OnPoint: Election 2011: GO!
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Steve Parks, in reply to
You mentioned earlier in this thread about CGT stopping speculation,
Did he? I’ll leave Matthew to respond for himself whether that’s accurate. I’d say the reasoning is more correctly described as “reducing excessive speculation”. The idea being to ecourage investment in areas that are the most productive, rather than an area with a tax loop-hole. You do realise a capital gains tax will not be for 100% of the capital gains? I’d be surprised if it stopped property speculation full stop.
... consider a builder/developer buys some sections and builds a series of spec houses and on sells them that is not a drag on the economy or the tax pay,
I don’t think that’s what is meant by a ‘capital gain’, is it?
It is likely that CGT will IMHO also push up rents.
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I asked you [Matthew] a question in this thread awhile back ...And I asked you a question about whether you had actual evidence that a rent increase was a clear result of a capital gains tax, and if so whether it would be a significant problem. You never really answered.
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Sacha, in reply to
To be clear, it's not just home owners who are responsible but voters and governments who arranged the economy to permit such silly misdirection of investment. That's both major parties for decades.
And their economically illiterate advisors like little lord fauntleroy of Dipton, ex-Treasury numpty skillfully stewarding another recession. And slagging public servants while conveniently forgetting his own outstretched mitt for more housecleaning on the public purse, to say nothing of his venal housing rort.
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Steve Parks, in reply to
one way to help creative people do their stuff is provide them (after they have established their abilities) with the average wage – on the condition that, IF they earned a lot more, they ceased to be so supported, and paid back into a general creative pool. One little bureacrat would’ve been a sufficient overseer…
You mean a minimum wage, surely, not an average wage? And regardless, “One little bureaucrat” would not be sufficient to oversee such a scheme. But you meant this as hyperbole, I assume.
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DexterX, in reply to
Removing the depreciation from ppty has resulted in rents increasing and CGT will have a similar effect - that is my view - I don't have to research this the same way I don't have to research the fact that the sun comes up each morning.
By and large increasing the cost on an item eventually gets passed on to the end user in this instance of CGT and the remocal of depreciation this is the tenant.
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DexterX, in reply to
It is weird I remember, it may have been in the lead up to the election Labour lost, Michael Cullen was blaming those naughty NZers who had bought wide screens TVs.
The problem with a lot of the approaches to the thang that is the problem is that people look for someone to blame and then as a solution they look for someone to tax or levy to cure what they perceive the problem was and what they perceive the problem was wasn't actually the problem.
If the problem wasn’t the lack of regulation in capital markets globally, governments coasting along on consumption taxes and not fulfilling their function then a Widescreen TV Tax is in order.
If NZ is living beyond its means then it has to increase it earnings and reduce it spending on Widescreen TVs. Exporting composting toilets and perfumed candles is a go, to take advantage of this once in a lifetime opportunity please send a personal cheque for $500 made payable to CASH, after all we need to invest in ……………...
National has in two years hoped for a recovery, it didn't happen, I don't know perhaps they have set the economy on implode and are now plotting a course that will take us to the centre of the sun.
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 hold the view that investing Kiwisaver funds in NZ makes sense, but I also hold the rather distorted view that the purpose of the economy is to provide goods and services for the people, but I may be wrong.
In conclusion I am against the sale of power generation and a CGT - I don't see that either will be of benefit to anyone. If I had to chose between these bleak alternatives I would vote against a CGT.
This is my last post I on this topic; I am off to sit on my composting toilet and roll perfumed candles both of which I intend to export, I do look forward to receiving your cheques and hope that there will be a development subsidy in the next budget so that even those that don't send the cheques can enjoy investing in the creation of my wealth.
Thanking you all in anticipation.
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Removing the depreciation from ppty has resulted in rents increasing and CGT will have a similar effect - that is my view - I don't have to research this the same way I don't have to research the fact that the sun comes up each morning.
I put it to you that one is considerably more certain than the other.
You're pretty much going off correlation, I think. Remove depreciation, rents go up, so therefore removing depreciation makes rents go up.
The problem with this thinking is that rents going up is correlated to pretty much everything because they only ever go up. Sun comes up, rents go up.
The driver of this is greed, manifesting in the expectation of a return, and the brake on it is the renters themselves, refusing to pay. That's the only thing, aside from regulatory price fixing, that stops landlords charging whatever they want. They don't need an excuse to put rents up.
Refusing to pay won't help much in any short term, because pretty much every property investor expects high returns, that's what's driven this bubble. A big part of that expectation, which can only be short term, is that there are massive tax incentives on property investment in this country. Remove that and you might remove some of the expectation, gradually. Naturally it's not going to do the whole job, property goes up for many reasons. One of those is a lack of development. If no more property is being made, it becomes scarcer as populations rise, functions like gold in that respect.
Development is an entirely different activity to speculation, although it is also risky, so people can be forgiven for seeing them as similar. But consider this - property speculators don't make a damned thing. Often all they do is buy something and let it run down, milking it all the way, and then sell it for an untaxed profit. Developers, OTOH, actually create property. This could bring prices down, if they create a glut, turning it into a buyer's market.
Unfortunately for renters in NZ, this kind of activity is highly discouraged. We'd rather that colonial hovels designed for poor working classes during the early 20th century, or before, are endlessly recycled, than allowing high density good quality property to develop near our city centers. Our tax system encourages massive profits from taking places like that, putting a lick of paint on them, maybe a new kitchen, and selling it for millions of dollars. Our resource consent system makes development prohibitively expensive, not to mention ridiculously time consuming. This is a tax on development, pure and simple, and it's way, way out of control.
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Lucy Stewart, in reply to
We'd rather that colonial hovels designed for poor working classes during the early 20th century, or before, are endlessly recycled, than allowing high density good quality property to develop near our city centers.
You're also going to have to persuade the renters that they want to rent high-density infill property - of whatever quality - and that's an entire shift in attitude about living space which is not just price-driven.
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Matthew Poole, in reply to
You’re also going to have to persuade the renters that they want to rent high-density infill property – of whatever quality – and that’s an entire shift in attitude about living space which is not just price-driven.
Give the renters high-quality high-density property and some will take it. NZ's big problem is that right at the time high-density started to become common it was also discovered that a lot of it was leaky. Old homes aren't leaky (at least not in the systemic manner of leaky-building syndrome), so of course people trust them. They're cold, but you know they're built well.
It's going to take a long time before the consequences of leaky building wear off the market for high-density housing. A lot of people like the idea, but the execution was typical NZ: crap.
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Sacha, in reply to
I don't have to research this the same way I don't have to research the fact that the sun comes up each morning.
that's a powerful argument :)
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BenWilson, in reply to
You're also going to have to persuade the renters that they want to rent high-density infill property - of whatever quality - and that's an entire shift in attitude about living space which is not just price-driven.
For sure. I'm just saying it's not that common to find it here, so complaints that property prices and the rents that drive them are soaring do seem to come back to the nature of our urban/suburban property. Yes, it's cheaper to live Melbourne, but they do have about 5 km in every direction around the city filled with low-rise property. We don't. So if you want to live close to the city it costs an arm and a leg, or you live in something really crappy.
They're cold, but you know they're built well.
They're the devil we know, for sure. I don't think they're that well-built, but given enough incremental fixes over a century, they're adequate for people that, on the whole, don't know any different anyway. Having moved to a house that's not old, cold, drafty and humid, I've started to see how silly the obsession with their character is. I'd love to live in an inner suburb, but it won't be the quality of the houses that pulls me in.
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Andre Alessi, in reply to
that’s a powerful argument :)
I'm not even going to talk about it.
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Steve Parks, in reply to
Removing the depreciation from ppty has resulted in rents increasing and CGT will have a similar effect – that is my view – I don’t have to research this the same way I don’t have to research the fact that the sun comes up each morning.
Heh. But you’re on stronger ground inductively with regard to the latter. But I think there’s a consensus here that cgt may well add to the pressure on rents. However, Matthew P gave reasons why this would be mitigated. Even a small rent increase would be a downside of cgt, sure. But all major policy changes have pros and cons. Introducing gst had positive and negative aspects, and if it were to be removed that would also have good and bad sides. With capital gains tax, I find the arguments in favour put forward by the likes of Huang and Effille that a carefully thought out implementation (learning from the experience of other countries with the tax) would be overall beneficial are more convincing than your concerns about rent rises.
Coincidently, I have just read this comment by property lawyer David Whitburn. I also find it an unconvincing rebuttal to Huang and Effille’s articles. I’m not sure where to start pointing out the flaws and inconsistencies in his argument. Hilariously, he calls Huang and Effille “disappointingly emotive” in their articles, but then concludes himself “New Zealand needs a capital gains tax as much as we need the plague to strike us”.
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Matthew Poole, in reply to
Elliffe, not Effille.
And I'll take a taxation professor over a property lawyer when it comes to discussing matters of taxation, kthxbai.
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Kumara Republic, in reply to
Coincidently, I have just read this comment by property lawyer David Whitburn. I also find it an unconvincing rebuttal to Huang and Effille’s articles. I’m not sure where to start pointing out the flaws and inconsistencies in his argument. Hilariously, he calls Huang and Effille “disappointingly emotive” in their articles, but then concludes himself “New Zealand needs a capital gains tax as much as we need the plague to strike us”.
Once again, turkeys don't vote for their own Thanksgiving.
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Matthew Poole, in reply to
I think there’s a consensus here that cgt may well add to the pressure on rents. However, Matthew P gave reasons why this would be mitigated. Even a small rent increase would be a downside of cgt, sure. But all major policy changes have pros and cons
Not only mitigated, but also cancelled out in other areas. The effects of tax changes must be looked at over at least a medium term - in economics considered to be about three to five years.
Rents go up immediately, sure, but what's the long-term effect on the economy? Rents will reach equilibrium within 18 months, probably less, but as the speculation-discouraging value of a CGT starts to hit home the slowing or flattening of property value increases carries through to a reduction in the rate of rent increases. Longer-term, renters pay less because property values don't increase as fast.Also, as I said, a CGT only hits you if you sell. If your intent is to take the income stream not the capital gain, you have no need to capture the "loss" caused by the CGT because it doesn't affect you. If you charge a bit less rent than speculative purchasers who are trying to capture the CGT, you get more choice of tenants. That helps with the market equilibrium situation, and acts as a cap on what can be charged. But even if that doesn't happen and all landlords bump rents as far as the market can bear, it's a one-off jump and we're then back to the paragraph above where the CGT dampens price increases (or even has a one-off deflationary effect) and that restrains rent increases by both reducing inflation and by altering the calculus for an economic return on capital.
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DexterX, in reply to
Jezz Ben, I have had to get up off my self-composting toilet and stop rolling up perfumed candles such is the extent of correction your delusional perspective requires.
I have not said the sun goes up, so rent goes up - you might not have noticed that the sun goes up and down.
Depreciation and CGT are not correlated. If you remove one, depreciation, and the other, CGT, doesn't exist - then they don't exist.
My point of view simplified to help you understand it is that if the inputs (+ve) to the rent cost equation are increased above the product of that equation, which is the rent people pay, will also increase.
In the interests of being positive the vision for self-composting toilets and perfumed candles (SCT & PC) will take off,
The financial institutions and capital markets have created the shit that lead to the GFC and if it was made mandatory that they, the financial people, have to deal with their shit through the introduction of self composting toilets then what you would find is that they would have less money to spend on luxury good like Ferraris, Wide Screen TVs and partying like Charlie Sheen. They would however have enough coin to purchase perfumed candles, which they would now most certainly need. A CGT won't clean up the shit from the GFC or 11 years of toss..
Self-composting toilets and perfumed candles will take off; it is safe for me to say that Key is close to pulling off support from Obama who is waiting to see how Keys fares in 2011 before endorsing the concept. Russell Norman and all the best people have one; Tony Veitch is never far from his and takes it into the studio.
Kindly send your cheque made payable to cash and stop your incessant bleating, which frankly isn’t helping with the recovery. I don’t want to have to come down off my throne and correct your limited viewpoint.
The answer does not lie in CGT, selling SOE – the answer is stop bleating like little lamb lost and get on with SCT & PCs and other such stuff.
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DexterX, in reply to
Apologies - That was meant to be posted in reply to Ben Wilson.
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DexterX, in reply to
Refer to the earlier miss posting.
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Steve Parks, in reply to
And I’ll take a taxation professor over a property lawyer when it comes to discussing matters of taxation, kthxbai.
Well, sure, but it doesn't even come to assessing their respective expertise/qualifications. His argument in itself has obvious inconsistencies that are apparent probably without even needing to read the articles he was responding to.
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nzlemming, in reply to
that’s a powerful argument :)
I’m not even going to talk about it
He's just acting out.
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BenWilson, in reply to
and stop rolling up perfumed candles
I think it's the smoking of the candles where you should really take a break.
I have not said the sun goes up, so rent goes up
I know, I said that.
You might not have noticed that the sun goes up and down.
Well, if we're being obtuse, actually the Earth rotates, causing that illusion.
Depreciation and CGT are not correlated.
Who said they were?
My point of view simplified to help you understand it is that if the inputs (+ve) to the rent cost equation are increased above the product of that equation, which is the rent people pay, will also increase.
Yes, that is very simplified. It fails to take account that next-to-nothing stops a landlord putting rents up. Doctors bills up? Increase rents. Paying too much for green fees? Put rents up. Oil shocks? Put rents up. Monday? Put rents up. Bored? Put rents up. The only thing that makes a landlord ever put rents down is not getting someone in to pay that rent.
The financial institutions and capital markets have created the shit that lead to the GFC
Yes, and what were they doing that was so nuts? Lending shitloads to property speculators. In this country it was a field day, because all those capital gains were tax free. CGT might have helped slow this down in NZ. It probably would not have stopped the housing spike here but it could have softened it.
I don't know what you're on about with respect to toilets and I don't care. Are you actually sober at the moment?
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Matthew Poole, in reply to
You made me read it, you nasty man. Ugh. I feel dirty.
What an incoherent load of shit! I mean, advocating that you not be allowed out of the country if you have an outstanding student loan balance? And decrease tertiary education funding? Way to ensure the population gets stupid, stays stupid, and anyone with any desire to get educated leaves: and likely never returns. -
BenWilson, in reply to
And you made me. Quite astonishingly poorly reasoned.
I want to live in a New Zealand that rewards those who receive income, pay tax on this income and don’t spend all of their net income, so they have this money left over to built their asset base.
Considering that managing to do all of this is its own reward, his point is really that he want's to punish people who can't. Even though not being able to is also already incredibly punishing without his help.
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DexterX, in reply to
Lending shitloads to property speculators. In this country it was a field day, because all those capital gains were tax free.
Where is the proof that capital gains are tax free and what is the figure?
People engaged in the development of property as their principal activity if they buy say a section and sell it say 10 years later without developing it they pay tax on that gain.
Banks don't lend shitloads to speculators - you don't appear to know the difference between investment and speculation.
A speculator buys an asset without any analysis as to what it will produce and takes a punt it will produce a return – it is usually with ones own money and it is the speculators risk..
An example of how the tax regime on tax works in realtion to ppty - I purchased an apartment in Auckland with the intention of living in it – things transpired and I ended up working elsewhere when I moved into the apartment some 7 years after owning it I had to in that year pay income tax on the difference between the price I bought it for and the value of the ppty on the date I moved into it.
You need to learn more about how things actually work – you opinions on things are ill founded and appear to me to be based on your belief in political spin doctoring.
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There seem to be two common threads that are holding NZ back - cargo cultism and anti-intellectualism - which would be difficult to legislate against. The former, as previously mentioned, has been summed up by David Harris, creator of Pegasus Mail. The latter is partly summed up in a recent column by award-winning scientist Paul Callaghan.
What people think of as tall poppy syndrome is really a subset of anti-intellectualism. And its antithesis, ladder-kicking, seems cut from the same cloth. So 'tall-poppy loppers' and 'ladder kickers' don't seem so different. Case in point? Supporters of Paul Holmes, Paul Henry and Christine Rankin claim they're under attack from TPS. Critics, conversely, point to their supposed pride in walking on the downtrodden.
If TPS is the problem, then why is no one pulling down Sam Morgan and Steve Tindall? Because they don't kick ladders, that's why.And as for cargo cultism (and its cross-dressed form, hyper-nationalism), you see it in those who support a US-NZ FTA at any cost, conveniently glossing over the Aussie experience with one. You also see it in those who say "if it's not for the Yanks you'll be speaking Arabic!"
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