Trying to justify the unjustifiable.

?everyone else is doing it, so we should?.

By Owen Jennings

One of the key arguments used by the Tax Working Group and now by Ardern and the coalition to justify introducing a Capital Gains Tax is that ?everyone else is doing it, so we should?.
The fallacy of that position is immediately obvious. It was St Augustine who said, ?Right is right even if no one is doing it; wrong is wrong even if everyone is doing it.? How true. Conformity for conformity?s sake reeks of a lack of a solid argument and an ill-conceived approach.

There are endless examples of where doing something because everyone else is doing it is plain stupidity and totally devoid of merit. Those examples stretch from instances in our own lives to instances in the life of a government.

There are times to consider a change if one is the only one out of step. Anything else would indicate arrogance and short sightedness. However, on its own, it is a dangerous and rather pathetic justification. If a proper assessment of a position shows value, then following the majority shows wisdom and value. Unfortunately, the Tax Working Group did not conduct a proper assessment. The majority of the group were already committed ideologically and would not entertain any other outcome than the introduction of the new tax. It was a travesty and an insult to voters.

Photoshopped image credit: Boondecker

Michael Cullen?s views on wealth and taxes are well known. He doesn?t bother to hide his contempt for the well-off no matter how they earned their wealth. Marjan van den Belt thinks economic growth is evil and is a fan of United Nations? interference. As for Bill Rosenberg, he would have to be the economic luddite of the century; another socialist determined to sock it to those who work hard and improve their position.

It is no surprise that a heap of other taxes were snuck into the report. It is hard to see what else they could dream up for a tax ? fresh air? The minority report by three members of the Group has largely been pushed aside. Cullen has held the floor and continues, quite wrongly, to advocate and push for the reforms. It is an untenable position and it shows his unprincipled bias.

The minority report is useful. Capital Gains taxes are difficult to administer. They are very inefficient ? a dollar collected costs more to administer than any other tax.

Exemptions add to the cost of administration and create a lawyer?s paradise. Taxpayers are caught up in wasteful, time consuming and expensive compliance. Distortions emerge and the so-called ?fairness? gains become illusory. How can a gain in value of an artwork be given preference to a gain achieved by hard work, innovation and community good like employment?

Assets subject to capital gains tax may be held for many years and inflation compounds quickly. In instances where a capital gain only represents compensation for inflation, a taxpayer will be obliged to pay a capital gains tax even though their overall real wealth has not changed. There is nothing fair about that, especially when it’s government mismanagement that causes inflation.

If there are excessive profits being accrued to owners of multiple homes ? and that is doubtful ? then simply extending the bright-line test easily and inexpensively fixes the so-called problem.

The tax is going to dampen innovation and entrepreneurship and, for a country desperate for such, that is worse than unfair ? it’s madness.
This is an unconscionable measure driven simply by envy. The merits of the tax, based on “fairness” and ?because everyone else is doing it?, are dubious to say the least. The only winners will be tax accountants and lawyers.