Thursday, July 07, 2011

You can't take it with you when you go

Labour's suggestion of a capital gains tax has got the speculators running scared, with the Auckland Property Investors Association saying that landlords are already talking about selling up and moving to Australia to avoid it (which is odd, given that Australia has a capital gains tax). And, according to a quote in another story, this will

reduc[e] the supply of rental properties and pus[h] rents up further.
Um, no. To point out the obvious, houses aren't mobile; you can't take them with you when you go (or at least, not very cheaply). So if a parasite flees New Zealand to avoid paying their fair share, their rental property does not suddenly disappear. Unless they bulldoze it out of spite - an unlikely proposition - it gets sold to someone else, who either lives in it or rents it out to someone else who does. The net effect on the supply of rental properties? Zip.

Which is a nice example of why threats by the wealthy to "go Galt" are so much hot air: to the extent that their investment is productive, based on buildings, factories, plant, and other people doing work for them, its not particularly mobile, and the natural way of them exiting is to sell it to someone else. Which means that that someone else simply steps in to fill the economic niche the fleeing Randian superhero has vacated, and life continues as before, though with less arrogant and egotistical management. Which sounds like a win-win scenario to me.