Time To Tax Property Speculation

Friday, 25 February 2022, 6:16 am
Opinion: Ian Powell

When she became Prime Minister, following the September 2017 general election, Jacinda Ardern’s government established a working party to advise on taxation, including a possible capital gains tax.

This was actioning a Labour Party election commitment. The working party was chaired by former Deputy Prime Minister and Finance Minister Michael Cullen.

Cullen’s working party did its work and recommended a capital gains tax. But, in April 2019, to the shock and surprise of many (including Labour supporters), Ardern ruled out a capital gains tax. This was not only during her first term of government. It was for as long as she was prime minister. Her argument was that New Zealanders did not want it.

Since she announced her decision in April 2019 the median house price has increased by more than 50% to $880,000. Clearly this was not the Prime Minister’s finest moment. Nor was her finest fiscal decision.

Now Newshub has published a commissioned Reid Research opinion poll with the following question: Should the Government revisit introducing a Capital Gains Tax on property? Kiwis back capital gains tax

The poll is revealing. A significant majority supported the affirmative. Those in favour were 55% and those against were 33%. The rest were ‘don’t know’.

Reframe the debate

Earlier today I was a panellist on Radio New Zealand’s The Panel where the poll results were one of the topics. During the programme a text poll was conducted with 70% supporting the tax. The poll was obviously unscientific but interesting nevertheless.

I argued that the debate should be reframed in order to focus on what sits behind the capital gains tax. For me it is fairness. It is unfair that unearned income was untaxed whereas earned income was. When one gets back to first principles it is as simple as that.

This leads to a tax on property. In particular, taxing income from home ownership for speculative purposes. Distinguish this property from property for owners’ living purposes. But don’t call it a capital gains tax; call it what it specifically is – a property speculation tax.

Just a little bit of courage

Unfortunately Prime Minister Ardern is having none of this (I doubt she listens to The Panel or reads this blog). In her own words she responded “We’re focusing on all of the other things we can do… I won’t change my position on the CGT.”

What Aotearoa New Zealand needs is political courage. In fact, for a property speculation tax it does not require that much courage. The Government appears frightened of something but it is not clear what that is.

It is not good for Jacinda Ardern to oppose something that, based on the best evidence available, only around one-third of New Zealanders oppose and her own party supports. Time for a rethink Prime Minister. 

© Scoop Media

Ian Powell

Otaihanga Second Opinion is a regular health systems blog in New Zealand.

Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Salaried Medical Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.

Contact Ian Powell

• Website - Otaihanga Second Opinion