Is this an 'envy tax'?

Is this an 'envy tax'?

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 completed

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.

Showing 9 reactions

  • Gareth Morgan
    responded with completed 2016-12-12 10:17:23 +1300
  • Aaron Sowry
    commented 2016-12-10 14:51:51 +1300
    No. Taxing blue Mercedes’ but not white ones would be “taxing people based on their consumer tastes”. People don’t buy cheap cars because they “like” them more than expensive ones.

    For what it’s worth, my personal opinion is that, if this tax should be applied to depreciating assets such as cars, then this depreciation should be deductible, as should things like repairs. Maybe even petrol and running costs. But these are all minor details at this stage, and completely beside the point anyway.

    The whole point of this tax is to encourage capital to be invested in productive assets in NZ, rather than locked up in non-productive ones. Just because the Paul Henrys of this world have to resort to playground-level name-calling, doesn’t mean the proposed reform was conceived by a bunch of jealous “have-nots” in a fit of envy. Tax is not about “taking” money from one group of people and “giving” it to another, nor is it about “preventing” people from doing anything they want to do with their own money. It’s about incentivisation – in this case we want to make it more attractive for investors to put capital in places other than the housing market, and in doing so give future generations a shot at being able to afford their own home too.
  • Luke Malcolm
    commented 2016-12-10 00:10:40 +1300
    There is one rather large flaw in the metaphor of the car analogy: Cars depreciate value (rapidly), properties appreciate value. So unless your drive your Mercedes or Toyota as a taxi driver, I’d challenge that this policy amounts to ‘taxing people based on their consumer tastes’.
  • Aaron Sowry
    commented 2016-12-09 23:47:04 +1300
    I wish people would stop using this as a forum for spouting thinly-veiled criticism in the form of a question. Yeah, I drive around in an old Toyota as opposed to a Mercedes, because that reflects my “consumer tastes”. Envy tax? What? Try to be constructive.
  • Tim O’Donnell
    commented 2016-12-09 23:05:10 +1300
    It taxes you on the fact you can afford the expensive car. If you have the money for an expensive car but choose to buy a Toyota then you can use the money saved to spend on other more productive investments that potentially create jobs. That I think this is his point. It’s an opportunity cost tax. What could you have done with the money if you had invested it more productively? Money sitting idle is wasted. I guess we have to be careful of there being a tax on savings sitting unused to long? If you want to buy a luxury item, you have the money to pay the tax on it. Ultimately it’s your choice.
  • Hayden Donnelly
    commented 2016-12-09 22:48:01 +1300
    Gareth is like most other politicians. He is narcissistic enough to think that he can centrally plan the entire economy with regulations, taxes, and banning things like an authoritarian dictator or social scientist (people participate in this harmful game because they get to be anonymous at the voting booth and most of them get to be on the side that does the stealing while the minority of hard workers get to be the partial slaves). It is basically summed up in the 20 / 80 central message. Don’t worry! We are stealing from those rich bastards… This is communism. Legalised theft. I on the other hand view society as being full of individuals with basic natural rights that aught to mean something. Property rights. The right to keep what you earn. The freedom to gift your money voluntarily to those of your chosing but never to steal from others. Anyway it is the central bank with artificially fixed low interest rates that is causing the housing bubble anyway. (no incentive to save but lots of incentive to spend, doesn’t even have to be a productive asset class to generate income to offset the interest at these levels…). De-regulate that / or abolish it and you will get a housing and stock market crash (back closer to a true market price). Problem solved – housing affordable again and people incentivised to save and invest in productive ventures, borrowing would once again be (mostly) reserved for entrepreneurship which make it possible to justify taking out large loans at the higher interest rates. :)
  • Hayden Donnelly
    tagged this with i have the same question 2016-12-09 22:48:00 +1300
  • Oliver Krollmann
    followed this page 2016-12-09 22:24:46 +1300
  • Leon Iusitini
    published this page in Ask a question about policy #1 2016-12-09 21:34:48 +1300