Ten years ago, capital gains taxes were a "third rail" of New Zealand politics, dismissed as a fringe idea advocated only by parties like the Greens. Now, after years of patient advocacy and a multiyear housing crisis, even the rich support them:
Mainfreight executive chairman Bruce Plested has advocated a capital gains tax to take the steam out of an overheated housing market and urged the government to treat teachers as "true professionals" paid on the basis of performance.
Plested said the price of housing in New Zealand "is another glaring problem", with the average house in Auckland now costing 10 times the average household income, which is above the ratio of three-to-five times average income that is the globally accepted norm.
Unprecedented immigration, low interest rates and a trend for the well-off and those nearing retirement to return to invest in the Auckland housing market had resulted in Auckland being one of the world's most expensive housing markets. Profit expectations were driven by "the perception and reality ... that upon sale, the gains made would be capital gains non-taxable," he said.
"Not taxing capital gains on the sale of assets causes distortion in buying and investment decisions," he said. "There is no reason that New Zealand should be different from Australia, UK or the US in taxing capital gains on housing. If this tax needs to be introduced progressively over say a two-year period, it will alter buyers' and sellers' behavior and perhaps pave the way to solving New Zealand's housing problems."
Its a sign of how far the political consensus has shifted that Plested is arguing for this, and it opens up enormous space for the left to both correct the housing bubble and act against inequality. After all, why stop at housing? Shouldn't we tax capital gains on shares and company sales as well?