Hard News by Russell Brown

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Hard News: Press Play > Budget

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  • Deborah, in reply to Andrew C,

    If you are going to have a CGT on family homes, you need to provide rollover relief each time people sell and buy, otherwise you impede labour market mobility. That gets…. complicated, especially if you are trying to work out when people are making their final sell and buy moves, perhaps as they move into a retirement home. You also get all sorts of issues around matrimonial property. Plus you get older people rattling around in huge houses because they don’t want to sell and cop the CGT. So usually, it’s easier from a design perspective to just ringfence family homes.

    Plus it would be a bit of a political nightmare. And a worry with respect to comparisons worldwide. I can’t think of any jurisdiction that has a CGT on family homes, so if we had one, but other countries didn’t, then we might decrease the attractiveness of NZ as a place to live and work.

    If we were very purist, we would of course, have a CGT on family homes. But the practicalities rule it out, I think.

    New Lynn • Since Nov 2006 • 1447 posts Report Reply

  • Luke Williamson, in reply to Andrew C,

    Because it feels good? I don't have a good economic argument. I read Gareth Morgan's Big Kahuna and liked the theory of his capital tax but it would be a pretty big leap for people to launch into that scenario. I think the government has just delivered a budget that sums them up pretty well - not much of anything and no clear direction, uninspired, etc. Probably sums up my attempts at the budget also.

    Warkworth • Since Oct 2007 • 297 posts Report Reply

  • Steve Barnes, in reply to Andrew C,

    why would you exclude the family home from a CGT Luke?

    Because a family always needs a home so the profit being taxed is never realised. You could, theoretically, sell the family home and live in a tent, sort of what National is trying to do to the country.
    I have just watched our Prime Minister embarrass the entire country with a speech of which Mike King would have been proud.
    Oh dear, what have we done?.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Luke Williamson,

    Yeah, what Deborah said.

    Warkworth • Since Oct 2007 • 297 posts Report Reply

  • Russell Brown, in reply to Steve Barnes,

    I have just watched our Prime Minister embarrass the entire country with a speech of which Mike King would have been proud.

    That was pretty awful. Clearly, he enjoys it, but I wish the Prime Minister could bear in mind that his job is not stand-up comedian in chief.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Steve Barnes,

    I must say Winston is on form today. Worth a watch.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Danielle, in reply to Russell Brown,

    I wish the Prime Minister could bear in mind that his job is not stand-up comedian in chief.

    Particularly as he is NEVER FUNNY.

    Charo World. Cuchi-cuchi!… • Since Nov 2006 • 3828 posts Report Reply

  • Fooman, in reply to HenryB,

    Does that mean that the SOEs have been making a significant contribution to the growth in NZ’s GDP whilst core-govt expenditure has stayed static?

    Were there not figures flying about how the SOE's recent rate of return is something on the order of 18% on values on anywhere between 3-7 billion. Seems a bit more than the just above static GDP of recent times.

    Core govt expenditure has actually skyrocketed recently (by approx 18 billion off the top of my head) - but that is not in the field of things like health, welfare, etc. The increase, as far as I could see were the Roads of Unusual Size, earthquake costs and the bailout costs. Raw figures are at:

    http://www.treasury.govt.nz/government/financialstatements/yearend/jun11/16.htm

    For my earlier lay-analysis, see: http://www.kiwiblog.co.nz/2012/04/government_expenditure-2.html#comment-956469

    FM

    Lower Hutt • Since Dec 2009 • 87 posts Report Reply

  • Steve Barnes, in reply to Danielle,

    Particularly as he is NEVER FUNNY.

    It's always easy to get a laugh from your fan-club.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Andrew C, in reply to Steve Barnes,

    Because a family always needs a home so the profit being taxed is never realised.

    I don't quite understand what you mean here. If you sell an asset that makes a profit you pay a % in tax. You can still buy a better/bigger home with the remaining profit cant you? Just because you chose to spend it on a bigger home doesn't mean the profit is unrealized, it just means you spent the profit.

    If you are going to have a CGT on family homes, you need to provide rollover relief each time people sell and buy, otherwise you impede labour market mobility. That gets…. complicated, especially if you are trying to work out when people are making their final sell and buy moves

    why? They still make money on the sale, they just get a little less that without a CGT, and it might even slightly suppress prices (although the stamp duty in Oz doesn't seem to, so maybe not). I don't get why you need to wait until the final sale to wash all this up either.

    Plus you get older people rattling around in huge houses because they don’t want to sell and cop the CGT

    If they sell they will pay CGT out of their profit, not out of their savings. And I assume that if they rattle around too long and die their estate will have to pay it when it sells the house, so I'm not sure of the motivation to stay.

    Anyway, not wanting to sidetrack anything here, I simply didn't immediately understand why the home should be exempt, so asked in case there was a blindingly obvious reason.

    Auckland • Since May 2008 • 169 posts Report Reply

  • Danielle, in reply to Steve Barnes,

    It’s always easy to get a laugh from your fan-club.

    You know how Elvis had the Memphis Mafia, and they all had to laugh uproariously at his unfunny jokes? Yeah. TCB.

    Charo World. Cuchi-cuchi!… • Since Nov 2006 • 3828 posts Report Reply

  • chris,

    Thanks for posting Keith's visualisation, that's just superb.

    Mawkland • Since Jan 2010 • 1302 posts Report Reply

  • Russell Brown,

    I added Keith's visualisation to the above post after it was published, so if anyone missed it, it's here.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Steve Barnes, in reply to Andrew C,

    why? They still make money on the sale,

    Ah, but. The house they are buying is attracting tax too, from the vendor.
    Effectively the market is being hit twice and the market will pass that on in increased prices and then the whole thing runs away with itself and we all go broke and the Government gets all the money. Or something.
    But seriously, you don't make money on a booming house market buy buying and selling the family home until you scale down and then the kids want a flat and...
    The tax is aimed at the speculative end of the development market and that really needs looking at, it was the inflated values of that market that burst the bubble. Had that bubble been taxed effectively then we might have a bit more in the public purse.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Hilary Stace,

    That removal of the tax credit for very low income earners is mean. It will affect young people doing things like after school jobs, and some students and women who have part time jobs. It's not that small a group when you consider that a large proportion of individuals live on around $14,000. So a single parent whose child delivers papers for some pocket money or a pensioner whose spouse does a little part time work will be the sort of families affected. That is the group who would have benefited most from Labour's policy of no tax on the first $5000 or even Gareth Morgan's Big Kahuna.

    Wgtn • Since Jun 2008 • 3229 posts Report Reply

  • Luke Williamson, in reply to Andrew C,

    This all makes good sense. However, I guess the "intent" of a CGT is to stop the obsession with second, third, fourth investment properties and to direct that money into other areas of investment. In doing that, the presumption is that the artificial heat goes out of the property market and capital gains on property diminish to a point where it doesn't matter if the family home is exempt. Maybe?

    Warkworth • Since Oct 2007 • 297 posts Report Reply

  • Deborah, in reply to Hilary Stace,

    I just got interviewed by Radio Live about that, Hilary.

    New Lynn • Since Nov 2006 • 1447 posts Report Reply

  • DexterX,

    CGT not a solution - better management of the economy is the answer.

    Auckland • Since Nov 2006 • 1224 posts Report Reply

  • Hilary Stace,

    I was right about the Pasifika health (and disability) funding. I think Tariana has had some effective lobbying here (although not by rich white men). Good on them.
    http://www.beehive.govt.nz/release/fund-improve-health-pasifika-communities

    Here is the press release from last week about the extra disability funding - can't find any more detail yet. Some of it is a catch up for the huge waiting lists for equipment, where there is big discrepancy between people funded by the MoH as opposed to those funded through ACC. There is a residential review going on which is behind the residential funding but most of that will go to the big residential providers, the staff (catch up sleepover funding?) and probably not the disabled people themselves (who may also be negatively affected by the welfare 'reforms'). The last item relates to a new way of assessment, but is not about creating or providing more services. But all better than nothing. The big worries on the horizon are the welfare 'reforms' and the education cuts.
    http://www.beehive.govt.nz/release/budget-2012-144m-more-disability-support-0

    Wgtn • Since Jun 2008 • 3229 posts Report Reply

  • chris,

    That removal of the tax credit for very low income earners is mean. It will affect young people doing things like after school jobs, and some students and women who have part time jobs.

    Pragmatically I'm not sure the work will dry up but It will do wonders for fostering a tax evasion mindset, somewhat undermining the intent .

    Mawkland • Since Jan 2010 • 1302 posts Report Reply

  • Matthew Poole, in reply to Kumara Republic,

    Has Treasury actually done any scrutiny of the Roads of National Significance? If not, is it a case of regulatory capture or otherwise cosiness with roading contractors?

    As Russell said, yesterday English not only admitted the Roads of Dubious Significance haven't been assessed against Treasury's guidelines, he stated they won't be assessed because, as best I can understand, they're election promises.
    So I would say that's more a case of provincial thinking (everything good comes/goes by road) and some degree of cosiness with the Road Transport Forum.
    Toss in a healthy dose of Auckland-hating/baiting and you've got a recipe for endless tarmac laying at the expense of everything else. The money that's earmarked for the RODS could pay for Auckland's City Rail Link, pay for Project Lifesaver (quick fixes to SH1 north of Auckland to make it safer and bypass Warkworth), and still have at least $10b left over for general spending on all kinds of projects with long-term benefits to the country and non-negative benefit-cost ratios..

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Sacha, in reply to Hilary Stace,

    But all better than nothing.

    We don't really know that yet without taking into account the other side of the ledger, but certainly better than no gross increase at all.

    Ak • Since May 2008 • 19745 posts Report Reply

  • Matthew Poole, in reply to chris,

    That removal of the tax credit for very low income earners is mean. It will affect young people doing things like after school jobs, and some students and women who have part time jobs.

    Pragmatically I’m not sure the work will dry up

    Nothing to do with employment. The tax credit is an offset of low incomes (ETA: credited to the earner) so that people with incomes below $9,800 pay less income tax. Taking it away means that they now lose more of that meagre sum to income tax.

    It’s a stark contrast with Australia, which has just announced that their tax-free threshold will be increased to AUD18,000 from AUD6,000.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Sacha, in reply to Matthew Poole,

    As Russell said, yesterday English not only admitted the Roads of Dubious Significance haven't been assessed against Treasury's guidelines, he stated they won't be assessed because, as best I can understand, they're election promises.

    To clarify, the Treasury guidelines mentioned are more recent than the business cases for most of the RONS, which were assessed against standard transport economic modelling frameworks - but it's true, without some of the rigour Treasury usually insists on for other capital projects.

    Those cases were not done until after the projects were announced as a done deal. When it became clear that the benefit-cost ratios for some were less than 1, pressure went on for the cases to be reworked until they delivered the politically-desired result.

    Rod Oram's 2010 article is a highly recommended read.

    Ak • Since May 2008 • 19745 posts Report Reply

  • Kumara Republic, in reply to Matthew Poole,

    he stated they won’t be assessed because, as best I can understand, they’re election promises.

    Whereas when Margaret Wilson signalled the abolition of the Employment Contracts Act well in advance, Treasury’s warnings about it were front page news.

    Whoever turned Think Big’s name to mud, we need him/her and the Auditor-General to tell us the full story on RoNS. I’m trying to do my bit with visual satire.

    The southernmost capital … • Since Nov 2006 • 5446 posts Report Reply

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