Ask a question about policy #1

Ask a question about policy #1

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    Ha ve you read "THe Spirit Level"?

    That little book makes such a strong argument for making wealth and income more even, level. It improves the quality of life in so many ways. I am so impressed and encouraged. Your policies are so principled. And starting knowing that the first task is to educate. Good luck. I am a serious supporter. Niels

    2 reactions Share

    How will you convince owner occupiers to accept this tax?

    Folk who have worked and saved hard to buy their own house, already pay rates, repairs and maintenance on their property, which rentees don't, so why should they be hit with an additional expense? What perverse incentives will it send to younger workers/families?

    Official response from completed

    80% are going to be better of via income tax cuts. 

    3 reactions Share

    Do you have a back up tax policy if this one fails miserably with the public?

    Will you scrap it or will you stick to your ideological dogma and go down in flaming glory at the election? You said you may not contend the election if you don't get enough support so that's telling me if people don't like your ideas you will pull the pin rather than adapt and change the policies.

    Official response from completed

    Flames. We are not here to propose weak and ineffective policies to buy votes like establishment parties. We want to fix things, make a difference, make NZ fair again. 

    The people will either indicate they will vote for that or not. Completely up to them

    7 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

    Why do you not pay your fair share of tax?

    Official response from completed

    Because not all income is taxed. See the original policy http://www.top.org.nz/top1

    9 reactions Share

    Where do you get the 80%/20% split from?

    You have presumably done some analysis of how you think this will work - so exactly how is this going to leave 80% of people in the same boat and "only" tax 20% of people more somehow??

    Official response from completed

    We have models of the distribution of income and wealth in NZ - how many people earn what, and own what. They are of course proximate because the wealth data collected in NZ is very poor. But there are a number of ways we can get reasonable distributions and then run sensitivity experiments to see what difference if any it makes if we chose alternative income/wealth distributions. Then we specify how the tax would work, and for any one simulation you have to pick an income tax scale, decide what exemptions if any you’re going to allow, decide what rates you’re going to apply to this deemed capital income, what rate of capital income you’re going to deem, etc etc. And finally of course the whole package must be tax neutral. Now that just gives you an impact effect. From there you have to assess what if any behavioural changes you’re going to allow for, especially say with business investment and growth because business is a big beneficiary of this as its supply of capital changes now the property gravy train has been halted.

    At the end of all that you get a feel for the numbers, you certainly have a range of reasonable outcomes. We found the number better off under various assumptions varied between 75% and 95%, dependent mainly on how we set the new income tax scale. generally though the more that benefited, the lower the benefit for those most of those who do. 

    Of course they’re models, not reality so nobody is going to say definitively this is what will happen. Economics just isn’t like that, predicting behaviour change is especially tricky. And working out 

    4 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

    Re tradies.

    So if they do well and make a profit they pay tax and if for any reason they have a bad year and don,t make the minimum profit you will tax him anyway. ????

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    Same tax take

    Hi Gareth, if you are taking the same amount of tax, will there be extra funding for conservation. Health and education top the list of budget demands, but a failing environment will cause a diverse range of health problems when ecosystem services fail. Water is a good example. DoC has a miserable budget for conservation and the management of threatened species. Will the conservation budget be increased?

    Official response from completed

    That is a question about spending not collecting. We will speak more on this latter

    3 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

    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


    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

    Why treat housing differently from any other lifestyle asset?

    Almost any lifestyle asset I keep in my possession could in principle be rented out by me instead, and so generates a virtual income or benefit, just as home ownership does. In principle why not tax my inherited artwork, car, or even clothing based on their rental value? In the same vein why not tax my education and other marketable personal attributes for the economic value they represent even when not being put to active income generating use?

    Official response from completed

    That is the proposal. It's up to the government of the day to set a threshold for what is worth taxing and what is not

    8 reactions Share

    Why not make residential rent tax-deductible?

    Your ideas are good but taxing the income-equivalent of the family home is political suicide and will stop people from considering otherwise good ideas. You can achieve the same end by making residential rent tax deductible and owner occupation tax-exempt (rather than the other way around which is your current policy). This will mean there are no losers (apart from - possibly - a bit more tax on the wealthy), some winners, and you'll still achieve your goal of tax/investment neutrality. Note that when GST was introduced, the one local exemption was residential rent.

    Official response from completed

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

    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