Free Press

Stating Our Values
Serial migrator Oliver Hartwich of the New Zealand Initiative has lived in Germany, England, Australia and New Zealand. He observes that all countries put migrants through the wringer with endless forms before they can become residents and citizens, but New Zealand omits one that Australia requires – Hartwich is hardly a fan of bureaucracy, but points out that we don’t require new immigrants to sign a Values Statement.

The Australian Values Statement
You can read the form that Australian immigrants are required to sign here. Other than omitting Freedom of Speech, it is pretty good, requiring new citizens to sign up to: respect for the freedom and dignity of the individual; freedom of religion; commitment to the rule of law; Parliamentary democracy; equality of men and women [and] equality of opportunity for individuals, regardless of their race, religion or ethnic background.” New Zealand is lucky to have inherited liberal traditions and we should be more up front about stating them.

A Capital Gains Tax by Stealth
ACT campaigned heavily against a capital gains tax last year (and every other year in memory). We oppose it because it is an envy tax. On the doorstep, Epsom voters told David Seymour they wanted nothing to do with such a new tax.

An Envy Fuelled Tax
The value of capital is that it produces a stream of revenue, which is taxed. If your capital asset grows, chances are your revenue will increase and you’ll pay more tax. For example, as rents rise, so does the income tax landlords must pay on their revenue. A capital gains tax means you pay twice for investing wisely, once on the revenue then again on the capital. It is double taxation on those who save and invest, as such it is an envy tax.

Acorn Taxes
Former ACT Leader Richard Prebble points out that taxes are like acorns – they grow. GST was introduced at 10 per cent, it has been raised twice to the present 15. Income tax was introduced in 1891 as a 5 per cent tax on those who earned over $60,000 in today’s dollars. Somebody earning only one dollar is now taxed at 10.5 per cent and the top rate is 33 per cent.

National Plants an Acorn
The Nats also campaigned against a capital gains tax but are now colonising Labour’s policy manifesto like Staphylococci on fresh agar. By introducing a ‘bright-line’ test, they will ensure any house resale within two years of purchase is automatically taxable for capital gain. History suggests National’s capital gains tax on housing taking root and expanding.

Won’t Work
As the Law Commission and nearly every major law and accounting firm has told the Finance and Expenditure Committee, the bright line test won’t solve the problem it is supposed to solve – property speculation. It is expected to bring in only $5m per year (top real estate agents earn more on commission). Serious speculators, on the other hand, will simply avoid the bright line test by holding properties for more than two years.

How it Will Grow
We know National’s CGT will not supress house prices. Just ask people in London, Sydney, Vancouver and Los Angeles. A future government will react by saying National were too lenient in 2015, and extend the bright line test to include anybody reselling within five years, then ten, until there is an effective CGT on all properties except the main family home. It may not stop there.

The Real Losers
The tax will be paid by those who have no options (e.g. someone who gets sick and must make a mortgagee sale on their investment property within two years of buying it). Presently they could argue with the IRD that they had not bought with the intention of profiting, under the bright line test they have no such defence. People in dire straits will be hit with nasty tax bills.

ACT’s Problem
ACT must support the bright line test through Parliament. It is a budget measure and ACT is committed to backing Bill English on Budget Measures. Nonetheless planting the CGT acorn is a monumental policy blunder that will grow into a blight on New Zealand’s otherwise world class tax policy landscape.

The Right thing to Do
The Government should delay the bright line test until the effects of property disclosure are seen. There is already an intention test on property investment. If you invest in property with the intention of profiting from capital gains you must pay on those gains. Submitters to the committee point out that the Government’s disclosure laws will assist in making the intention test more stringent, and will likely be more effective at cooling property speculation than the bright line test.

We Live in the Greatest Country on Earth
As an aside, the Select Committee submissions show how lucky we are in New Zealand. In some countries accountants and lawyers are hardly upset that convoluted tax laws fatten their fees. We are lucky to live in a country where such professions turn out in numbers with substantial submissions to the Select Committee and criticise poor legislation.

Saved by the Peak
John Key pulled off a political masterstroke by adopting the Greens’ bill to include Red Peak in the flag referendum. He simultaneously injected some enthusiasm into the process and made Labour look very silly. A furious Grant Robertson stormed out of select committee when the MPs got the news on their phones.

A Bit Green
The biggest loser is the Greens’ new co-leader James Shaw, although it will be a while before this dawns on him. On Tuesday the Greens and Labour presented a coordinated strategy at question time (together they made the Prime Minister answer the same question six times). It was a lame strategy but the message was this: we can cooperate and we are a credible alternative government. On Wednesday Shaw showed Labour he’ll sell them down the river without a moments’ notice.

The Green God Complex
ACT has good relations with all parties except New Zealand First, which is more of a cult. However Bill English pointed out that the Greens were rude and ungrateful to deal with over the flag. Free Press showed two weeks ago that the Greens do not have two science-trained MPs to rub together (arguably they have none). They are the most authoritarian party, akin to religious zealots who feel their higher purpose excuses them from using manners etc.

Real Greenery
For every prediction of doom and gloom (running out of food, running out of oil, overpopulation), technological advances have made more efficient use of available resources (the green revolution in crop farming, more efficient vehicles, contraception). The Greens are waging an obsessive war on the car, but articles like this show that you needn’t be a science fiction freak to see how electric and driverless vehicles will make people more mobile than ever. Of course, the Greens would only complain that better transport will lead to more sprawl (and they’re absolutely right).

ENDS

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