Wednesday, January 20, 2010

ZenTiger Land of Taxes

Martin Evans, president of the Property Investors Federation of New Zealand (PIFNZ), said that as long as the land tax was universal, it would be a "fair tax".

No, it would be a universal tax.

He said the Government would find a way to exempt from the land tax properties with low per-hectare values.

So not universal then either?

I've already blogged about how I feel about instituting a land tax. It may be the tip of the iceberg though.

My impression to date is that the tax review is not to make things fairer, it's to increase the tax base with new taxes without removing the old taxes.

John Key has flagged that he doesn't want the overall revenue balance to change, but that will likely mean that any "windfalls" in one area will be absorbed by another. If businesses pay less tax, that might be good for job creation but the middle class can expect to bear the burden of the adjustment.

GST also looks increasingly likely to rise, and I think that will do more damage to low and middle incomes. The suggestion of "tax credits" to balance it only continues Labour's theme of turning more people into welfare beneficiaries. More excuse to grow the government to monitor and adjust and administer.

It's communism for beginners. Tax the whole salary and then compensate the 100% tax take by claiming tax credits. Maybe the government can see to making vodka cheaper so we can get into the spirit of the whole thing?

Land of the Taxes

The actual document is out and available for reading. [PDF Link]

Now I have something specific to rant against (or be mildly pleased about, if that is at all possible).

As I said on Homepaddock:

That’s a great parable. (It is, go read it). I’d seen it before, but worth bringing out for occasions such as this.

I have accepted a default position of pessimism over the tax redistribution exercise, and I think it is looking very dodgy. The more they bang on about it being “fairer” the more suspicious I become.

I think there may be a few short term wins that may take the political sting out of the changes, but ultimately they will likely create a new land tax (which I think a very bad move) and increase GST (which I think will hurt us all in the long run).

Ironically, I am a general supporter (a few minor mods) of the “fair tax” movement in America that suggests REPLACING all PAYE tax and business with a GST of 20%. Such a move will provide many benefits (I’ll do a post about it one day if it ever gets talked about seriously in NZ)

However, lowering PAYE and company tax rates and increasing GST will only mean that PAYE rates will creep up again in future years, and it would be unlikely GST go down. On top of that, homeowners will see the new “land tax” rates increase, and as they retire and their incomes drop, struggle to pay tax on their “security”. It stinks.

And I agree with what Andrei says about GST affecting the poor. I’m not confident they will offer a suitable offset for that increase in GST. And even if they do, it will just increase the bureaucracy to administer it.

Now it is time to go see how close I was to the mark.

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