Some commentators have called policy #1 an 'envy tax', citing cars as an example: owners of expensive cars pay more tax than owners of cheaper cars, which amounts to differentially taxing people based on their consumer tastes (e.g. a preference for Mercedes over Toyota). What is your response?
Official response from Gareth Morgan
Well Paul Henry I’m sure you see it that way as you don’t care that your tax load is lower by virtue as opposed to any thing you can claim merit for. It is not a tax designed to “tax the rich”. I know many rich who pay an enormous amount of tax even relative to the asset base they control. What it is though is a closing of a major loophole in NZ’s income tax regime. That hole has seen a burgeoning class of property-woning elite who buy house not because they need them, not even because they want to be landlords, but because they know this loophole is making more and more people want to get the same tax advantage and that’s what’s driving the excessive demand for housing. They will want to change where they invest their money.
In regards to paying more tax on a Mercedes rather than on a Corolla, the benefit one receives from an asset is directly proportional to the value of the asset. That’s what markets do - they price assets as per what the next person is prepared to pay for them. That benefit of course is a form of income (not cash, but income) and we’re talking here about income tax. the more income you have the more tax you pay.
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