Yes, I think it’s really good there’s a contest.
And it was good to see how solid and passionate Cunliffe was. I was slightly skeptical of Cunliffe’s swift announcement he’d up taxes on the rich, followed by the careful shuffle to make it clear he meant he was keeping the CGT and wasn’t making any commitments beyond that. It came across a little too pandering.
David Cunliffe has been Revenue spokesperson for the past 10 months or so, and he's become very familiar with the issues in the portfolio. So it's hardly surprising that he's got a clear view on what changes can be made within the tax system.
Pandering vs pragmatic? Hard to know which is what sometimes.
He pretty much covered all bases. Good on him for trying to appease as many as possible. He obviously knows he's got to try to convince some but I thought his face showed some integrity.One sentence about his wife , his kid, his affording exclusive Herne Bay, and his history was a good piece for journos. Plus all sorts of people in his office. Plus he's Auckland. I'm Goff land and I like him too but others obviously didn't. All of them seem very individual. I like that melting pot.
To add a little more, the tax system is kind of complicated. Raising a rate here means creating pressures there, or a loophole yonder. Last time we had a top tax rate of 39%, but the trust rate was 33%, we had masses of wealthier people channeling money through trusts, rather than pay the top rate. But if you set the trust rate at the same rate as the top tax rate, then you have a problem with respect to ensuring that all trusts are taxed fairly. For example, you run into problems with testamentary trusts (trusts created by wills) held for the benefit of children. Do we really want those trusts taxed at the highest possible rate? And yes, you can write exceptions into the law, except that everything gets terribly complicated, and usually, exceptions create more loopholes.
I wrote something more-or-less on point a couple of months ago: Tax avoidance by well-off a rort.
It's very, very easy to shift money around in the tax system, and it's not at all clear how to minimise it.
I am sure the tax system is complicated. I’m also very wary of politicians saying they’ll raise taxes when talking to a very left-wing audience but being unwilling to substantiate beyond that. It has too much potential for the traditional run to the left in the primary and then back to the middle for the general election.
[I must admit, so speaks the hyper-suspicious Labour left party member, with bitter hereditary memories of the gulf between rhetoric and reality going back a century.]
Sure. I'd be worried too, except that in this case, there are probably some sound technical reasons for going down the CGT route. Ie. it's an achieveable thing to do, not just a pie-in-the-sky promise.
One of the things about a CGT is that if you exempt family homes, which is a fairly standard exemption worldwide, then the people who tend to end up paying it are those who own holiday homes and second homes and boats and share portfolios and so on. All typically owned by wealthier and higher income people. So instituting a CGT is a tax on richer people. It's just not quite as obviously a tax on richer people in comparison to a straight rates hike.
Long story short: in this case, going down the CGT route looks reassuringly practical and achievable to me.
Actually, the NZ tax system is both extremely simple and extremely biased in favour of asset owners against wage earners.
Compared to other developed countries we have no:
- inheritance tax
- capital gains tax
- tax on real property transfers
- initial tax allowances
- social security / payroll tax
- local income taxes
and we have a very measly pension savings scheme (the UK allows up to GBP50k of annual savings with tax relief at 20%, it used to be 40% on 15% of salary *and* the fund's accumulation is untaxed).
Basically, it's a huge subsidy from working stiffs to a minority of wealthy asset owners, mostly from the baby-boomer generation.
Yes --- but the CGT's already policy. It's a bit clever to reply to a question about raising taxes on the rich with "you betcha" and then carefully dodge every question on income tax, and keep mentioning the thing that's already party policy.
A question though - can the Leader actually change policy all on his or her own? Isn't this more a case of saying what sort of policies they favour, rather than "if I'm Leader, the policy will be X" - because I'd expect the rest of the party to have some say in what the policies should be too, not just the Leader?
If I were the National Party strategist, I would be actively encouraging comments like yours Craig. Division between Labour and the Greens is the way to maintain power for a third term as is the absurd “lunatic” name-calling for the Greens
Small point of fact, Hebe, I’d rather nobody do it – and I could make similar observations about National. I didn’t vote for MMP, but I well and truly lost that argument nineteen years, and six general elections, ago. There are elements in both Labour and National whose stuck on anger and denial grieving process for FPP is just morbid.
(Sidebar: Here's another measure of leadership -- or dare I use the c-word, CHARACTER - for me. The ability to adjust to new realities, even if you fought them tooth-and-nail and still find them profoundly distasteful. Leaders have to live in the world as it is, not some fantasy land - just like everyone else.)
It is also very much the case that Grant’s not been in a position to take distinct political stances, because he’s been a loyal deputy and front-bencher for the past few years.
Yes, I get that.
Didn't know he was the chair of the policy council, but it's not surprising. He also used to comment here from time-to-time. I reckon he could be a good Labour leader. To be clear, I'm not hatin' on 'im. Getting to know them both a bit, and enjoying the notion either could be good.
the careful shuffle to make it clear he meant he was keeping the CGT and wasn’t making any commitments beyond
Hm. I hope he'd like to go further, but is being cautious.
Mind you, CGT will be a great start.
I’d rather nobody do it – and I could make similar observations about National.
Good. We're one then.I don't hold with abusing the Key bloc as the devil incarnate either. That doesn't stop me laughing at satire of all colours.
re MMP: I believe that two leaders who have best understood how to work with MMP have been Rod Donald and Jim Bolger. It's a good system, and voters understand how to deliver a finely-balanced result.
Sight & sound…
From a cartoonist’s point of view, Cunliffe would be an airy lozenge-like economy of line, while the other two, with their angry hair and changing faces, could mean hard work, cross hatching even!
But listening to Cunliffe announcing
his tilt at the big windfarm,
I couldn’t find him in there,
he vibrates all wrong,
he didn’t make me believe it…
Jones, is at the other pole, I think…
but always comes across like someone
I would rather not do business with,
a whiff of abrasive bully?
There’s a lot of people’s support to lose either side of that cut…
Robertson seems to be a workable middle ground,
and appears comfortable in the media melee….
‘The Leader’ is really just ‘The Messenger’…
..but what do I know?
I am noticing the word primary, being used rather a lot during the run up to the selection of the new Labor party leader. It’s not that I mind adopting American language, they did win the war, after all.
One of the things about a CGT is that if you exempt family homes, which is a fairly standard exemption worldwide, then the people who tend to end up paying it are those who own holiday homes and second homes and boats and share portfolios and so on.
What about rental properties? Won't any tax increases will just end up being passed on to tenants?
I also forgot to comment about one of the sexuality of Shane Jones. being out about his being a bit of a perve . You know, the buying the blue movies on the parliamentary credit card and all that. Well I think about it, can anyone say if David Cunliffe even has has a sexuality at all? We all know about Grant Robertson being gay, and how that's OK.
Couldn't you just round up the median marginal rate of the beneficiaries to the nearest bracket? After all, the beneficiaries of a non-charitable trust are a discrete class so it's a relatively trivial exercise to determine their marginal rate and do the calculations.
I understand that the trustees are legally the owners of the income-earning assets of the trust, but it seems a nonsense that the law treats the trustees, rather than the beneficiaries, as the ones whose taxation status matters.
I guess that it could be rorted by having all beneficiaries totally discretionary and then adding in a bunch of extended-family minors who have no income and might get a few dollars from the trust every Christmas, but that would also smell a whole lot like avoidance to the Commissioner.
What about rental properties? Won’t any tax increases will just end up being passed on to tenants?
Depreciation deductions already got nailed down and it didn't result in a massive increase in rents. The market for housing actually works moderately well in most of the country in terms of the price of rental housing, because there's sufficient supply. If a landlord is trying to gouge, there are options.
Auckland and (particularly) Christchurch are exceptions, because there's insufficient supply of housing in most areas to meet the demand. Which means that rents can jump hugely in short spaces of time because renters have few options and landlords have a large pool of potential victi^Wtenants.
Almost certainly, human avarice being what it is.
On the other hand won't it also put a damper on those who buy up two, three, four or more houses that they don't really need and don't intend to live in but regard simply as income generators?
Perhaps more houses will become available for those who actually want to own their own home.
Primaries are unique to the USA.
The big difference with a US primary is that anyone can tick a box on their electoral registration form to register as Democrat or Republican, and then vote in the primary - no need to pay subs or adhere to the parties rules, etc. In some states with "open primaries", you don't even have to do that - anyone can vote in either primary.
Re rental housing and depreciation deductions, Matthew's right (and were he a student in my Tax paper, I would be giving him marks for his answer). Residential rents are somewhat driven by landlords' underlying cost structures, but the much greater influence is the market price that landlords can charge. So in general the people who ended up paying more when depreciation deductions disappeared were landlords, who had to pay more tax (although strictly speaking, in the longer term, it all evens out [and even more strictly speaking, you still need to take the time value of money into account]).
Rentals in our two main cities (Auckland and Christchurch) have been increasing, but that seems to be due to demand. In places where demand has not really increased, rents haven't increased either, even though landlords' tax costs have increased.
On the other hand won’t it also put a damper on those who buy up two, three, four or more houses that they don’t really need and don’t intend to live in but regard simply as income generators?
I think the LVR policy is misguided and incorrectly targeted. It's not people who "own" their home (or, at least, own the bath and maybe the toilet) who will cause our economy to collapse if there's a correction. Rather, it's the highly-leveraged "property investors" who have half a dozen (or several dozen!) houses in a cascade of 95% mortgages. The Reserve Bank should be clamping down on second and subsequent mortgages, where people are borrowing to buy additional houses. Maybe 30% deposit requirement for a second, 50% for third and additional. That would have two effects. First, it'd slow down the compulsive landlords by making it much, much harder to borrow to buy up multiple houses. Second, it'd reduce the exposure in a failure by reducing the level of leverage.
Nobody needs to own more than one house. You can't live in multiple houses simultaneously. Making it harder to do doesn't have any impact on owner-occupiers, but addresses the serious structural distortions present in our housing-focused economy.
Income earned through trusts can get taxed in the trustees' hands, or in the beneficiaries' hands. If the income is retained in the trust, then it gets taxed at 33%. If it gets distributed to beneficiaries, then it gets taxed in the beneficiaries' hands, at whatever rate is applicable for them.
I think that what you're suggesting is something along the lines of taxing income that is held by the trustees in proportion to the underlying beneficiaries rates. But that wouldn't really work, because beneficiaries don't actually own the trust, and usually trustees are free to give more income to some beneficiaries than others. So it's not clear what proportion of income which has been retained in the trust, can be attributed to each beneficiary. And that means that you can't establish overall tax rates fairly.
The current rates where the trustee rate (applied to income that is retained within the trust) happens to be the same as the top individual tax rate seems to have slowed down the amount of clever stuff going on through trusts, because there's no particular advantages to be gained now.
Rentals in our two main cities (Auckland and Christchurch) have been increasing, but that seems to be due to demand.
It's also due to National abolishing all previous rental protections that applied to tenants. There's no cap to how much a landlord can increase the rent for existing tenants, beyond the need to give adequate notice and the restriction of a six-month waiting period before another increase. Throw in that tenants can be evicted without a reason in order to allow a really big increase, and the market is very much in the landlord's favour in those cities. There's zero regulatory protection for tenants.