So 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