Ask a question about policy #1

Ask a question about policy #1

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    How will the value of assets be calculated for the tax?

    6 reactions Share

    Calculator makes it clear how the 80% would benefit!

    You need to include a calculator to demonstrate the benefit to the 80% that will benefit. Love your thinking Gareth, and the juxtaposition of launching the policy out side Keys mansion. Nice format you have developed.

    Official response from submitted

    Not hard to do - add 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?

    10 reactions Share

    Me & a few others are really interested in your thoughs on this thread

    http://www.top.org.nz/63114/a_simple_transactional_tax_that_can_t_be_avoided_or_claimed_back

    7 reactions Share

    Farms?

    How does this policy affect farms. eg what happens with a farmer who owns a $5mill farm that this year returns $100k. Tax is assessed on the asset value and say it comes to $300k (6%). Next year the farm makes a loss of $100k but is still assessed to owe $300k. The farm would need to clear $400k+ every year just to pay the tax and show a tiny return. Few farms make returns like this

    Official response from completed

    http://www.top.org.nz/how_would_farms_be_treated

    9 reactions Share

    Sorry Gareth,not a question but a suggestion.

    Most people will struggle to get over the misconception that they will be double taxed on their only hard-earned asset worth anything, their house. They will not see how the net effect is a tax reduction as their income tax is reduced by more than the asset tax. A simple online calculator, if that's possible and with all the necessary caveats, would help people like myself understand if they will be net winners or losers. I support the policy regardless, for the same reasons as you, but it can only help if 80% can see they would likely be voting for a tax cut. The comments I've seen so far indicate that even intelligent and questioning people are misunderstanding the policy so the only, way to get the message across might be to demonstrate how it could work at a personal level.

    13 reactions Share

    Will owner-occupiers be able to deduct expenses and/or depreciation?

    If we're taxing imputed rent, then I guess the owner-occupier would be considered a kind of non-incorporated business. Does that mean that owner-occupiers could also claim certain residential expenses (repairs, depreciation, etc) against this income, in the same way a business does? If so, I think this would sweeten the deal for many people. Please clarify.

    Official response from completed

    there are two ways you could apply the tax - tax the whole value of the asset and make interest deductible, or tax the equity only and don’t. The second is simpler.

    6 reactions Share

    Hi Gareth,

    I need to see the numbers. My wife and I are 71 and 70. We live in our mortgage free home which has current market value is of $380,000 $400,000. We have no other property. Our sole income is NZ super. Due to the fact that we don't owe anybody for anything means that we can manage OK. Any increased outgoings could not be supported without significant sacrifices.How would the figures stack up under your scheme?

    Official response from completed

    Your biggest issue is cashflow. Under our plan you would write an IOU to the IRD for the tax that you need to pay each year. This will be taken by the IRD when the property changes hands next or out of your estate when you pass. So no cash flow issues

    8 reactions Share

    Possibility could work but I see that you need to separate one home owners from multiple home owners

    Official response from completed

    See this FAQ - http://www.top.org.nz/why_don_t_you_exempt_the_family_home

    8 reactions Share

    Can you please outline a scenario example showing how this would work?

    To help us understand how this will affect us as individuals ... especially since you're saying 80% of people would be better off, can you please give some scenarios showing what the tax would be using current tax rules vs these proposed tax rules? e.g. Dad earns $70K, Mum earns $20K, they own their family home worth $600K, mortgage $400K. Second example - Dad earns $90K, Mum doesn't work, they own family home $600K, mortgage $300K, plus a rental worth $400K, mortgage $300K. Third example - Couple, both earning: Husband $80K, Wife $90K. Own a home worth $1m, mortgage $400K.

    Official response from submitted

    Giving an exact response is hard because we don't know the exact numbers the government will choose

    Add 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?

    8 reactions Share

    Aren't you attacking the 'legacy building' motivation that drives humans to strive?

    If I work and sacrifice harder than usual throughout my life in order to build up what I hope is an enduring legacy for my family, paying tax on all that productive output, why must the legacy also be eroded away by tax? Wouldn't I contribute less to the economy of what it takes to earn that legacy if I knew it too would just be taken away in the end, as a sort of final gesture of contempt on top of having 40% of my working life's time and energy already 'harvested' in tax of one form or another. Yes, property values are far too high, and yes what is proposed is probably more economically efficient, in a sociopathic sort of way, and yes, to an extent things like rates and maintenance/depreciation costs also work in the same direction of eroding capital, but on a human emotional level level doesn't this policy mess with something pretty fundamental about the reason we work so hard all our lives and have much of an economy at all? After a lifetime running the taxation gauntlet, what we want is a finish line after which what a person has worked and sacrificed to build is finally safe from the demands of others. Why would we embrace the prospect of watching the product of all this work evaporate away to suit the agendas of other people, as soon as we are no longer harnessed to the treadmill ourselves? Why would society not continue to see as reasonable and desirable, a sense that something of tangible and permanent value is achievable as a reward for that life of hard work? a sense of fair play where there is a time limit on the demands it places on it's productive individuals? If property values and housing accessibility are the primary drivers of this policy, why not institute a near 100% capital gains tax on the unimproved land component of property value (with adjustment for general inflation and the current population in the country who arguably compete for the same land). That would allow a legacy to remain and be passed on, not penalise the economic activity surrounding home improvement and maintenance, yet eliminate the incentive to land bank, or hold property in anticipation of passive gains generated by the home improvement and economic activity of neighbours

    Official response from completed

    So as I read it the basic question you are asking is: 

    Are you attacking the drive of people to leave stuff for their kids?

    Possibly given that this loophole has been here so long now we have people investing inordinate amounts to accumulate the unearned gains from merely holding a particular asset type - housing. With that incentive removed those folk will need to put their money to work elsehwere. Investing in businesses that grow and employ and make profits and pay higher wages would be a fine thing don’t you think?

    This tax will make houses more affordable you your kids won't need the inheritance to get ahead.

    8 reactions Share

    What are the exact numbers?

    Hi Gareth, I like the sound of this but I'm still not clear on exactly how this works. What percentage of your house equity will we be paying? Say I have a family home worth $1million and a household income off $100K. What amount would we pay each year? I can't see any specifics in your FAQs or policy documents.

    Official response from completed

    add 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?

     

    13 reactions Share

    Hi Gareth, good on you for getting a debate going.

    I have a couple of points I'd like clarification on please a/ how will you try and prevent somebody with a valuable house in Auckland, but little income and an extended family feeling forced to cram more people in simply to try and divide this tax between more heads? this could make things worse for some families. b/ what about people with sporadic seasonal work? c/ will you be allowing people who do unpaid work - such as tending aged or disabled family members - in their own home a tax credit. They certainly are unsung heroes in many cases and get a very poor deal as it currently stands. Many of these homes have been invested in simply to tailor them to circumstances and special needs - thus increasing their apparent value. cheers Nick keep up the good work

    3 reactions Share

    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?

    5 reactions Share


    Will the same tax apply regardless of whether an asset is held by an entity or a natural person?

    Official response from completed

    if the owner is a trust or company then the tax rate is at the trust or company rate. If there’s say 5 owners then the liability is split proportionally. Any more than that and the liability per owner is calculated on the basis of their value portion times the average tax rate faced by the 5 highest tax-rated owners. Of course one day I dream of having a single tax rate (and a UBI). Then it doesn’t matter how many owners there are. But one step at a time.

    4 reactions Share

    whats the net tax impact for people like a tax calculator or you can't support the policy or party

    you can't say subject to negotiation. You need to be telling me what you would be proposing and base calculations on your policy not 'subject to negotiations'. If 80% are tax neutral then simply prove it. I like the idea but the message delivery sorry but it's atrocious. I'm an accountant and I was even struggling to get my head around answers so the average kiwi rightly has no bloody idea. And all they see is $247/week cost of the policy and no offset. So in a few weeks no one will care what the policy actually was as this will be all over. Also just stick to property incl cars, watches or whatever else is planned will 100% kill this policy dead eg fishing boat etc. Property done right can see support if explained who it will and won't impact.

    Official response from completed

    add 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?

    4 reactions Share

    Can you please clarify these few questions for me:

    In your policy, TOP says: "Our proposal is to deem a minimum rate of return on all productive assets, including housing and land", and that "All productive assets […] produce income each and every year, not cash necessarily but income nevertheless." 1) How is the 'annual productive asset tax' any different to taxing an unrealised capital gain? 2) Wouldn't taxing all capital gains be a more efficient, determinable and transparent tax policy? 3)You say capital gains taxes don't work toward the goals TOP wants to achieve, why so? 4) How does your policy propose to determine the value of return on a productive asset with no cashflow or assessable income related to it? 5) What if the asset actually made a loss that year? 6) How will this policy avoid the chances of double taxation for people who intend to accept a capital gains tax on sale of their property? 7) Have you purposely avoided the 'elephant' of capital gains tax because of its hot political nature, or because you really don't believe it would be effective?

    5 reactions Share

    Does this mean every home owner will now have to file a tax return?

    Currently if your only income is from PAYE wages/salary you aren't required to file a return. Wouldn't a simple land tax billed with the rates notices be easier to administer, more efficient to collect, and not require a whole lot more people to file tax returns? The land tax rate could be based on the regional or national average amount of time the value of the land doubles. I understand your proposal is a tax on a deemed rate of return rather than a tax on capital gains. Does your proposed deemed rate factor in the usual capital gain as well as the annual "market rate" rental? If not, I'm afraid there is still an incentive to gear up on property.

    Official response from completed

    Not really - its very easy to get your house value from the local council, your insured value from an insurance company, and your mortgage from a bank. The IRD has many rights. You don’t need to do anything if it’s just the home that’s involved. If there are other assets you might need to fill an online form, sign a statutory declaration. Very simple really, no accountants needed that’s for sure.

    4 reactions Share

    Inflection point.

    Believe alot of people, particularly home owners such as myself, are struggling to understand the real cost/value implications of this policy. Do you have a projected inflection point of wealth/property value at which people switch from the 80 to the 20%? eg. 600k @ 3%

    4 reactions Share

    Are there any quantifiable metrics that prove your tax policy will actually work?

    Or did you just pull everything out of thin air? I have read your FAQ and your policies, but found it hard to find literature of precedent and proof. How do you know they will work? Has this been done before in any other countries? Have you done any economic modelling? Have you consulted with economic experts or do you have a 'screw the experts' mentality?

    Official response from completed

    Many governments try other tactics to close this loophole like estate duties, inheritance tax, wealth tax, land taxes, capital gains taxes etc. They are all aimed at the same thing - the untaxed return owners of capital make over time. Most of the taxes above impact as a one-off hit, often at the end of life. This is a political choice but the consequence of it is that capital is mis-allocated (ie; allocated according to tax impact rather than economic return) right through the life of the owner. You can think of the approach we propose as aimed at the same thing by impact in an as-you-go basis. That’s the logic.There are a number of very successful economies who have not had the runaway house price inflation for example that we have facilitated. What they have in common is that unlike New Zealand they all try to address the issue rather than ignore it. Is pay-as-you-go tax on income than an end-of-life, or event-triggered one-off tax? If you don’t want to distort markets along the way it’s just logic.

    8 reactions Share