Proposed Capital Gains Tax: Slammed by National, Applauded by Others

Sir Michael Cullen pn273

The Tax Working Group report was supported by eight and opposed by three of its 11 members. The political leanings of the former, with the exception of one Greens supporter, are not known; the latter are business leaders.

The first thing to note about the Tax Working  Group headed by Sir Michael Cullen is that its report comprises recommendations, and the second that the recommendations will be considered by Government and, in due course, by Parliament. Nothing is set in concrete at this stage.

Nothing will be implemented until after the 2020 elections assuming Labour is still in government. And the tax would only be paid on capital gain from 2021, not on the gain since the asset was purchased.

National leader Simon Bridges called it  a "monster tax grab" and an "assault on the Kiwi way of life", and  pledged to fight it every step of the way. (On TV1 News tonight,  National MP Amy Adams echoed his exact words.)   Bridges  said the tax is motivated by "envy and ideology" rather than fairness, and promised to repeal it if National is elected in 2020.  His position was backed by  @GeoffsAgHortHub on a typical  Facebook comments page:

Michael Cullen announces his utopia for NZ to have the most aggressive, complex and; punishing tax system on earth. So how will the troop of monkeys, misfits, moron; and court jesters in Arderns govt react? Will they break the spine of hard working Kiwis with Cullens lunacy?

A contrary position was expressed by Gordon Campbell in Scoop.

 "Absurdly though, the Opposition has responded to the TWG’s mild set of recommendations by calling them a ‘recipe for buggering off to Australia’. Really? After all, anyone who did bugger off in that direction would be in for a nasty shock. Australia has had a meaningful capital gains tax for years."

The Facts taken from this Stuff article

The Tax Working Group has confirmed its support for a broad-based tax on capital gains, suggesting handing back much of the $8.3 billion it might raise over five years through income tax cuts for almost all workers.

Some have criticised the proposed tax as "envy tax", but working group chairman Sir Michael Cullen said it was wrong that wage-earners were taxed on their full income while "you can earn income from gains on assets and not be taxed at all".

The proposals, if adopted by the Government, would take billions from the wealthy and give most of that money back quite evenly to millions of taxpayers.

The share of the tax by disposable income

The vast majority of the extra tax would come from the wealthiest 20 per cent of Kiwis, who own more than 80 per cent of the assets that would be newly taxed.

The working group's favoured option is to hand back much of the proceeds by increasing the amount of money people could earn at the lowest 10.5 per cent tax rate, which is currently capped at $14,000.

Options include raising the threshold to $20,000 or $22,500 from 2022 or 2023, at a total cost of between $3.8b and $6.8b over the first five years of the capital income tax regime.

That would deliver an income tax cut worth between $420 and $595 a year to the majority of taxpayers.

The proposals have been supported by some environmental groups.

You can read the full report by clicking here.

Now we wait to see what Mike Hosking will say, and how fairly the recommendations are reported in the mainstream media.

Taylor Kee, co-publisher of Money Morning Report, has beaten Hoskings to it.  

He says the report has "slashed the throat of the NZ economy", taxes on everything, minimal gains for low-income. Why? Because "politicians like to get their hands on your money."

And this emotive outburst from an educated man who is usually so cautious on other matters!