Possible property ‘value capture’ tax to fund infrastructure

Finance Minister Grant Robertson is thinking about a tax targeting people who will get an advantage from improved infrastructure to help fund projects like rail links.

Rather than ‘user pays’ this is ‘benefactor pays’ – but it could become contentious deciding who benefits and by how much and how much extra tax they should pay.

Would property owners who are adversely affected by new rail lines and roads get tax reductions? Property values may go up close to new railway stations, but values may go down if a property suddenly has trains whistling past them.

The very fact that property values are changed by infrastructure projects will already affect the level of rates they pay, which is already a local body tax on property.

Stuff: Finance Minister Grant Robertson considering property ‘value capture’ tax to fund rail

Speaking at the Auckland Chamber of Commerce/Massey University annual finance lunch at the Pullman Hotel in Auckland, Robertson said the Government was investigating “innovative” ways to bridge the funding gap to pay for the rail and roading infrastructure the country needs, especially in Auckland.

“Between the balance sheets of the Auckland Council and the Government, we still don’t have enough,” Robertson said.

“Minister Phil Twyford and I are actively looking at opportunities for how to do that.”

“If we are going to make big investments in things like [Auckland’s City] Rail Link, and a series of different rail links, people will benefit from that. How do we capture the value of that, and use that to fund the development?” Robertson said.

In March last year, the Productivity Commission gave an example of how that might work.

If the land value of a property benefiting from a new rail link increased in value from $100,000 to $250,000 over five years – a 150 per cent increase compared with a rise of 120 per cent in land values in the wider area – a tax could be levied on the $30,000 gain attributable to the infrastructure improvements.

The tax could be levied alongside of rates, the commission suggested.

This would amount to double taxing – increased property values mean higher rates, but this proposes slapping another tax on top of that.

Sounds very complicated, and it would be very contentious.

People who don’t use rail and don’t sell their properties will end up paying more for nothing. This is likely to particularly affect retired property owners who don’t commute and who are unlikely to move except to the cemetery – perhaps old people living close to cemeteries should be taxed higher.

21 Comments

  1. Corky

     /  March 11, 2018

    Wile most elections centre around ”handouts,” the coming election is shaping to be fought on taxes v handouts in a big way.

    Labour seems hellbent on introducing a raft of new taxes that will choke the goose laying our golden eggs.

    It’s fascinating that not only National has learnt little from Labours time in the political wilderness, it would seem Labour has learn’t little as well.

    • Blazer

       /  March 11, 2018

      what is the goose and what are the…golden eggs?

      • Corky

         /  March 11, 2018

        Goose- Private enterprise and overseas investment. Our global reputation.

        Golden Eggs- Economic prosperity. Top-line niche products. Keeping unions chained. Keeping public services streamlined.

  2. artcroft

     /  March 11, 2018

    A tax on the family home? Absolute poison in NZ. Bridges is going to have a field day.

    • Corky

       /  March 11, 2018

      Arty, once well water is tainted, every hombre and critter steers well clear. Only them that are desperate chance a slurp.

  3. David

     /  March 11, 2018

    You can see the logic in it in some circumstances, re zoning on the urban boundary for example for bare land could work but in the form of an annual charge if the land wasnt developed.

    • Callum

       /  March 11, 2018

      Being forced to pay tax because a possible use of your property is more valuable than the current use is plain stupid.
      So if I own a farm, continue to farm it and some Council decide they want to expand the urban area in my direction it means not only do I have to put up with neighbours who complain about normal rural activities, skyrocketing rates bills as my property is now worth more they then want to tax me because my property value has increased due to something completely outside my control. Effectively that farmer would be forced off their land because a council thinks houses should be built there.

      • David

         /  March 11, 2018

        Sorry I wasn’t clear, bare land as in unused bare land which surrounds many cities usually home to a pony or nothing. Don’t mean farms and they rarely are on urban boundaries anyway.
        I know it sounds like appropriation by stealth but there is a lot of landbanking on Auckland’s fringe and if you re zone for desperately needed housing putting the stick about is one option.

  4. David

     /  March 11, 2018

    Trouble is if you put a motorway at the bottom of someones garden the house value may rise but the quality of life decreases and then to be taxed on that is not a vote winner…or fair.

    • Kitty Catkin

       /  March 11, 2018

      The house value might rise in theory, but in practice the house could be all but unsaleable.

      I lived right on a main road briefly, and the traffic noise even on that one was intolerable.

  5. PDB

     /  March 11, 2018

    The initial question should be asked – why do they need more tax on top of more borrowing?

    We are well in surplus, economy has been handed over in great condition, and National was not only going to pay down debt faster than Labour but were going to give tax cuts to all taxpayers.

    Fiscal hole anybody?

    • David

       /  March 11, 2018

      Because ‘Tax the Rich!’ That’s why.

      • Gezza

         /  March 11, 2018

        Actually it’s smelling like tax the homeowner. A lot of us ain’t rich. We managed to buy & maintain our home. It’s tight already. That would lose them one of my votes.

        • Kitty Catkin

           /  March 11, 2018

          Tax the ants to look after the grasshoppers.

          We don’t pay rent but we do pay rates (renters do indirectly, of course, but you know what I mean), insurance and maintenance. I am mortgage free, in a modest house, and I am damned if I can see why my tiny income should be even tinier so as to fund people much better off than I am.

          Gezza, your place looks like a lovely place to live. You have made it so to a large extent. To penalise you for your hard work making that paved area and so on would be an appalling injustice.

  6. David

     /  March 11, 2018

    “Sounds very complicated, and it would be very contentious.”

    I get the feeling he thinks this is a good thing.

  7. David

     /  March 11, 2018

    There are some interesting quotes in that article;

    “Responding to a question from Sam Stubbs, founder of the Simplicity KiwiSaver scheme, Robertson said: “We want to see that [KiwiSaver] capital invested as much as possible here”.”

    Watch out, he’s got his eye’s on your pension savings to fund his dreams….

    • Blazer

       /  March 11, 2018

      Sam Stubbs resigned from Hanover Finance …just before the shit hit the fan..and the Watson/Hotchin scheme that had’ the strength to withstand any conditions’….blew up the savings of…many…suckers.

  8. Alan Wilkinson

     /  March 11, 2018

    Funny that we build infrastructure for centuries but when Labour gets in we suddenly need brand new taxes to fund it.

    • Corky

       /  March 11, 2018

      Economics 102.

    • Blazer

       /  March 11, 2018

      alot of beneficiaries out there AL…and with the 65 trigger,an aging population,its all got to be…paid..for.

  9. Blazer

     /  March 11, 2018

    its only up for discussion…present your submissions…and keep..calm.