Wednesday, July 06, 2011

More on capital gains tax

Labour's proposal for a capital gains tax has produced the usual screams of outrage from the speculators it would hurt, with the Property Investors' Federation saying it would discourage people from flipping houses (that's the point), and John Key threatening that it would send New Zealand "screaming backwards" and that it would "crush everyday New Zealanders". Hardly. While 60% of us own our own homes, fewer than 5% own another, and ownership is of course concentrated tightly among the ultra-rich. Key, for example, owns five properties in addition to his family home, including holiday homes in Omaha Beach and Hawaii, and apartments in Wellington and London. He's not "ordinary", and if 15% of his capital gain when he flips them will "crush" him, then he's a very sensitive little flower indeed.

But the best argument for a CGT comes from Labour's Jordan Carter:

If you own a business and apply your energy and talents to make a profit, you pay company tax on that profit (28c in the dollar).

If you work hard as an employee - say as a nurse, or a callcentre worker, or a web designer, or one of those people who annoyingly applies parking tickets - you pay income tax (up to 33c in the dollar).

If you sit on an asset for long enough and it goes up in value, you pay no tax on that unearned income when you cash it up.

That's not fair.

And that's what this is about: making people like John Key pay their fair share. The fact that doing so will also discourage property speculation (making home ownership more accessible for ordinary kiwis), while raising enough money to fund tax reductions on ordinary kiwis, reduce the deficit, and pay for public services is an incredible bonus.