The unloved capital gains tax

Photo credit: South Island Independence Movement

Most people now accept that Capital Gains Tax (CGT) will do very little to make housing more affordable. Most people, that is, except Jacinda Ardern. She continually parrots the claim that it will help young people get into the housing market; when all the evidence is that it will not. I’m not sure if she is untruthful or incompetent, but she is one or the other. quote.

As the debate over the introduction of a comprehensive capital gains tax rages in the media, it has mostly been reduced to arguing about its effect on the housing market and who would be stung by it and who wouldn?t. But one thing most commentators agree on is that it wouldn?t dent house prices significantly.

Interviewed on The Nation over the weekend, Jacinda Ardern seemed unaware of these inconvenient truths. Asked about a capital gains tax, she said: ?There is a large group of New Zealanders ? particularly young New Zealanders now ? who, if their aspiration has been homeownership, [it] has just become harder and harder.?

It is extraordinary that the Prime Minister ? whose ?captain?s call? for a capital gains tax backfired on her so spectacularly in the 2017 election campaign ? still doesn?t appear to understand the negligible effect it would have on housing affordability and is continuing to use it as a selling point.

end quote.

This is because she doesn’t understand the issues. Most owner-occupied houses are family homes and, even though the TWG has tried to include as many as possible, there will still be a huge number of properties where capital gains can still be tax free. quote.

In a clumsy effort to downplay the opposition to the mooted tax, Ardern also told The Nation, ?There?s a large group of New Zealanders who don?t have columns in the Herald, who might not be having a chance to have their say on this [tax].?

In fact, it?s not just Herald columnists criticising the proposal. Even media sites that represent a younger and less conservative readership than the Herald?s haven?t enthusiastically supported the proposed CGT.

Unfortunately for the government, it is caught both ways. It appears the pushback against a CGT is fiercer than it expected from property and business owners and it hasn?t sparked obvious support from poorer and younger voters.  end quote.

No, because nobody is really benefiting from it. Taxpayers may get a few extra dollars each week as a result, but they would have got that if National had been kept in power anyway. quote.

With opinion ranging from apathy and disappointment to virulent opposition, there is no easy way out for the government from this tax imbroglio.

Even if the government decides against taxing the gains from shares, farms and businesses and restricts the tax to residential investment property alone, it will still be on treacherous ground.
There are more than 600,000 rental properties in New Zealand and their owners and their families represent a big chunk of the voting public. Many of them undoubtedly won?t take kindly to being singled out for the taxman?s attention. end quote.

Singled out even further, you mean. Landlords get the worst treatment of all taxpayers. I’m surprised there are still 600,000 rentals, but I’ll bet that number will drop like a stone if CGT is ever brought in. quote.

A big part of her appeal to younger voters rests on the belief she will deal to the housing market. If a capital gains tax is rejected, it will mean that what were perceived to be the government?s three main weapons to lower house prices ? implementing a capital gains tax, using KiwiBuild to vastly increase housing supply, and cutting immigration to dampen demand ? are all likely to be viewed as fizzers.

Noted. end quote.

They have done nothing about immigration. Kiwibuild is a complete fail. Now CGT looks to be a complete failure too.

Jacinda came in as the head of a ‘transformational’ government that was going to solve all the problems of the world. Now everyone is beginning to see the truth; that they never had a clue what they were doing and they simply made promises; promises that they had no idea whether or not they could keep. What a joke this ‘transformational’ government has turned out to be.