I haven't seen any numbers

I haven't seen any numbers

I haven't seen any numbers showing how this policy would work in practice for different income/capital segments of NZ's population. Are there any?

Official response from completed

You can get an idea by adding 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?

Showing 5 reactions

  • Andrew Commons
    commented 2016-12-12 15:51:05 +1300
    Thank you for reply.

    With respect, unless you can be a little more precise with how the policy will work in practice, it is difficult to believe people will support the idea, or TOP. Even if TOP says it has no aspiration to be the Government, surely, it does aspire for its policies to get traction. I would suggest modelling what you consider is the best basis upon which to incorporate this policy into reality. It will then be easier to “sell” to voters, and, potentially, to a new government. Voters will want to see the numbers behind the assertion that it is “fairer” and governments will want to see your optimum modelling from which to consider the extent, if any, to incorporate the policy in whole or in part.

  • Gareth Morgan
    responded with completed 2016-12-12 10:42:15 +1300
  • Tristan Kiddie
    tagged this with i have the same question 2016-12-10 14:59:43 +1300
  • Oliver Krollmann
    followed this page 2016-12-09 22:43:55 +1300
  • Andrew Commons
    published this page in Ask a question about policy #1 2016-12-09 17:23:37 +1300