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ACT’s regular bulletin: Do as We Say

Free Press

ACT’s regular bulletin


Do as We Say
Once again the Green Party has topped parliament for air travel expenses. At an average of $6,490 per MP, they edged out the Labour Party. The Nats averaged $5,342 each, NZ First MPs $5,291 and ACT $5,777. None of the Greens are Ministers or electorate MPs. Where do they go, and why should we take their environmental message seriously?

David vs. Jacinda
In the Sunday Star-Times vs Jacinda Ardern, David Seymour argues for a bill to be debated on Assisted Dying. Jacinda thinks we should wait for the select committee inquiry. Free Press agrees, but with the Government refusing to introduce a bill, David’s private members’ bill is still essential for the law to change.

No New Taxes?
National campaigned on no new taxes and will soon have introduced three. It begs the question, why vote for a National party that introduces new taxes like a Labour Government on heat?

Tourist Tax
The tourism industry is furious about the $25 arrival fee applied to visitors. It was sold as a user charge but the Government has never shown how it covers cost created by the user. That’s a tax.

Capital Gains Tax
If you buy and sell a property other than your primary residence within two years you automatically pay tax under National’s new bright-line test. The only difference between this and what most countries regard as a capital gains tax is the time period, which the opposition are already promising to extend.

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Land Tax
As Rodney Hide writes, John Key’s land tax is political genius. It won’t actually affect house prices, it taxes ‘foreigners’ rather than New Zealanders, it shows the PM ‘doing something’ and it partially steals another idea off the left (why do National win power to implement their opponents’ ideas?). Best of all, he’s only proposed it, so he can still back out.

Acorn Taxes
The Capital Gains and Land Taxes would seem to make more sense if extended. The bright line test will catch almost nobody at two years, but at ten years it would bite. Commentators are already saying the land tax would be a good idea if extended to all property owners. Half-hearted taxes are a time bomb.

Great Set Up
The National Government is setting up a tax regime for a big spending future left wing government. If Labour, Greens, and New Zealand First are Christian Cullen, then National is the workmanlike Frank Bunce, feeding them quality ball. We taxpayers are the hapless Wallabies standing under the posts.

A Bonus
If you are a rugby fan and have forgotten how sublime Cullen was, you can see a compilation of all his All Black tries here. The first one is set up by Frank Bunce.

The Purpose of Tax
ACT believes the purpose of tax is to raise enough revenue for public goods such as public safety with a minimum of disturbance to the economy. National is now introducing taxes not to raise revenue but to distort the economy. How will they know when to stop?

Credit Where It’s Due
The Government’s new option of Pay As You Go company taxes is a very good move. The provisional tax system of paying based on last year’s income is old fashioned and a cash flow headache for smaller businesses.

Once More with Feeling
The real housing problem is supply, and nobody ever built a house so they could pay more taxes. Until we start getting close to New Zealand’s all-time record for home building (set in 1974) prices will continue to rise.

The Elephant in the Room
The Government could pass a law to build more homes tomorrow. Simply remove the draconian land use planning powers of councils and introduce financial incentives to build infrastructure. The problem is that homeowners vote and no government will survive a major housing market correction, so all current policies are designed not to work.

A Long-term Project
Home values in Auckland are currently ten times incomes. Healthy housing markets have a ratio of three, as did Auckland for most of the period from WWII to the 1980s. If house prices stayed static and incomes rose at three per cent per annum, it would take 40 years to get back to that ratio.

A Good Start
Six years ago a young(er) David Seymour told an ACT conference that councils should be given targets for house price to income ratios. He compared it to the Reserve Bank’s regime where the Government sets a target and the bank meets it. Last week Bill English proposed the same thing. ACT has always been the party of ideas.

Could it Work?
It’s not clear if councils could really control prices in a meaningful way. The Reserve Bank itself is currently missing its target due to record-low global inflation. Housing markets are influenced by immigration and interest rates in the short run, how much tolerance would councils be given?

Worth a Try
Bill’s (David’s) idea is worth a try because it at least focuses people on what the price should be. Having a house worth ten times your income is thrilling but dangerous, as many Americans discovered in 2008. Then there is the fact that much of what we call poverty in 2016 can be tied back to a shortage of housing.

A Saner Discussion
Setting a goal for housing affordability would allow for hard questions to be answered. Can we afford a compact city model, or is the Auckland Council chief economist right when he says the city must grow out? If intensification is the go, then how will central city residents be reassured about congestion, school zones, and community character, other than just being called NIMBYs?

The End of the Beginning
The land tax is too silly to be taken seriously, but with English’s suggestion we may just have turned the corner into a serious discussion about how and where New Zealand will build more homes, talking prices down off the ledge without a major correction.

ends


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