I think someone got the numbers MAJORLY wrong on this story. Today it was leaked (probably by the Labour Party) that Labour will introduce a Capital Gains tax policy as part of its election campaign sometime next week, as reported in the NZ Herald.
While all speculation at present, the details appear to be:
- a 15% capital gain tax
- excludes the family home
- excludes property purchased prior to when it is introduced (so around 2012) (this has to be the case, since Govt’s cant pass retrospective laws).
The article reports it will raise around 4 billion. I think that’s wrong, and here’s why:
- The tax workging group sais a FULL capital gains tax, on ALL property at the marginal tax rate of 33% would raise around 9 billion (around 2007/8) (they admit this is a very rough figure).
- It’s estimated that around 15% of property is investment property (ie not the family home). So 15% of 9 billion = 1.35 billion
- At a marginal tax rate of 15% this would raise $613 million
Now many of these figures are rough. Many will even be wrong, but my point is that its VERY hard to raise any large amount from this tax without making either the tax equal to the marginal tax rate (ie 33%) and/or putting it on the family home too – a sure vote killer.
In addition this tax only raises money when property prices are rising. At present they aren’t ( by any large factor). So the value from this tax in 2012 might be closer to zero. In 2013 I would doubt it would raise $100 million. This si going to create issues for Labour, since none of this helps with paying for their billion of dollars of already announced policies (remember GST off fruit and veges which will cost almost a 1/4 billion alone?)
Now I would also add that I am in favour of some sort of capital profits tax, but not of this sort. Its too watered down to be effective, and too forced on “tax the rich” to actually do anything other than piss a bunch of people off.
Of course that last point isn’t a worry for Labour – they have so few supporters at the moment they need bold initiatives like this to give it a go.
Black and White Version: Capital gains taxes aren’t all bad – but the one proposed by Labour just wont work, because it wont raise much money.
Rather un-election year like since it isn’t the major spend up that we have seen in the last 20 years or so in election year.
Everyone has given their opinion so far:
- KiwiBlog (from the economic right)
- Phil @ Whoar (from the economic left)
- Frog Blog (from the economic world of Neverland)
Anyway .. here is my black and white take on it.
|The Good||The Bad|
|Financially prudent||Lack of vision – how is the govt going to GROW the economy|
|About the right balance of “give” and “take”||One could say some of the big issues are still not resolved – student debt, health care, superannuation etc. Although in fairness this is only term one, and on some of these issue there is small movement in the right direction (eg student debt).|
|Good to see new TARGETED health and education spend.|
|Partial asset sales with a Govt majority (50%+) shareholding. Good to see this happens AFTER the next election, so we get to vote on it|
Overall I give it a sold B. Can’t give it an A since there is no long term vision.
I think the media got all the headlines wrong about the budget, but that’s not new is it? Focusing on what was cut, or that “middle NZ hurt” isn’t the main story. The main story is about returning to the black one year earlier than planned, all while investing 5billion extra cash for the rebuild of Christchurch.
Oh, and I can’t really comment on the budget without posting this. Key caned Goff (are we surprised?). I am waiting for Labour to be a real opposition and talk about alternatives (rather than just “no don’t cut that”).
Black and White Version: Solid B for Bill. The right balance, and economically prudent. Needs work on vision (see me after class Bill).
Both Labour and National have announced various economic policies for New Zealand over the least few days. (although the media seam more interested in Goff’s hair dye, maybe coz that’s more interesting?)
The mainstream media, and plenty of blogs give plenty of views and in depth commentary, so here’s my back and white take on them both. Before I start the context needs to be set:
- NZ (and most of the world) just out of a global recession
- NZ borrowing $300m a week just to fund current activities
- Govt expenditure as a % of GDP extremely high (ver 40%) due to massive growth in last 10 years (almost 50%)
- NZ close to a downgrade from credit rating agencies due to high dept and future borrowing – something needs to be done (downgrade means higher interest rates in NZ – hits everyone).
Richard’s Black and White Summary
|The summary||Labour: Up to 1st $5,00 tax free||Partial sale of selected Govt assets floated, as part of 2011 election policy|
|Good, bad, other?||Stupid. Aimed at vote catching.||Interesting. Novel. Courageous even|
|The good||Everyone gets some cash.||
Frees up capital for other projects.
Being on selected assets ony , we know what we are voting for.
Means (ultimately) less borrowing.
|The bad||Not feasible. It will cost 1.1billion, and even a new top tax will only collect in 30% of that. The rest is made up with reducing tax evasion, but in fact introducing a new top tax bracket will only make tax avoidance happen more through income shifting. remember Labour also has a policy of no GST on fruit and veges – costing a further 250 million in lost revenue. We have to BORROW this!||
Some wont like “selling stuff”.
In a perfect world we wouldn’t sell anything some would say, but I think AirNZ is a perfect example of how it can (and does) work well.
(our of 5 stars)
|Two stars (only coz some uninformed people will vote for it)||Four stars|
Black and White Version: Labour still has no vision. National shows that you can put options to the people to vote on.
I read today in the NZ Herald that the ACCC (the Australian version of the Commerce Commission) that they do not support the planned alliance between AirNZ and Virgin Blue.
I have one word in response: GOOD. It was never a good idea (I blogged about it being such a bad idea here) for anyone except maybe Virgin Blue and to a lesser degree AirNZ. The consumer would not benefit.
ACCC Chairman Graeme Samuel says:
These routes account for around one quarter of passenger traffic in the trans-Tasman market. More than a million passengers a year could be adversely affected if competition between the two airlines was removed.
Yep, exactly. Enuf said.
It’s clear that for real competition THREE is the minimum. Voda/Telecom in the mobile space proved that. (It took 2Degrees to move prices significantly). Two get rather too cozy IMHO.
Black and White Version: We need competition in the NZ and Trans-Tasman airspace. Less airlines isn’t the way to achieve this.
Yesterday the NZ Herald made an interesting story on how Jeans in NZ were almost double the identical pair in the US. The asked the question is shopping in NZ a rip off?
They pointed out:
A pair of black Levi’s 501s for men cost up to $139.90 here but you can pick up the same pair in the United States for just $75.11.
Some of the explanations proposed by Shamubeel Eaqub, principal economist for the New Zealand Institute of Economic Research, were:
Today I had a nice new copy of the Yellow Pages and White Pages delivered to my home. So I picked them up, and put then straight in the recycle bin outside. I did peak inside the white pages (coz it was smaller than last year) but that’s all. They have no use to me anymore. I wonder how many people even use the physical version anymore?
I think the online service is still relevant (although diminishing with every year), I use Google 10x more than I would ever use Yellow Pages for online searching to get “stuff”.
I remember a few years back when Telecom sold off Telecom Directories for a few billion $ and thought at the time good call, since the long term future of Yellow Pages (and physical directories in general) was dead. Yellow Pages online presence competes in the same sandpit as Google, and I know who’s gonna win that one!
Anyway, interesting how times change. Only 10 years ago any business not in the Yellow Pages that sold stuff to the public would have been thought of as crazy. Now it’s more like why would you?. I think the modern equivalent is being online – you HAVE to be there (I know if I cant find info online I would rarely buy from a company these days).
As an aside, one might ask WHY they still produce the books if no one uses them. Why not OFFER the book and see who takes it up? Well the answer is easy: Advertising. If Yellow Pages did that they couldn’t claim x million copies in circulation. What a waste of trees.
Black and White Version: Yellow Pages physical directory is dead in NZ. I wonder how long before the online version is?
Don’t get me wrong – I am actually quite a greenie at heart. And it’s actually because of that I get annoyed with initiatives proporting to be “green initiatives” that are just people wanting a bit of free publicity, without understanding ANYTHING about how over consumption is effecting the planet.
The article today in the Christchurch press Lights Switched off around NZ is a case and point:
Matahana Tikao celebrated her 11th birthday with friends on Saturday night, making the most of the candlelight hour to set up a puppet show with an Earth Hour theme.
“It was really quite cool, because we had lots of candles,” she said
The reporter might have actually done some RESEARCH here and pointed out that most candles are made from parafin – which is OIL based. Where as around 70% of all electricity in NZ is made from renewable resources. I love the lots of candles touch – that really made it!
And then this :
The Palms Shopping Centre in Shirley marked Earth Hour with a free drive-in movie.
Marketing manager Tracy Thompson said the idea was to get hundreds of people watching one screen rather than hundreds sitting at home watching many TV screens.
Nice – well done. Hundreds of people DRIVE THEIR CARS to watch something they can watch at home WITHOUT DRIVING THEIR CAR. I think the word shortsighted is just a tad underdone for this idea (dopey would be closer to it!).
If I can find this info, how come the reporters can’t? Well actual even their own paper can, with the same edition reporting Electric Cars May Increase Emissions. This article at least researches the electricity generation data, although I don’t agree with everything it says, at least there was research for this story.
And yes, I do get part of this is about symbolism (you know, turning it off, thinking about it .. ra ra ), but any symbolic action should be in a way that itself doesn’t add to the problem. And the media should play their part by education people about this.
Black and White Version: Green initiatives should at the very least BE green themselves. Education is clearly still needed.
PS: Go on, disagree with me, dare ya!
Today the NZ Herald has the Headline Will Telecom Survive?
That’s easy: YES. Regardless of the XT issues, the “f&*% you” texts, it will. The later being nothing at all (the quote, ‘f*** you” scandal’ was one staff member (or maybe two) saying something highly inappropriate. No scandal.
Anyway .. back to this headline. The answer is easy. YES. End of story. The story the Herald runs actually isn’t much about the headline anyway, its more a history lesson, almost unrelated. It fails to answer the question posed by the headline. Even if the whole XT network collapsed Telecom would survive, even if their broadband business died it would. It might kill it’s share price, it might drain it of a bunch of cash, but it would survive. While the XT issue is going to hit it’s customer base it will FAR from kill it.
Black and White Version: Yes, Telecom will survive.
Ever since the new tax plan was announced by John Key yesterday there has been a proliferation of the the whole the rich are getting the tax cuts message. Even my own post got lots of rather negative comments about this.
It just shows how little journalists understand how tax works (or maybe they do but just want misleading headlines like this one).
Anyway.. I am continually reminded of this parable, which explains it oh so well, and it goes like this:
- GST to 15% (a “we are seriously looking at” should be read “we are gonna do it, but want you to feel like it’s been eased in”): GOOD1
- No Capital Gains Tax: GOOD
- No land tax: MISSED OPPORTUNITY (although also politically safe, and also better for me personally with no land tax).
- Changes to property tax rules: GOOD (I think. I will assume they mean removing deprecation etc).
- Welfare Changes like reapplying for dole every year or so, encouraging part time work on DPB etc: GOOD (if not a tad weak – but politically more palatable).
- Discussion document exploring minerals on crown conservation land of high wealth/low eco value: GOOD (the riskiest move of all politically, but still good).2
- Adding in that any funds from the above form a “conservation fund”: EXCELLENT (win-win)
- New “lets fix the tax system”: Rhetoric sounds fine so far, and I would like to say GOOD, but I just don’t know yet. Will update in future posts after the budget.
- Other minor changes (Holidays Act etc): All fine so GOOD I guess.
- I think consumption tax (GST) is one of the fairest taxes there is. It encourages saving (a good thing), taxes even the black market/illegal activities (since when they spend the profits they pay GST), and wealthy spend more, so pay more. I do understand as a percentage lower income spend more of their income (like almost all of it in many cases), but that’s not a reason not to raise it, that’s something to balance up with other tax changes.
- I have to say I am VERY pro sustainability, and believe over consumption is the biggest issues facing the world. But, unlike this blog the world ISN’T actually black and white, and a blanket ban actually serves no one. Having discussion around this issue is the right way to start.
Black and White Version: A definite pass here (not with merit though, not yet).
Hattip: Kiwiblog, for the best summary (better than the mainstream media) of the changes. I even agree with most of what he says!