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Five Reasons Why David Parker Should Abandon A Death Tax


As Inland Revenue investigates New Zealanders’ inherited wealth, the New Zealand Taxpayers’ Union is warning the Government against taxing this wealth via a death tax.

Taxpayers’ Union Campaigns Manager Louis Houlbrooke lays out five reasons New Zealand doesn’t need a death tax:

Incentives: A death tax would discourage New Zealanders from saving and investing their earnings. Less capital would be built up as older New Zealanders choose to spend their savings instead of building an economic legacy for future generations.

Fairness: A death tax is a double tax. Someone would spend a lifetime giving up their earnings via income tax, only to have their remaining earnings taxed again as savings upon their death.

Complexity: The biggest beneficiaries of a death tax would be accountants and tax lawyers, who would be engaged by the wealthy to thread investments through complex exemptions and loopholes in the tax, such as exemptions for farm assets, trusts, and gifts prior to death.

Revenue: Any revenue from a death tax would be meagre. Of the OECD countries to have implemented death or gift taxes, an average of just 0.5 percent of total tax revenues is generated by those taxes. This means that even if our government decided to make a death tax revenue neutral by cutting income tax, the income tax cut would be nearly imperceptible.

Problem definition: A death tax, or indeed any kind of wealth tax, fails to address the actual causes of rising inequality: specifically the shortage of housing which has pumped up the value of assets held by the upper and upper-middle class.

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