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Needs punchier presentation

Needs punchier presentation

So that people can get their heads around it, and to prevent them writing it off as "economist speak". E.g.

What? A tax on imputed rent. Imputed rent is what you would get, to rent a house like yours, if you didn't already own it.

Why? To fix the housing market, by putting property on a level tax playing field with the rest of the economy.

How much will it cost? About x% of the value of your home. So for someone in a home worth $500,000 that's about $y per week. This will still be way cheaper than renting, because as an owner-occupier, the imputed rent will stay in your pocket just like it does now. You'll just pay tax as if it had changed hands

How will I afford an extra tax? We'll cut your income taxes, so most people will come out about even

Who will be worse off? Rich people who own property worth a lot of money (and yes, this includes Gareth Morgan)

Who will be better off? People who pay rent to a landlord. These people won't have to pay the new tax, but they will get the same income tax cuts as everyone else. Also, young people and children will be better off, because this tax will gradually take the heat out of the property market. By the time today's young people want to buy homes, incomes will have started to catch up to property prices .

Is this crazy? No. Five other countries around the world do it: Switzerland, Luxembourg, the Netherlands, Iceland, and Slovenia. The OCED says that it would be good for every country, but around the world most politicians are too gutless. At TOP, we're not.

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    • John Rusk
      commented 2016-12-12 21:37:28 +1300
      Hi Steve. Nice summary. Your wording does a better job than mine, of being broader than just housing. Nice.
    • Alistair Newbould
      commented 2016-12-11 09:49:30 +1300
      Nice!
    • Steve Cox
      commented 2016-12-11 09:27:26 +1300
      Hi John

      Well done on a good interpretation and presentation. Below is what I wrote on another thread.

      The Property Tax (PT) is charged on net worth; that is valuation minus mortgage.
      The policy doesn’t say what the valuation method will be so let us say it is Rateable Value.
      Income Tax cuts will be introduced so that all the money received from the PT will equal that Income Tax cut.
      80% of people will be better off and 20% worse off.
      All property will be subject to PT – home, rental houses, factories, farms, …
      Business gets to claim PT against their Income Tax.

      I’ve tried (and tried) to construct some numbers to demonstrate the above. Here is what I’ve got for housing only.

      Lets say it is decided that all people get an Income Tax cut of up to $10,000. On current tax rates that means everyone earning $56,600 or less would pay no Income Tax. Now if the PT was set at 1% then a $1 million net worth home would incur a tax of $10,000. Break even; woohoo.

      A single person on National Super living in a mortgage free home earning 20,000 (Super plus some interest) pays $2,520 of Income Tax. If their home is valued at more than $252,000 then they are worse off. You’re one of the 20%. And this is why Gareth has had to offer an IRD mortgage.

      Anyone with a house net worth greater than $1,000,000 will be worse off at an Income Tax cut of $10,000 and a PT of 1%. Move either the tax cut or the PT and the numbers get to look better or worse for you.

      About half the houses in NZ are rented. if we say then that about half the population rent their home then all these people are going to get a tax cut of up to $10,000. Yay, some winners. But your rent may go up as the landlord tries to recover some of his PT. Renters will mostly be winners with a few who’ll lose.

      Starting with 100% of people we deduct the 50% renters who are winners. That leaves 30% more who are winners and 20% as losers. Or to put it another way, if you are a property owner there is a 40% chance you’ll be worse off. Better off property owners will mostly be where a working couple each get the tax cut and combined they exceed the PT.

      The effects from farm and business PT may shift those numbers, but by how much I’ll leave to Gareth to explain.

      Technical issues: –
      a) How will IRD know what your property’s net worth is?
      b) Does every home owner have to file an annual return telling IRD what size their mortgage is?
      c) Is it a lump sum tax or will it be paid monthly, quarterly?
      d) is it paid as you go or in arrears?
      e) Will the current capital gains loophole be closed as well? OK, this one is changing the subject but more than anything else this will do the most to stop the current rampant speculation; not a PT.
    • Oliver Krollmann
      followed this page 2016-12-11 07:24:23 +1300
    • John Rusk
      published this page in Ask a question about policy #1 2016-12-10 18:31:02 +1300