Posts by Paul Campbell
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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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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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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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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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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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Unlike Lucy's experience every place I've worked in the US had a coffee/break room with hot water, a kettle, tea/coffee, a coke machine (often free or with minimal prices), a microwave and fridge (at at least one place there was a "no durians" sign on the outside because of, well, you know, that incident when they had to evacuate the place).
But no organised twice daily sit down which I did miss
Now I work in NZ for a US startup I still get the weekly email reminder to clean out the fridge
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I must admit to having been spoiled working for silicon valley startups - one of the first things through the doors in a new business that we always did was take care of coffee - Peets and a good drip machine or an espresso machine depending on the people concerned - we want wired employees :-) and a standing coffee order from the right place - sure you can always find bad coffee but there's just no excuse
I lived in Berkeley for 20 years so I was spoiled for choice I guess
(on another cultural note, the first week when I first started work in the US I kept waiting for something to happen and strangely couldn't figure out what it was, I finally figured out it was morning/afternoon tea time - while people had coffee breaks there was no assigned time or place to all sit down and drink tea/coffee - it's one of those important non-official times where quite important non-structured communication occurs in the workplace)
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sigh - finding good coffee in the US - look for the artsy fartsy hippy bookstore part of town, check out the cafes (alternately find a "Little Italy" though there's only a couple of big cities where that's possible) - remember that the names of things will be different from what you expect - that latte will probably come in a tall glass that's way too big and too hot to carry (until you learn to hold it from the top), there will not be a 'flat white'
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OnPoint: Election 2011: GO!, in reply to Keith Ng,
How much you benefit depends on how much money you have to buy shares. So basically, it depends on how rich you are.
and that was what I was trying to get at with my second paragraph - the rich pay more tax than the rest of us - if tax rates go up because the govt loses the income from the SOEs they end paying more extra tax than most of us - unless of course the Nats decide to do something with the tax system to soak the middle class and protect the rich
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I'm trying to get my head around the difference between the govt owning the shares and the income from them reducing the amount of tax that has to be extracted from me - and me owning the same shares and receiving the income - the question I'm trying to answer is "am I personally better off?" - it seems at a first hack at the problem I'm better off if the govt owns the shares because if I own them I have to pay tax on any income from them
Another issue is that it does seem that the rich gain the most from the govt owning the shares as if the govt sold them and had to raise taxes to cover the income loss the rich would have to pay the lion's share of that increase ... and, well, aren't the rich generally the Nat's supporters - it makes no sense politically - unless the Nat's are depending on the short term cash from the sales to sort of patch up the budget for a year or so rather than fixing the tax system to actually cover the costs of running the country