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37. Asset heavy, income light people are not necessarily "rich"

37. Asset heavy, income light people are not necessarily "rich"

Answer

Totally correct. However to the extent that someone has chosen to invest in assets that earn no cash but provide some other service to them, that is their choice. Along comes this closing of the income tax loophole and those folk suddenly find they have too many assets relative to their ability to pay what amounts to an increased rates bill. Now we’ve already dealt with oldies by ring-fencing them and making it in effect an estate duty. But for others there are choices to make - get more cash-generating assets and have less in cash-lite ones. But because we’re phasing this in there is time, the tax liabilities will not just leap overnight but be staged in a way that doesn’t collapse house prices for example. So that enables you to reposition.

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    • Steve Cox
      commented 2016-12-12 20:01:03 +1300
      I own my own home mortgage free. I work part time and earn some money from investments. Together it is enough to get by on without being allowed any great extravagances. And I’m not an oldie yet.
      That makes me one of the 20% as I don’t pay enough income tax to get it back to cover the property tax. I’ll be worse off without having the option of an IRD mortgage.
      There is nothing I can do to improve my situation by changing my asset mix. All I could do is choose to work longer hours but that would put someone else’s job at risk as I would now be doing their work.
      Give me a UBI and things would probably be OK. But UBI is not linked to this policy.