“If we talk rubbish enough, people will just get scared and vote National”

The title is an example of what some NZ media must be thinking right now. Here’s an article on stuff.co.nz. Effectively, what it’s saying is that if Labour’s unannounced capital gains tax goes ahead, rent and house prices will increase because of it.

This makes absolutely no sense. House prices will go down, because people will be less willing to buy houses then attempt to sell them six months later for a profit because of the tax. This means the housing market will be less inflated by property developers and the likes. It will also mean investment dollars will go into productive industries rather than capital industries, leading to a boost in economic growth.

In terms of rent prices, a capital gains tax should not effect this at all. The tax only comes in when you sell the property, so if you are keeping it to rent, you will not be hit by the capital gains tax.

All of these scare tactics are quite pathetic. They have absolutely no rational ground and are just there for political gain, presumably for the National Party.


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Posted on July 7, 2011, in New Zealand Politics and tagged , , , . Bookmark the permalink. 8 Comments.

  1. Interesting to see how many anti-CGT have popped up in the last few days for a policy that hasn’t even been announced yet. I agree Daniel, in theory it should encourage a slight shift towards productive investments. At the present, I can’t see this being a bad thing.

    There is the argument that rents could go up to cover the profit lost for when the asset is sold. I’m not sure how much of an effect that could have for renters, but it certainly looks like it would help out first time home-owners.

    • But if you’re getting an investment property with the plan of renting it, the long term plan isn’t to sell it, therefore it should have little or no effect on renters.

  2. The main problem (aside from it being another tax) is that it is very narrow and creates a lot of exceptions. For instance, if I have one house worth $600,000 and I sell it, no CGT; but if I have two houses, and sell them, CGT applies.

    Simpler taxes are always better. Either apply CGT to every capital gain, or don’t bother. Taxation should be to raise revenue in order to pay for government programmes – not to force social change.

    You know the best way to shift investment towards productive sectors? Flat taxes so that taxation does not even play a factor.

    • Having found out today exactly what the Labour Party’s CGT would look like, I actually must say I am no longer supportive of it. I support a CGT, but not they way they are doing it. I will post about that later on today. And apparently Labour is confirming this on the 6pm TV3 News, so I will get in before that haha

  3. “Taxation should be to raise revenue in order to pay for government programmes – not to force social change.”

    I totally agree James! This is why I disagree when people, such as ACT supporters, think we should introduce flat rates of tax in order to make the system of taxation ‘fair’ for all.

    The problem is that capital gains ARE income, just by another name and route. As such those gains are no different to any other monetary gains made through conscious investment of one’s labour or capital. Rather than introducing a CGT I would prefer we simply broaden the definition of ‘income’ to include what otherwise is labelled a ‘capital gain’.

  1. Pingback: Capital Gains Tax: Good if it’s done right, but Labour’s doing it wrong « Politicalisation

  2. Pingback: Daniel’s Election 2011: New Zealand Labour Party « Politicalisation

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