Capital Gains Tax finally on a major party's agenda

[Oscar]

This e-mail turned up the other day:

A young woman was about to finish her first year of university. Like so many others her age, she considered herself to be Labour Party minded, and she was very much in favour of higher taxes to support her education and for more government programs – in other words, the redistribution of wealth.

She was deeply ashamed that her father was a rather staunch blue-ribbon Conservative, a feeling she openly expressed. Based on the lectures that she had attended and the occasional chat with a professor, she felt that her father had for years harboured a selfish desire to keep what he thought should be his.

One day she was challenging her father on his opposition to higher taxes on the rich and the need for more government programs.

The self-professed objectivity proclaimed by her professors must be the truth, and she indicated so to her father. He responded by asking how she was doing at university.

Taken aback, she answered rather haughtily that she had a 90% average, and let him know that it was tough to maintain, insisting that she was taking a very difficult course load and was constantly studying, which left her no time to go out and party like other people she knew. She didn't even have time for a boyfriend, and didn't really have many university friends because she spent all her time studying.
Her father listened and then asked, “How is your friend Audrey doing?” She replied, “Audrey is barely getting by. All she takes are easy classes, she never studies and she barely has a 50% average. She is so popular on campus; university for her is a blast. She's always invited to all the parties, and lots of times she doesn't even show up for classes because she's too hung over.”

Her wise father asked his daughter, “Why don't you go to the Dean's office and ask him to deduct 20% off your average and give it to your friend who only has 50%. That way you will both have a 70% average, it would be fair and you would both be equal.”
The daughter, visibly shocked by her father's suggestion, angrily fired back, “That's a crazy idea; how would that be fair! I've worked really hard for my grades! I've invested a lot of time, and a lot of hard work! Audrey has done next to nothing toward her degree. She played while I worked my tail off!”

The father slowly smiled, winked and said gently, “Welcome to the Conservative side of the fence.”

[Indiana_Jones]

Unsure about the CGT bit, but the 39% tax can piss off.

Why does labour's solution to making it fair always seems to be dragging the people higher down to the level of the lower, rather then bringing the lower up....

-Indy

[Clockwork]

Not quite. The shareholders are in effect the owners of the company, they want a return on their investment . For the shareholders to get a return, the company must trade profitably & growth is usually a requirement to generate increased income & therefore an increased return to the shareholder. Increased profit means an increase in share value.
If the share holder is not seeing an increased return in dividend or share value that company is going backwards.
I'd rather we invested in companies & fostered economic growth than continue land banking, hence my partial support for a CGT but not in the form Labour proposes

A company simply has to return a profit in order to pay dividends, growth is simply an added bonus which preumably share traders are hoping for. Regardless, once the company's shares have been floated all subsequent share trading is speculation and really has no material effect on its producutivity or bottom line.

Now if Kiwis have so much spare money to invest, then as a nation we'd be better off if they invested in companies that earned their income from offshore not from domestic service providers that the nation already owns.

As for the original topic of the thread, on refelection (and speaking as someone who is likely to end up paying CGT) I really can't see why income earned in this way should not be part of the tax base. As to how it is subsequently spent by the Government, well that's a different debate.

As far as the GST on fruit and veg etc I'm swayed by the argument that it is best left simple as it is BUT as GST rises, that argument starts to loose some validity. however I believe that a tax free alowance of $5000 should more than compensate for that.

This current trend of abusing sales taxes to use them as a form of social engineering gets right up my nose and I'd love to see an end to it.

[Hinny]

No argument from me.

However lets reduce the argument to New Zealand which I contend is an egalitarian society without the extremes of wealth and poverty found in other parts of the world. I'm not even sure the USA fits your description although there are graphs suggesting it does.

Anyway - just who and where are all these rich people in NZ? The few I've come across put their trousers on one leg at a time, experience the same highs and lows of life as the rest of us, and you wouldn't notice them on the street.

There are sod all of them. I honestly think this is an empty debate in NZ. Straw men set up by Labour/Greens etc to draw political support from the bitter and envious. Hardly inspiring stuff.

Your contention might be mediated by referral to the OECD figures which show that the wide gap between the rich and poor is a major reason we rank as low as we do in the standard of living stakes.

The poverty in the States is extremely depressing to witness. Given the way that country plunders the wealth of the world you would think they could do a hell of a lot better looking after their own. It is a telling indictment of their political system.

I think your last line is a Nat party spin.
(Remember who the straw men are?)

[Winston001]

A company simply has to return a profit in order to pay dividends, growth is simply an added bonus which preumably share traders are hoping for. Regardless, once the company's shares have been floated all subsequent share trading is speculation and really has no material effect on its productivity or bottom line.

Mmmm sort of. The added growth isn't a bonus - it is a reward for giving your money to the business.

Strong businesses can turn to their shareholders for more money instead of borrowing from a bank, and the share price is an indication of the strength.

Now if Kiwis have so much spare money to invest, then as a nation we'd be better off if they invested in companies that earned their income from offshore not from domestic service providers that the nation already owns.

Agreed.

And this is exactly what the Cullen Fund (as it is popularly called), Kiwisaver, life insurance policies, and superannuation funds do. The overall problem is we are still infants as a nation at investing wisely.

As for the original topic of the thread, on reflection (and speaking as someone who is likely to end up paying CGT) I really can't see why income earned in this way should not be part of the tax base.

Yes I sort of agree even though my kids will be less well off.


But isn't the basic problem accumulation of assets? In the hands of a few families? A disproportionate amount of wealth unavailable to the rest of the community? A CGT is hopeless in attacking that.

[Clockwork]

But isn't the basic problem accumulation of assets? In the hands of a few families? A disproportionate amount of wealth unavailable to the rest of the community? A CGT is hopeless in attacking that.

Maybe. But you're talking about wealth (re)distribution again and that's just a matter of politics... I'm basing my point soley on the fact that I believe all sectors of society should share the tax burden as fairly as they can. the lack of a CGT has meant that only wage earners and spenders have been contributing so far.

[Swoop]

Why does labour's solution to making it fair always seems to be dragging the people higher down to the level of the lower, rather then bringing the lower up.

Because that is the mentality of labour.

[Hinny]

A company simply has to return a profit in order to pay dividends, growth is simply an added bonus which preumably share traders are hoping for. Regardless, once the company's shares have been floated all subsequent share trading is speculation and really has no material effect on its producutivity or bottom line.

Now if Kiwis have so much spare money to invest, then as a nation we'd be better off if they invested in companies that earned their income from offshore not from domestic service providers that the nation already owns.

As for the original topic of the thread, on refelection (and speaking as someone who is likely to end up paying CGT) I really can't see why income earned in this way should not be part of the tax base. As to how it is subsequently spent by the Government, well that's a different debate.

This current trend of abusing sales taxes to use them as a form of social engineering gets right up my nose and I'd love to see an end to it.

Good points.

The CGT consideration reminded me of the time I had to convince the tax dept. a client was able to live off his $6 per week of taxable income... He had five houses. LOL

Lost on the last point.
I thought social engineering was the role of Govt.

To possibly misquote the Hon. Trevor de Cleene; but certainly to convey the sentiment, 'The role of Govt is not to give the public what they want but rather what they need.'

[puddytat]

What is "rich"? $5 million in family assets after repaying the mortgage? $3000k family income per year?

If it was up to me, just so people dont feel like they are being unfairly victimised I would set the "Officially Rich Level " at around $200 Million.....

Then anything after that goes into collective coffers, for the greater good of all
& sundry to establish heaven on Earth .
Seems fair to me.

[Ocean1]

But isn't the basic problem accumulation of assets?

No. What possible justification is there for taxing assets? Neither they nor their owners benefit from any public support for their existance. At least earnings can be said to depend on public infrastructure and services.

There's even less reason to tax spending.

[Clockwork]

Good points.

The CGT consideration reminded me of the time I had to convince the tax dept. a client was able to live off his $6 per week of taxable income... He had five houses. LOL

Lost on the last point.
I thought social engineering was the role of Govt.

To possibly misquote the Hon. Trevor de Cleene; but certainly to convey the sentiment, 'The role of Govt is not to give the public what they want but rather what they need.'

I accept that Governements will social engineer (especially ones calling themselves "socialists") I just pisses me off when they do it using taxes.

[Hitcher]

No. What possible justification is there for taxing assets?

Local authorities and regional councils tax assets. They tax your property, usually based on its capital value.

Unlike central government, the only way they can account for who lives in their respective rohe is property ownership. They have few alternative options for revenue gathering, as local councils provide more than just services, so they can't totally go to a revenue gathering system that's based on that.

[Winston001]

What possible justification is there for taxing assets?

Because the rich pricks have them. Duhh...!!

[Clockwork]

No. What possible justification is there for taxing assets? Neither they nor their owners benefit from any public support for their existance. At least earnings can be said to depend on public infrastructure and services.

There's even less reason to tax spending.

Sorry, I don't buy that. Every member of society benifits directly or indirectly from most of the things that Government spends money on. And the more you have the more you stand to loose if society fails. The assests themselves aren't taxed just the realisation of any capital gains those assests may make.

[Ocean1]

Local authorities and regional councils tax assets. They tax your property, usually based on its capital value.

It hasn't escaped my razor sharp attention.

Unlike central government, the only way they can account for who lives in their respective rohe is property ownership. They have few alternative options for revenue gathering, as local councils provide more than just services, so they can't totally go to a revenue gathering system that's based on that.

Bollox. If they can define what they provide then they can cost it and charge accordingly, same as anyone else that wants my money. The sole reason for the current setup is...

Because the rich pricks have them. Duhh...!!