Capital Gains Tax? Keep related posts in this thread, please.

[cube]

Generally speaking, capital gains is a lie. A bare-faced deceit.
I can't believe that erudite forumites proceed with the pros
and cons of this or that tweak, when I've shown that there
is no such thing as any capital gains in the form of an increase
in purchasing power. All there is, is a change in numbers.

Say after me: there is no real gain in capital.

A CGT is an opportunistic bit of tax thievery by grubby, venal
politicians, based on a gain illusion, but taxed in real terms.
What it really does is encourage governments to actually
foster inflation, so they gain a real, paid in today's-value-
dollars tax windfall based on the inflationary wooden coin-
age of their own financial malfeasance.

If I'm wrong, please show me how.

And it doesn't matter if other countries do it. The rationale is
the same, based on the same lies, the same deceit and the
same self-interest.

The purchasing power argument -i.e. the pernicious whittling away of the value of one's investment through inflation - is valid.

However, you have to remember what colour wooden head it is that is proposing the tax.

The envy comes about from leaveraged gains. As every good PI knows, this is a game that you are best off playing with someone else's money - you put in $20K, borrow $380K, normal market fluctuations (aka inflation) push prices up 5% in a year and, yay $400K property now sold for $420K. A nice 100% return on investment - and it is that type of figure that gets the envious riled up (never mind the interest, agents fees and tenant damage that happened along the way).

Leveraged gains can happen in those other investments as well, but because of the higher risk, banks aren't so keen to lend.

[Perry]

Maybe not just envy,
but also fearfulness?

[One]

I don't think envy or fearfulness explains why politicians are thinking about CGT. Most of them own IPs.

More like they're chasing the popular vote - and with the media so emphatically beating landlords up, it'd be amazing if the general populace didn't buy into it.

[Perry]

I meant those comments as they relate to the great
unwashed; not to the Wellington woodenheads.

[eri]

it's not about landlords

the best landlords don't sell

it's about taxing the flippers

and if they leave the market

landlords could find rents rise and house prices drop...

[speights boy]

Gareth Morgan: Capital gains tax best way to tackle rot

On both counts the New Zealand regime has long been defunct. The highest contribution to the tax collect is not made by those with the greatest means, it is made by those with the highest taxable income.

These are not the same thing. I have a lot of wealth but very little income, I know of income earners who pay a lot more tax than I do.

We have a chronic misallocation of capital. Investment in capital here has very little to do with the taxable income generated, in some cases it is inversely proportional, people with the greatest means to pay tax are commonly asset-rich and deliberately income-poor.

The time for a tax on capital is overdue.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10737829

[TheLiberalLeft]

I suspect Gareth's and my definition of "very little income" wouldn't match.

[flyernzl]

it's not about landlords

the best landlords don't sell

it's about taxing the flippers

and if they leave the market

landlords could find rents rise and house prices drop...

I'd agree with that. I haven't sold a property since 1979.

There is however a deeper argument for/against GST.

In brief terms, the NZ Government is broke and borrowing millions a week to stay afloat. (Not all of it is their fault, the run of natural disasters has certainly helped put the boot in).
Therefore, in the medium term, the Government needs to get cut costs and get more money in.
National is attempting to do this by reducing the Public Service payroll and selling off public assets.
Labour would try and do this not by reducing the payroll and selling assets but by getting more tax money in. Unfortunately, a significant number of Labour voters have in the past and will find in the future that 'high income earners' include themselves if they are plumbers, electricians, school teachers et al.
So they have come up with the CGT option. On the face of it, it is to punish investment property owners, but the deeper push is the need to raise more revenue. In order to acheive this aim it will be necessary to CGT everything - owner occupied housing, farms, businesses, shares.

I find it a bit amusing that the Greens support CGT. Maybe they will change their tune when they find that their organic orchards and nut-growing farms will also fall into the CGT net.

[TheLiberalLeft]

Oh, those will be excepted, flyer, and quite rightly so. We need to encourage those green initiatives.

If money's too tight to mention, why are they announcing the ACC cut?

[flyernzl]

To subvert the dreaded possibility of opening up the 'Work Related Injury' side of ACC to private competition.

Note how the motor vehicle side of ACC - which as not been faced with this awful prospect - does not seem to be able to reduce its premiums.

[cube]

it's not about landlords

the best landlords don't sell

it's about taxing the flippers

and if they leave the market

landlords could find rents rise and house prices drop...

Legitimate flippers are already taxed income tax on their profits.

[Contrail]

I think the 'productive sector' that people want investment to be redirected into would be exporters ie. business / start up capital / tourism ventures etc.

Rental properties aren't productive because... they produce nothing anyone overseas wants? At least I can't think of anything.

I would say a home owner invests more in their home than a property investor would invest in a rental on average. Though, even if the amount was the same or more it wouldn't matter as plumbers / builders working on homes aren't 'productive' as far as increasing GDP?

[Perry]

Not as far as overseas income goes, no. But GDP - yes.

As Bob Kane has oft pointed out, all this talk of "productive"
whatever (magical or otherwise), is usually devoid of any
reasonable number of examples which can be realistically
substantiated. What businesses will the mum and dad PI
invest in which will help improve our balance of payments
with the rest of the world?

Try getting a bank loan with an export-related business
plan as collateral.

[Austrokiwi]

there may be one way to thwart Labours plans......stop letting your IP and start leasing them. Get you out of all the nasties of the RTA the tenant becomes responsible for maintenance and the lease can be sold by the tenant.

[Perry]

Nice idea, Austro. Problem is,
the Residential Tenants' Farce
gets in the way.