains Tax talked about and let’s try and kill this stupidity before it becomes law.
Stay Inspired and Stay Safe ~ Dean Letfus
The Ethical Investing Strategist
If you voted for the greens??
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I’m sorry to be mentioning this again but sometimes you just have to keep presenting reality when fantasies abound don’t you.
In the media today is this uninformed $@#*($&* from the Greens finance spokesman:
The Balance of Payments figures released tomorrow will likely show New Zealand’s net debt breaking the 100% of GDP barrier while the National Party drags its feet on overdue changes to the tax treatment of investment properties.
“New Zealand currently ranks as the fifth most indebted nation in the OECD. Increasing levels of debt to fund another round of house price increases is not a sustainable economic path,” said Green Party Finance Spokesperson Russel Norman today.
“The Government needs to introduce incentives that will reprioritise borrowing and investment in the productive sector and away from speculation in housing,” urged Dr Norman.
The Greens are pressuring the Government to introduce a suite of demand and supply side measures to address New Zealand’s debt problem. The productive sector in New Zealand has been in recession now for the last five years due, in part, to difficult borrowing conditions.
“We need new tools to revitalise this sector so we can earn our living by what we produce rather than by what we borrow,” added Dr Norman.
“Our current tax system encourages a disproportionate amount of our wealth to be invested in non-productive assets like property. A capital gains tax on investment properties is one of a suite of measures to help restore some balance.”
Further demand-side measures would include putting limits to the tax write-offs property investors are able to claim through loss-attributing companies. Losses on LAQCs, used to offset tax, have increased from $750 million in 2003 to $2.3 billion in 2008. On the supply side, greater numbers of state and community sector housing starts along with smart growth initiatives would help ease the demand for housing.
“We may even need to consider more specific measures targeting the bank lending behaviour at the root of this all. For example, by increasing the amount banks need to hold in reserve for lending in bubble-prone sectors like housing, you effectively limit the amount of borrowing.”
Now I have already outlined in previous blogs the complete and utter fallacy this is and obviously Mr Norman must be added to the list of politicians that can’t do research or read history books, but maybe we are getting what we deserve in New Zealand. We vote for politicians and political parties that have a narrow or minority platform and then they get to try and implement laws they know little about.
Just in case you didn’t know USA, UK and Australia all have a capital gains tax and have equal or HIGHER housing growth rates than we do.
Should we not make it a priority to put economically savvy, dare I even say capitalist politicians into power. After all if we don’t have a sound economic base, being surrounded by dolphins, whales and pohutukawa won’t stop us from starving. Unless we start eating what we’re surrounded with .
So remember next election things like the above and make sure your vote really counts. Do away with MMP and bring back first past the post I say!!
Without a sound economic base all our PC posturing won’t save us from national poverty!!
If you haven’t joined the family yet do your head a favour and get my free video course on property investing now at http://massiveaction.tv/free
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
To get the latest investing information on time and for free make sure you get my regular newsletter here
Capital Gains tax nonsense
Posted by: | CommentsI actually can’t believe I have to publicly talk about this because anybody doing 5 seconds of research will see that it is a ridiculous argument.
We are once again being told that a capital gains tax on investment property would keep house prices down and should be considered as an effective anti bubble and affordability strategy.
So if you were a policy maker and thought of this then the first thing I would do is look at the countries that had CGT on property to prove my theory before I opened my mouth in the media, wouldn’t you??
And a sensible man would look at several markets to see if this effective price control worked right?
Ok so lets pick the USA, they have CGT, and the UK and our nearest neighbour Australia. If there was the tiniest bit of sense in the current CGT debate we should see that house price growth has been effectively muzzled in these nations. That would be the proof that this might be a good idea.
Never let the facts get in the way of a chance to be on TV I guess. Only the USA has had lower growth than NZ. And their housing market did fine in the global recession didn’t it?? Hello??
And our closest neighbour both geographically and politically etc. has had the highest growth. So introducing a capital gains tax into New Zealand, based on the last 20 years of data available from other countries is most likely to INCREASE house prices even more and the evidence of it controlling affordability is around zero, zip, nada.
As traders and developers already pay income tax the increased revenue is not going to be as great as anticipated but revenue gathering would have to be the only possible reason for floating this idea.
Look at that graph again. Promoting it as an affordability control is just drivel. As I said I can’t believe it is being talked about seriously.
Our real issue is of course our low wages compared to all our neighbours but no one knows how to solve that yet, easier to pick on housing.
You can see how bad we are when you look at our income per person in NZ measured against our countries GDP. LINK
You will note that basically only 3rd world and banana republics are below us.
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
To get the latest investing information on time and for free make sure you get my regular newsletter here
