James Shaw slams tax timidity, calls on Labour, NZ First to be bold with CGT

In his opening speech for the year in parliament yesterday Green co-leader James Shaw slammed timid tinkering with tax, and, confronting pontification about whether the current Government can “politically afford to do what no other Government before it has done” and introduce a Capital Gains Tax asks “Can we afford not to?”

That must be aimed at Labour and NZ First, who have to agree with Greens on any tax changes following the Tax Working Group process.

First Shaw illustrated the tax disparity issue wit no tax on the capital gains of property.

Karen is a renter. She’s got a career, and she earns roughly the median wage. Over the last 10 years, she’s earned about $450,000 and she’s paid, roughly, $70,000 in tax. She budgets well, she can manage the rent, and she can manage the other expenses, but she can’t quite have enough left over to save.

And then there’s Paul. Paul also earns the median wage. He’s a bit older than Karen, and Paul got lucky and managed to buy some rental property before house prices really started rocketing—about the time that Karen came into the workforce, about the time that John Key became Prime Minister. On the day that Paul sells that rental property, he makes as much as Karen has in the last 10 years, and he pays zero tax on that income

Now, what does Paul do? He uses that as a deposit to buy two more houses. That is the rational thing to do. And what does Karen do? Well, Karen keeps renting because there is no way on God’s green earth that she’s going to be able to scrape together a deposit on $45,000 a year.

And that, in a nutshell, is why we have a large and growing wealth gap in this country, and it is undermining our ability to pay for the public services that we all rely on, including Karen—including Paul.

There is something missing from this illustration.The implication here is that ‘Paul’ paid no tax, but ‘Paul’ must be earning something to live on for the ten years before scoring a capital gain, and after reinvesting capital gains on more property, so could have been paying some tax.

Now, the Green Party has long been calling for that fundamental imbalance to be addressed, and every single expert working group in living memory has agreed with us, but no Government—no Government—has been bold enough to actually do it. But if we are to be the Government of change that New Zealanders wanted and elected, we must be bold.

The crises that we face on multiple fronts—the wealth gap, climate change, the housing crisis—we cannot solve without fundamental reform. These crises have been allowed to metastasise because generations of politicians have timidly tinkered rather than actually cut to the core of the problem.

And the consequences of that timidity—the consequences of that timidity—are being felt by Karen and by hundreds of thousands of New Zealanders just like her, trapped in “Generation Rent”. So when the commentators pontificate about whether this Government can politically afford to do what no other Government before it has done, I ask “Can we afford not to?”

Can we afford not to?

We were elected on the promise of change. If we want to reduce the wealth gap, if we want to fix the housing crisis and to build a productive high-wage economy, we need to tax income from capital the same way that we tax income from work.

The very last question that we should be asking ourselves is: can we be re-elected if we do this? The only question we really ought to be asking ourselves is: do we deserve to be re-elected if we don’t?

Shaw is effectively throwing down the tax gauntlet to Labour and NZ First, suggesting they don’t deserve to be re-elected unless they introduce a CGT.

I have to say, boldness is needed everywhere, everywhere.

That is a challenge to the other parties in Government with the Greens. The re-election comment is particularly pertinent for NZ First, who were well under the threshold in the latest poll.

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29 Comments

  1. Gerrit

     /  13th February 2019

    Lot of pontification but no detail.

    CGT ( or as Robertson would say a capital income tax) comes in many guises and levels.

    Surely Shaw would have had one of his minions suss out the CGT most preferred by the Greens?

    Would seem to satisfy Shaw and the Greens, the CoL could bring in a CGT of .0001% on any capital gains and he would be happy.

    All I see is the Greens party leadership looking at the polls and having to say something to justify them being in “government” as lackey for Labour and NZ First.

    .

    Reply
  2. Pink David

     /  13th February 2019

    “Well, Karen keeps renting because there is no way on God’s green earth that she’s going to be able to scrape together a deposit on $45,000 a year.”

    This is the problem a capital gains tax does exactly nothing to solve. The simple truth is Karen does not earn enough to be a home owner in the main NZ cities.

    What is the Green Party solution to that?

    Reply
    • Duker

       /  13th February 2019

      A single person ?
      The median household income in Auckland would be $125,000 per yr. The rest of the country median is $98 k ( 2017- probably $105k by now)

      The idea of a single person , living alone and renting with only an income of $45k – where does Shaw get his numbers from ?
      Household income is what pays rent and mortgages

      Reply
      • Kitty Catkin

         /  13th February 2019

        Owning a house is not a right, and if Karen’s roof leaks, she doesn’t have to pay to have it mended.

        Reply
        • Duker

           /  13th February 2019

          What’s your point…rent is supposed to cover repairs, insurance,rates etc.

          Reply
          • Kitty Catkin

             /  13th February 2019

            That IS the point, that the landlord has to pay for all those things, Some people act as if rent is 100% profit to the landlord.

            Reply
  3. Fred

     /  13th February 2019

    I think James forgot that after buying two homes Paul had to spend several thousand dollars getting them fit to be rentals then rent them out on which he will pay tax on that income until he sells them and if he sells them and falls on the wrong side of the bright line test then he will pay tax on the profit which is in effect a fair form of capital gains tax.

    Reply
    • Pink David

       /  13th February 2019

      He also ignores the strong possibility that Paul will lose money on the deal. House prices are not a one-way bet.

      Reply
      • Mother

         /  13th February 2019

        Mr Shaw is quite emotional, so I might as well point out something from the same angle –

        Paul is a risk taker. Plenty of his like minded will follow similar ideas. Some will succeed, some won’t. Good on Paul and co for giving it a go.

        Karen is perhaps not willing to live somewhere else where she might be able to get ahead financially. Perhaps she’s not a go getter. Perhaps Karen spends energy complaining. Perhaps she can’t think for herself.

        Reply
      • Blazer

         /  13th February 2019

        Paul is a’ winner’ and Karen is a ‘.loser’

        Karen needs to stop being so jealous of Paul, and stop drinking so much coffee and eating …smashed avocados.

        The solution is so simple.

        Reply
        • artcroft

           /  13th February 2019

          True.

          Reply
          • Kitty Catkin

             /  13th February 2019

            One man I know had such a bad experience with his tenant that as soon as he got her out, he sold the house. I don’t know if he recouped the loss from her unpaid rent or not. That’s the chance that landlords take. James Shaw ignores that aspect, and the fact that there is a chance that that house may well be owner-occupied now. If the tenant had been decent, she would still be there.

            Reply
            • Kitty Catkin

               /  13th February 2019

              James Shaw ignores the fact that Paul will not be making much at first.
              He has to pay rates, mortgage, insurance…Karen pays her rent and has none of the responsibilies of house owning.

        • High Flying Duck

           /  13th February 2019

          Maybe Karen could realise there is more to getting ahead than property, and start investing to achieve the future she wants within the means at her disposal.
          Or she could just be jealous of other people’s achievements and decide she’s a victim.

          Reply
          • Blazer

             /  13th February 2019

            maybe Karen could marry Paul,and divorce him after 3 years and they could have 1 house ..each.

            Reply
            • Pink David

               /  13th February 2019

              Well, that sounds like a more profitable career than the one that has her on $45k for an entire decade.

  4. Zedd

     /  13th February 2019

    Maybe Mr Shaw just needs to hold his breath; latest poll has NZF below 5%.

    2020.. Lab/Grn Govt. !? :/ 🙂 😀

    Reply
  5. Strong For Life

     /  13th February 2019

    How much tax does Mr Shaw pay? Show us your tax returns Mr Shaw, your earnings and investments, how many free lunches and dinners you receive, how much taxpayers have to contribute to pay for your share of the gold-plated Parliamentary superannuation scheme.

    Reply
  6. Duker

     /  13th February 2019

    In the US individuals family homes are subject the Capital gains tax, but on the upside they can claim mortgage interest against their income.

    Just as NZ ( Bill English) removed depreciation from the ‘costs’ which landlords can claim against income , may we can remove interest costs when you dont pay a CGT, as landlords can make a nice little investment by maximizing negative gearing

    Reply
    • Pink David

       /  13th February 2019

      “Just as NZ ( Bill English) removed depreciation from the ‘costs’ which landlords can claim against income , may we can remove interest costs when you dont pay a CGT, as landlords can make a nice little investment by maximizing negative gearing”

      You do realise that, to a large degree, it is the tenant who benefits from the tax deduction for interest don’t you?

      Reply
      • Duker

         /  13th February 2019

        The value of the home determines the rent, not the landlords costs. My neighbour who moved out after 10 years told me his rent was around $350, it was advertised at $550. The ownership hasn’t changed for around 15 years or so.
        The owners mortgage is likely paid off and the rent is a market rate , barely related to interest rates or any deductions

        Reply
        • Pink David

           /  13th February 2019

          “The value of the home determines the rent”

          Nonsense.

          “rent is a market rate , barely related to interest rates or any deductions”

          Yes, market rate. How did you get it wrong and then right in the same post?

          The willingness of people to buy a house and rent it out is dependent on the return. Mortgage rate deduction moves the supply side of the equation downward. Lower supply and that market rate goes up. It’s the tenants who benefit from that.

          Reply
          • Blazer

             /  13th February 2019

            ‘ Lower supply and that market rate goes up. It’s the tenants who benefit from that’

            sheer genius!

            Reply
  7. Pink David

     /  13th February 2019

    No you didn’t.

    “You do realise that, to a large degree, it is the tenant who benefits from the tax deduction for interest don’t you?…….”

    It’s really not that hard, but I guess you are just much happier being a dick.

    Reply
  1. James Shaw slams tax timidity, calls on Labour, NZ First to be bold with CGT — Your NZ – NZ Conservative Coalition
  2. Peters the elephant in Labour’s CGT room | Your NZ

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