OnPoint: Election 2011: GO!
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The CGT does not create a loss for you, or a cost that must be recaptured.
Most of the "Get rich using residential property" I read in Oz (which has CGT) suggested just holding. If you need money at some point, refinance. Never pay CGT until you die.
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It is surprising how short peoples memories are, well those that vote for National anyway, perhaps we should rename National "The Alzheimer's Party" and urge all to vote for Labour, "Least We Forget".
I see now that Key and pals are suggesting making Kiwi Saver compulsory for the under fives or some such hair-brained scheme. Well that smacks of a U-turn on what they were saying a few months back but hey, what National voter would remember that? they'll be putting cross-hairs on election posters next.
Another thing folks seem to forget was jolly old Blinglish pillaging the public purse for the double Dipton family home, it's all in the attitude folks, that good old sense of entitlement all wrapped up in a double standard.
If we really do need to realise some cash from our infrastructure assets then why not get the Cullen fund to step into the breach, or Kiwi Saver funds, that way we get the best of both worlds, we would still own and control it. As it is the only reason I can see for flogging off the "family silver" is to allow Nationals "Friends of Significunts" to continue their endless raping of the Nation in the name of ideology, I think I'm being generous there, we used to call it greed and that was only good in the Eighties apparently.
I still think there is room for Nationalisation of strategic infrastructure, surely only a fool would allow the engine of a Nation to fall into the hands of foreigners?
National has shown us before that they can't be trusted with the Wealth of the Nation, look at the mess we inherited from the Muldoon Government, which left the Lange Government little choice than to find a way to bail us out, unfortunately there were those in the ranks that were corrupted by the desire to enrich themselves and play idealogical ping pong. Since that time National has used that scenario as a reason to put their slimy hands in our pockets and put the blame on Labour.
So "Least We Forget" National put us in the mess we are in now back in the Seventies, you can't trust them they are but liars and thieves. -
And another thing. While we are discussing CGT, if I remember correctly and I do, CGT was originally described as a tax on "unearned" income, think about that for a second. Back in the day unearned income was seen as something bad, or at least undeserved and taxed accordingly and differentiated against "Earned" income such as wages. I don't suppose the ethics of the powers that be could allow them to understand that. They would more than likely call it an envy tax, as if we all desire to be greedy rich pricks.
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Time to remind everyone that almost every other western country defaults to taxing capital gains just like any other income - when they argue about CGTs it's because they might sometimes treat CGs as a special lower rate tax - taxing capital gains is not controversial (except in NZ for largely historical reasons).
The US for example treats capital gains the same as other income, but provides for a lower rate for long term capital gains (2 years or more) provided you announce your intention to make the investment at the beginning - (performing the process to lock in long term capital gains caught out a whole lot of .com employees when the .com bust occurred).
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BenWilson, in reply to
It would very much depend how it's implemented. I really don't like the idea of a tax on unrealized gains. Because, for starters, they might never be realized. Just because property is going up doesn't mean any particular property is. Also, if you can't delay the tax by not selling, speculation is not discouraged.
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Jim Cathcart, in reply to
Ben, I think Kate identified quite clearly that the banks have a huge hand to play in all of this. Lax capital reserve ratios and easy credit have created the debt quagmire. Surely, controlling lending and liquidity (while taxpayers carry the implicit guarantee for bank runs) is a much more credible solution than playing Robin Hood.
But you're right, she doesn't provide any argument against CGT. Kate's is an ideological position that gets to the crux of the debt problem. -
Yeah a tax on unrealised gains is pretty silly - it probably means you have to liquidated part of your investment to pay it ... and what happens when it goes down, can you claim it back? the govt would be on the hook for billions if the market crashed
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Kate's is an ideological position that gets to the crux of the debt problem.
I definitely agree with her that easy debt fuels inflation. That's pretty much received wisdom since the GFC.
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BenWilson, in reply to
the govt would be on the hook for billions if the market crashed
Heh, yes, I didn't think of that. At least with provisional tax, the final reckoning is only at the end of every tax year and is a small rebate if you didn't get the growth the IRD insists that you should have, based on....er, I don't know what they base it on. They still get the same amount of total tax each year as a proportion of your real actual profits.
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Armstrong's view. I like it, as usual.
Edit. Yet more evidence that Granny's not just National's Press Office. It's the uncredited editorials I find the most grief in recently. It's like what they're writing is so shamefully biased, that they can't put a name to it.
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I think you just pay the tax when you sell the asset - what happens when you make a loss is problematical - some countries wont refund you tax on losses but allow you to carry over losses into subsequent years - so if in year 1 I lose $1000 (in realised gains) I don't pay any tax on it but nor does the govt give me any back, if in year 2 I make $3000 then I carry over the $1000 loss and pay tax on $2000 - which I think is fair and avoids a lot of potential rorts
In the US they treat gambling windfalls the same as sharemarket ones (is there a difference?), you can write off your gambling losses against your winnings - but you do pay tax on winnings (why on earth don't we tax winnings over some useful threshold in NZ?)
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Jim Cathcart, in reply to
I definitely agree with her that easy debt fuels inflation. That’s pretty much received wisdom since the GFC.
Well that's when the mainstream became aware of it. Understanding the relationship between monetary easing, fractional reserve banking (or banking capital ratios), and wholesale money markets is important. Furthermore, it is clearly obvious that the Clark govt wasn't going to upset the party by warning people of the possible consequences.
For all this talk of the effectiveness of CGT, I'm surprised nobody has mentioned the influence of tax relief for the middle and rich prick classes through negative gearing. If you quantify the amount of tax loss there, I suspect it would far surpass that of CGT. -
oh and the US equivalent to Kiwisaver - 401Ks work well in this environment too - basically they create pots of money with a special attribute - that they haven't been PAYE taxed yet - that you invest for your retirement - like Kiwisaver 401K money comes out of your paycheck at source, but it's not taxed - it gets invested long term and you pay no taxes (long term CGT or otherwise) on it until you retire - then you crack the 401K and pay tax on it at as you take it out at your (presumably) lower tax bracket once you've retired. You can also borrow from your 401K provided you pay your (untaxed) self a reasonable return for things like a house or education
Kiwisaver is already PAYE taxed and we currently have no CGT so when you empty it any gains should be tax free - if we bring in a CGT that will have to change - tax unrealised CGs and people will be opening up the kiwisavers to pay for them.
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Doing something about negative gearing would be one hell of a difficult. Not being able to treat interest repayments as a business expense would be a major change in accountancy practices right across the entire economy. Yes, it would dwarf CGT.
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BenWilson, in reply to
Fairly sure it's the same in Oz, that the contributions to the super funds are tax-reduced by virtue of coming out of pre-tax income. IIRC, if you want to take your money early, you have to pay back the difference. You also have to have a good reason (I think genuine hardship counts). Or you can opt to manage it yourself, but that has a lot of rules, and you can't draw on it, or the same payback applies.
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Paul Williams, in reply to
and demolish the apprenticeship scheme.
Matthew, I know the point you're making and agree but "we" didn't abolish the apprenticeship scheme. That's a misleading shorthand. Industry training was reformed in the early 90s (by National but following a review commissioned by Labour, Phil Goff I believe) and, for a while, apprenticeship suffered but that was largely because, around the same time, many of the usual employers of apprentices were being restructured, privatised etc.
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in the US you always have to "pay back the difference" it's just that the "difference" changes depending on your current tax bracket - $1000 off the top in income at my highest tax bracket when I lived in the US would have attracted 43% tax (10% state and 33% federal, not counting SS here) - so I would have taken home $570 - if I retire and take that $1000 from my 401K as my only income I'm going to get $8-900 because I'll be on the lowest step on the tax tables. However you manage it you can't avoid paying PAYE on the 401K money at some point (even, I'm sure, at death)
(mind you my dual state status might leave the IRD wanting the difference between that tax rate and the lowest NZ rate because of the tax treaty between the 2 countries ..... but I think that's probably fair)
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And Key has announced the date - November the 26th. It seems the whole privatisation announcement was part of the now signature cynical media management strategy of prime minister Kevin Taylor - get the bad news out of the way and then attempt to simply shut down politics until the five weeks after the RWC when Saint John can coast them home with warm fuzzies of him and Richie McCaw holding aloft the Rugby World Cup.
I predict that after this week we won't hear Key on Morning Report or anywhere else that isn't a patsy media opportunity again for the next eight months if he can help it.
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Doing something about negative gearing would be one hell of a difficult. Not being able to treat interest repayments as a business expense would be a major change in accountancy practices right across the entire economy. Yes, it would dwarf CGT.
Why would it be difficult? You would simply have to prove to IRD that you are running a legitimate profit concern. Yes, providing a service to tenants is a legitimate business, but how many banks lend capital to small business people who can only stump up 10% of funding? The risk profiles are completely different.
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BenWilson, in reply to
Saint John can coast them home with warm fuzzies of him and Richie McCaw holding aloft the Rugby World Cup
Seems like a pretty risky strategy to me!
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NBH,
Paul got in before me but, just to emphasise his response to Matthew, the following publication provides a good overview of changes in the 'apprenticeship'-related space (i.e. the collapse of apprenticeship numbers and growing dissatisfaction with the system through the 80s, and the consequent development of the industry training system) up until the early 2000s: http://www.itf.org.nz/user/file/75/ITF%20Funding%20History.pdf
The industry training system certainly isn't perfect, but internationally it's seen as a leading example of 'sectoral' approaches to workforce development. It's a pity that we don't talk about this more, given that we are something of a world leader in the area.
[A small declaration of interest here's appropriate: I used to work in the area at the national level]
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BenWilson, in reply to
Why would it be difficult?
Depends what you're suggesting, of course. I was talking about removing the ability to claim interest as an expense. You're talking about removing the ability to borrow money so that the expense is greater than the return, which is a much lesser proposition (not a bad one either).
I'm trying to think how much tax that might generate. I worked out once (and it may have changed) that the break even point for residential property here was somewhere around 30% equity. So if the current average equity in investments is 10% then we're talking taking away 20% of the interest payments as write offs against income tax. That's a lot of writeoffs, which means a lot of tax.
It would mean a massive selldown, though, if brought in just like that. Property would crash, big time. That might even cause banks to fold. So it would need to be done slowly.
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You have to think there's someone NP analyst who's been agonising over "do you think they will win?" for months now
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BenWilson, in reply to
You have to think there's someone NP analyst who's been agonising over "do you think they will win?" for months now
And contemplating the "South African Method". Nothing like a bit of food poisoning...
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"Entrepreneurs are the life blood of New Zealand's economy. We have more than 470,000 small businesses run by smart, inspired Kiwis with mindsets that operate without boundaries," said Marta Mager, New Zealand Trade and Enterprise (NZTE), Regional Director, Americas. "New Zealand is one of the most innovative, creative, technologically advanced and internationally competitive countries in the world."
This being true, money must be absolutly pissing into New Zealand from all the overseas licencing deals we're doing on all these innovative, creative, and technologically advanced operations without boundaries. Wow, we can probably just use all that to pay off the debt right now, yeah?
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