The Labour led Government has gone into the Easter break chickening out of a Capital Gains Tax in any form. Obviously they are hoping that people will get stuck into their chocolate eggs and forget about it all over the break.
But Kiwis won't be able to forget about the crippling cost of living, which is almost entirely a product of house prices and rents rising faster than incomes. Nor will younger generations be able to forget the fact that they will never be able to afford their own home. Nor will businesses be able to forget about our economy limping along from lack of investment because all of our money is tied up in housing speculation.
Federated Farmers were right to call a Capital Gains Tax a mangy dog, and in the end it had to be put down. The Labour led Government excluded the family home from the outset. This meant any tax wouldn't have much impact on house prices, which was supposed to be the point. Businesses rightly squealed about their inclusion when the problem was so clearly the housing market. New Zealand First were no doubt going to make sure that farmers were exempt. So that would have left... investment property. Such a tiny proportion of our economy that it would barely have been worth the administration costs. And ultimately the poorest people in our society would have ended up bearing the brunt in higher rents.
New Zealand desperately needs tax reform, but not the proposal from the Tax Working Group. The tax reform we need would deal with our growing inequality, housing crisis and poor productivity. To do that housing needs to be taxed in the same way we tax other assets.
The Opportunities Party's tax reform is the best practice way to achieve exactly that. But there are other ways to achieve a similar goal, such as the ideas suggested by Andrew Coleman. The Tax Working Group, largely because of its restrictive Terms of Reference, wasn't really able to consider either of these ideas.
Capitalism can work, but only if it is a level playing field. Right now we have the opposite of a level playing field. We have a game that is rigged in the favour of a few. We have neoliberalism.
The Government has failed to be a leader on tax and New Zealand’s housing crisis. By sheltering New Zealanders from a conversation about how we tax all assets, including the family home, they ultimately sowed the seeds of this proposal's demise.
Now watch house prices and rents return to their inevitable upward march. Watch renters - half of Kiwis - continue to get screwed because they miss out on the biggest tax break this country has; owning their own home. Watch hard working Kiwi families get squeezed even harder. Watch young people walk away from their dreams of owning their own home. And watch our businesses continue to struggle for the capital they need to grow.
Incredibly the Prime Minister has also ruled out putting a price (some call it a tax, we call it a price) on water. The total cost of the Tax Working Group will likely come in under $2m, but with all these big ticket items off the table you have to wonder why we bothered at all. The result has been some very minor tinkering with a broken system.
The lesson is simple. If we are going to bother getting experts involved, don't hamstring them from the outset with loopholes designed to make them politically palatable.
We need to get real with the public, and let them make an informed choice.
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