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Forecast for policy to fulfill its promise?

Forecast for policy to fulfill its promise?

Hey Gareth, if this tax passed into law, how long would it be before an impact is seen? Will there be an immediate depreciation of house values & raise in incomes...or is it more of a long term strategy? If it's the latter what sort of time frame are we lookin' at. If it takes a while, 10 years or more, how will it help those in need now? I'd also like to ask what guarantee would the homeowners of New Zealand have that your proposed income tax cuts intended to blank out the tax wouldn't be rescinded by a future government, ie they keep the house tax in place but remove the income tax cut. Cheers.

Official response from submitted

There’s never any guarantees with tax. A government could raise them tomorrow and not tell you they’re going to. The closing of the loophole will not be fully achieved for some time. This is on purpose because we don’t want to collapse house prices, we want to have them tread water so incomes can catch up. The way to do that is to make the deemed taxable income on capital only small to begin with and wind it up over time until fairness is restored. How long would that take? Depends on the reaction of house prices.

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    • Nico Preston
      commented 2016-12-14 08:03:20 +1300
      Thanks for the reply Gareth. I have no doubt your policy is well intentioned and aimed at those who exploit loopholes. I don’t want to be a doomsayer but…worst-case scenario…your policy passes into law and all homes in NZ are taxed on their perceived deemed income. You say 80% won’t feel it as they will be subsidized, but you don’t need to be an economist to realize an asset tax has the potential to be a massive revenue stream for the government. If the subsidy was rescinded what would happen to the 80%? They would have to come up with extra money to pay this tax. If you’re not in a main centre your house is probably worth much less, but even on a $300,000 house at 1%, you’ll have to come up with an extra $3000, on top of insurance, maintenance and mortgage (if not freehold) costs. You have stated elsewhere incomes will rise, but what if they don’t increase sufficiently to bear the cost. If the asset tax was 3-5% the cost would be even more of a burden, and would likely force some of the 80% into debt, or to sell their house.

      I know this is a ‘what if’ and some will dismiss it out of hand but I think it is a valid concern. On FB you have said – more than once – it’s about fairness, but if this scenario played out, would it be fair to the majority of NZers? Cheers.
    • Gareth Morgan
      responded with submitted 2016-12-12 09:47:44 +1300
    • Oliver Krollmann
      followed this page 2016-12-11 07:21:38 +1300
    • Nico Preston
      published this page in Ask a question about policy #1 2016-12-10 18:40:17 +1300