Ask a question about policy #1

Ask a question about policy #1

We are going to do our best to get back to as many questions about our tax policy as possible. If there is something you don't understand, ask question below and we will get back to you. Before posting a question please make sure you have read the FAQ's

Read other people's questions below before posting, someone may have already asked your question

Please check your e-mail for a link to activate your account.

How does this policy discourage land-banking?

There are empty sections on my street that have been empty for years. By targeting houses and not the land they're on, there doesn't seem to be any incentive for people to build or sell to someone who will build.

1 reaction Share

Low/no income

Hi there, You've covered off over 65s with an IRD loan, but you haven't answered the question regarding low/no income households. I have family and friends under 65 in varying situations. Losing an income, permanent disability, redundancy, long term employment to name a few. They would have no ability to pay, and no bank would lend them money for this purpose. They're already struggling to pay rates, how will you deal with this group of non-retirees?

1 reaction Share

Can you explain TOP's tax policy with a graph?

All economic policy should be readily explainable with a graph, otherwise it is simply too complex.

1 reaction Share

How will this tax affect heritage properties?

Heritage properties may not be the most economically efficient use of available land/assets, but nevertheless contribute an intangible good to society. Won't it make it harder to justify conservation?

1 reaction Share

Deemed rate

I know you're open to what the deemed rate should be but just wondering if you think it needs to be lower than say the return people can get on a TD with a bank? If not, it will mean savers are penalised slightly correct? But if so, then won't the rate be too low to make a big difference when interest rates are so low? I also realise most savers will benefit from an income tax reduction but not all. Thanks very much and keep up the good work.

1 reaction Share

Wat is your view on having Organic public garden beds everywhere through towns

Over in a small town in Yorkshire they have done this To supply healthy food to poor families and the homeless. It could make huge difference in new Zealand especially here in Christchurch we have all this empty red zones why aren't we using that land to grow free food and could get local schools to look after the food so doesn't cost heaps and it's teaching them how to grow own food and to give service to the community

1 reaction Share

Hi Wat is your view on tiny houses as a solution to our housing shortage

Hi there I'm wondering have you looked into tiny houses and setting up land to lease in sections to people wanting live in tiny houses basically sub divisions of tiny houses and set up as a social housing trust and use the money made go back into local economy like education I'm part of a tiny house committee starting up in Christchurch to try and make this a reality and also work with local concills to ease regulations on them but if someone like yourself was to make it a parliament issue it could change so many peoples lives tiny houses have already taken off over seas as a way to keep up with housing issues and make affordable housing for low income people one issue we still facing is getting banks onside to lend money ATM we only know of one and they only just started doing it this makes huge hurdle for people wanting to build there tiny house thank your for your time read my message I look forward to your response

3 reactions Share

Net Equity Taxed? Interest Repayments Deducted from Income?

Hi Gareth. Would you please confirm that it is only a person's or business's total or net equity (asset valuations minus debts) that will be subject to the minimum income assessment. Will loan interest repayments be deducted for the purposes of calculating total income being generated by an asset (to then be compared with the minimum). -Matt

1 reaction Share

Can you share projections of how this tax would affect farmers?

I imagine this could become a politically-sensitive issue, depending on whether the average farm usually exceeds the threshold rate of return (6% or whatever it may be set at).

1 reaction Share

What's your current position on assets like boats etc?

Hi Gareth. I read your "Big Kahuna" book over the Christmas break. In the FAQ section at the end of the book you said that, for pragmatic reasons, the tax would be limited to land, houses and business assets. But I get the impression from your recent blog post, and the Paul Henry interview, that you'd now like it to apply to other valuable assets too: luxury cars, boats, art works etc. Could you clarify your position on this and, if such assets would be included, clarify how they would be identified and valued? (Except perhaps as a mandatory surcharge on the insurance premiums for such items, but that seems like an unorthodox approach.) I ask because I can't imagine how the practical and pragmatic issues would be addressed if such assets were included.

1 reaction Share

Are you actually going to answer any of these questions or is it just for show?

Where are you answering these questions. I haven't seen any answered yet?

3 reactions Share

What would the impact on houses held in family trusts?

From the FAQs it sounds like any property you have in a trust like your family home which could be a common case for company directors and small business owners would have to paytax at the company tax rate rather than the 0.5 to 1.5% suggested for a property not held within a trust is that correct?

3 reactions Share

Taxation policy

Wouldn't it be necessary to increase the supply of affordable houses at some time as introducing this policy? otherwise you run the risk of costs being passed onto tenants. If there few alternatives for them, they will have to accept the increased rentals?

1 reaction Share

Varying bond rate

Do you intend to use the 10yr or 1yr govt bond rate to set the rate of return? What arrangements are planned to incorporate the fluctuations in these rates that occur: over the last 40yrs the 10yr rate has fluctuated between 18% and 2%? Can you guarantee those arrangements will match the current rate rather than reflecting last year's rate? I note that up till mid year Govt was still using 8% for one of its capital return rates.

1 reaction Share

2 Questions: Jobs and ethics.

First of all, thanks for doing this. Jobs: When you raise taxes on the rich, aren't you risking having them move overseas? Where we can no longer tax them. Where they might impact our GDP. That might result in them hiring fewer people? Result in them taking jobs overseas? Ethics: You seem to be a generous patriotic philanthropist. Why do you want government to force the extra money out of the wealth when you could independently and voluntarily put money towards causes you believe NZ will benefit from?

1 reaction Share

When are you going to provide some hypothetical examples to help us to understand better the policy?

Official response from submitted

If you are trying to calculate if this positively or negatively effects you it's not hard to do - add up the value of all your assets, take off your debt. That’s your equity. Of course the government might say don’t include anything worth less than $10,000, or $20,000 - who knows?

Now you need to guess an effective tax rate that will be charged every year. I’d guess anywhere between 0.5% and 1.5%. But remember that will be ultimately. Who knows how many years a government would choose to phase in this change in the tax base? They don’t want to collapse house prices, the aim is to take the sting out of house price inflation. And who knows whether they grant an exemption - that could be anything from no exemptions (like GST) to a minimum value of say $200,000 - or even the value of an average house. These are all choices for the government to make.

Thirdly you need to estimate what happens to your tax rates - remember all revenue raised is returned through tax cuts. Also remember the more exemptions they  grant, the less tax is collected, the smaller any cuts must be. And of course a government might decide to spend all the proceeds cutting the top tax rate, another government might decide to cut the bottom rate only, a third government might just cut all rates equally.

Hopefully by now you can see that how it effects you in particular is impossible to know unless all these factors are known. These are political choices. If they do it properly as I would - and remember we have no aspiration to be the actual government - then they’d collect enough to cut tax rates by a third. So it is a fundamental change in the way tax is collected - wage earners at long last get the tax relief that is only fair, and asset owners are flushed out from the bushes. But hey, that’s your choice. 

I always ask people whether they think this enormous rise in inequality that has occurred since Ruth Richardson did her thing is in any way fair? If they don’t care we don’t need to talk on this any further. But if they think its unfair then I’m suggesting what the best (in terms of both economics and fairness) way to address is as I’ve outlined. Do it with no exceptions, cut income tax rates by 1/3rd and 80% of people will be better off. It’s a no brainer. The only issue is how many of the 20% (or those who aspire to be) care enough to support it. Your call.

I have to say it does amuse me to see people saying they’ll only support making NZ fair again if they are directly better off themselves. Makes them sort of prostitutes doesn’t it?

4 reactions Share

How do you measure fairness?

Official response from submitted

There are a wide number of measures - ranging from income, wealth, discrimination, etc etc. The Graph Pack we published at the launch of Policy #1 on tax reform gives a pictorial summary.

4 reactions Share

Having you thought about simplifying the message

Isn't this really just a move from income tax towards a resource based tax? Why should those having exclusive use of resources get a tax free benefit, while all the hard working people provide the tax? Surely this policy just tries to find a balance between resource and income tax to ensure no particular group in society is gaining at the expense of others?

4 reactions Share

Can you define the 20% who need to pay more tax by one's total income?

It is easier for the 80% to support this policy if you define the 20% who need to pay more tax based on their total income (which is direct income plus indirect income plus the notional rent based on say 3% of their rateable value).

Official response from submitted

Not that clear cut. The people with high income are already paying their fare share

The 20% we want to target are the 20% who are the most wealthy, indeed the tax cuts can be designed to ensure that. What wealth level does that cut in at? Who knows, wealth data in New Zealand is pretty sparse to be polite. It doesn’t matter in terms of policy design, you can implement the package so that the 20% point happens no matter what the actual wealth numbers turn out to be. If you think about it logically you could take all the revenue of one person and distribute a fraction of it to each and every other person. We each wouldn’t get much of course. So the question is a bit futile. It does amuse me however when I come across people who love the idea so long as they benefit - tells you a lot doesn’t it? The question is pretty simple with this tax reform - do you want a fairer New Zealand or not? Closing the loophole will achieve that.

6 reactions Share