OnPoint: Election 2011: GO!
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DexterX, in reply to
This is an extract from the Lbour Party conference:
“A capital gains tax was considered to be a vital part of the mix. Too many are doing business for a capital gain rather than development of technology. And change has to occur.”
I found this a bit naive. Who are the “Too many that are doing business for capital gain” and what is the proof? What “technology” did the people at the conference want “developed” and what risks where they going to take to do “it” – whatever “it” was that they considered needed doing.
If you want to encourage reinvestment then you provide tax relief for development – not a punitive capital gains tax which will effectively be passed on to the working poor and beneficiaries as increased rent and living costs whilst also sending the “business talent” off shore.
I find the experts view in the Herald Naive for the same reasons I have mentioned above.
A capital gains tax is not an answer – in the same way that the ETS won’t solve global warming - A CGT won't growth the ecomomy. .
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BenWilson, in reply to
If you want to encourage reinvestment then you provide tax relief for development – not a punitive capital gains tax which will effectively be passed on to the working poor and beneficiaries as increased rent and living costs whilst also sending the “business talent” off shore.
You'll need to fill in the gaps of your story, how exactly CGT causes a cost that needs to be passed on to people who don't even own property? Because speculators can't take such ridiculous profits when they sell, that will somehow affect rents? You understand that property owners who don't sell don't have to pay CGT? So this means you should only buy investment property if you want to be a landlord. If you want to increase rents you have to do your property up? At which point you're a property developer, engaged in productive activity?
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BenWilson, in reply to
A capital gains tax is not an answer – in the same way that the ETS won’t solve global warming - A CGT won't growth the ecomomy. .
Was anyone claiming it's a silver bullet? Yes, it won't create world peace either, but it could contain runaway property speculation, that is basically the purpose of it.
I have no problem with some of your other suggestions for encouraging growth, but it's not a binary. CGT can go with those.
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I would go as far as to say to that it is easy credit that has driven the property bubble in NZ, but that's too just damn obvious and distasteful for most people.
Quite true. When banks were offering 110% mortgages at the height of the property boom......well...
And
I think investing in stocks is a great idea, personally.
Quite. again. But if you want this magic thingy called "growth" the only way it is going to work along that avenue is to invets in IPOs surely. That was the whole point of a sock exchange wasn't it? To raise captital. You can't do that by just flipping existing stocks.
Convince me, please, that it is not just an ideological issue.
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You nailed it.
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At which point you're a property developer, engaged in productive activity?
An oxymoron if ever i saw one.
Property??? Productive??? Tui Ad coming........
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You’ll need to fill in the gaps of your story, how exactly CGT causes a cost that needs to be passed on to people who don’t even own property?
Well I think that's true. Part of the return for investing in property for many people is that they'll cover their costs with the rental income, but they'll make their profit X years into the future when they sell. I know a family member who did those very calculations and bought a rental property for that purpose.
If there's less profit at the end then a number of people will be wanting to make more from the rent since they'll be making less at the end.
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BenWilson, in reply to
An oxymoron if ever i saw one.
I conclude that you never saw one. Yes, building property is productive. Hell yes. Sometimes it's not that sound an investment, but hey, at least the buildings get made and, on the whole, used.
But if you want this magic thingy called "growth" the only way it is going to work along that avenue is to invets in IPOs surely.
Um, I can think of lots of alternatives. There was growth before there were stockmarkets, outrageous though that may sound. People can set up businesses, or build things for themselves. Even working for other people is good for growth, it means you have money to spend, and the other person has a business, and the customers get the services or products. The stockmarket is only a small piece of productive activity in this country.
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BenWilson, in reply to
If there's less profit at the end then a number of people will be wanting to make more from the rent since they'll be making less at the end.
They always want to do this anyway. They don't need an excuse to put rents up. They just need people willing to pay. That won't change.
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DexterX, in reply to
Refer to Kyle's post above the CGT will get passed on and there is also the position that it could take the form of an annual tax levy and it will definitely be recovered or covered by rents.
With regard to the other comments posted that lean towards growth - my view is that the economic growth is best undertaken by supporting innovation/ideas to get established and prosper.
The growth part of the economy doesn’t necessarily come from IPOs or the NZSE.
Creating a climate for growth is what is needed.
Part of the support government provides to NZ owned and based fledgling enterprises (that are starting to earn export dollars) is that they pay a lesser level of tax based on the amount that is reinvested in the enterprise (so that a toe hold in an offshore market can become a foothold or a platform for further growth). The rate of reinvestment has a direct result on the rate of growth.
Blah, Blah, Blah
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Sacha, in reply to
If we're going to sell shares in our state-owned businesses, it should be to people who will hold onto those shares for a long period of time.
Kind of like bonds, you mean?
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Sacha, in reply to
a sock exchange
Most homes could do with one of those
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Sacha, in reply to
why would you pay for my opportunity?
I was referring to my previous comment about the value transfer from underpriced initial offers that we've seen before:
first-round investors all sell out at the non-discounted market rate to foreign investors happy to pay for a guaranteed low-risk infrastructure asset backed by government bailout if needed. Another successful transfer of wealth from all taxpayers to those Kiwis who can afford to buy shares.
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Remember TranzRail!
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BenWilson, in reply to
Refer to Kyle's post above the CGT will get passed on and there is also the position that it could take the form of an annual tax levy and it will definitely be recovered or covered by rents.
I guess it could be done that way, if they're fucking crazy. Taxing unrealized gains would be even more ridiculous than provisional tax (where they tax you for profits you haven't even made yet).
With regard to the other comments posted that lean towards growth - my view is that the economic growth is best undertaken by supporting innovation/ideas to get established and prosper.
Innovation is OK, but it's also way too much of a buzzword for my liking. You can have good solid growth doing something quite unoriginal, like raising sheep, or putting down railways, or growing trees. Innovative is usually synonymous with "risky". I'm not so sure the government should be gambling with our money. Better would be if they provided the infrastructure for some kinds of targeted growth areas.
I like broadband for it because it just seems like something that should become a basic service, like water and power and a telephone. At least, they used to be. Now they cost fucking heaps. I'm spending something like $800 pa on water these days. It's starting to look like I'd save money just by getting a water tank. That's ridiculous, when the economies of scale that must exist in mass produced water supply are considered.
But there's plenty of others areas which would help industry grow, not to mention provide services to citizens. Unfortunately, neither of the major parties buys into the idea.
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John Key's celebrity crushes The Uncut Unpublished Version II - Next Weeks Sunday News.
On Friday’s talk show with Tony Veitch John Key set the record straight, he unreservedly apologised for any offence his "Hotlist" comments may have caused women, excluding the wife, "Face it she is used to it", Key chortled.
Key said, "Look, I know it is election year and women sometimes vote; lets be honest, I still stand to attention at the thought of a liaison with any of the chics on my hotlist, if NZ women vote for me they will definitely make it onto that list”,
“After all is said and done this is how I feel, I want to govern as an all inclusive leader, I would hate to think that any NZ women felt left out and didn’t vote for me as a result, it’s not as if I have a Shane Jones thing going on, let it be known any vote for me gets you on my hotlist and gives you a special place in my heart”.
Key thanked and attributed this change of heart to Dean Lonergan who he had now appointed as his Press Person; Key mentioned that Dean's legs were too hairy to get him into a short skirt so he was called a "Press Person" rather than a "Press Secretary".
Sue Kedgley was asked to comment on Key’s repositioning, her response was a brief, "WTF?”
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Jim Cathcart, in reply to
Well, I think that NZ needs a well-functioning stock exchange if we want a dynamic economy. Restricting access to foreigners is not going to do us any good and NZers don't seem to have problem with bidding up house prices with foreign capital,. If it's important to protect nationally strategic assets, regulatory options do exist.
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Dismal Soyanz, in reply to
Kind of like bonds, you mean?
Bonds are no more likely to be held long-term than shares, even by NZ investors. Certainly financially literate investors, especially institutional investors, will be ready to sell bonds if bond prices are high enough and can and do cycle in and out of particular debt issues.
There may be some marginal appeal to institutional investors through the fact that bonds issued by majority state-owned SOEs would have some form of credit enhancement but not enough to make such bonds the equivalent of sovereign debt.
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DexterX, in reply to
I said this before:
"The justification for the sale of power generation is to raise capital from Mum and Dad investors for the purpose of funding infrastructure development in schools hospitals etc.
If that is what this govt really want to do they could issue limited amounts of government stock that can only be subscribed to by private individuals in amounts of say $5,000 up to $50,000, that are non tradeable and tied to fund the a specific project."
I would also like to say that a CGT is like giving heroin to a heroin addict as a cure for heroin addiction.
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Ross Mason, in reply to
a sock exchange
My biggest problem is sorting out the left and right ones.
But I forgot to attach to the Property Developers the caveat of buying up and riding the wave. That is not productive. Likewise buying stocks to ride the wave isn't either. Growth via the stock exchange can only come via IPOs. Unless you call takeovers productive.
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But I forgot to attach to the Property Developers the caveat of buying up and riding the wave. That is not productive.
You're confusing developers and speculators. Yes, they can be the same people but they're different activities. One is productive, the other is not.
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Dismal Soyanz, in reply to
the banks/investment companies are going to need to find money elsewhere to replace it so that they maintain their equity, and they’ll look overseas.
Not equity. What the banks would be losing is a liability (the deposit) and an asset (what they used the deposit to fund). The balance sheet would shrink but not equity.
The presumption you make here is that the bank would then say it needs to increase its balance sheet back to where it was before. But how would it do that? It can borrow from overseas (liability) [ETA or even issue more equity - possibly to an overseas investor] but lend to who (asset)? In our static example, there is no new project being undertaken so no-one is going to borrow more. Hence the bank will not be rebuilding the balance sheet.
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BenWilson, in reply to
Well, I think that NZ needs a well-functioning stock exchange if we want a dynamic economy.
It's a good thing to have, makes investing in companies a lot easier*. We actually have one, it's called the NZX and has hundreds of stocks you can buy. Adding some energy stocks won't drag it out of the doldrums, though, that's a function of the recession.
*So much easier that it can be tempting to think of it as the sum total of all capital invested in business. Which would be totally wrong - most companies are not listed on the stock exchange.
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Not everyone working for Granny buys it.
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Sacha, in reply to
Well, I think that NZ needs a well-functioning stock exchange if we want a dynamic economy
I appreciate the argument that making part of these public assets privately tradeable helps the scale of the market.
I'd like to hear supporters make a better case that getting all taxpayers to fund that move will benefit more than the fortunate few who are already wealthy, foreign investors and banks, and brokers. And without risking the viability of a crucial underpinning of our future economy, our electricity system.
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