Tax and recovery: Two ways Bill English is correct

Whale Oil is unhappy with Bill English mentioning a capital gains tax.  Specifically he says:

In times of recession it isn’t that the government should be looking for more taxes.

But there are two reasons why I think Bill English is correct at the moment.

  1. Bill English appears to be saying that he wants income to be taxed more broadly to remove the “incentive” to shift income into housing.  As a result, he is saying that he wants to broaden the tax base, which implies that they can improve incentives and REDUCE other taxes.
  2. During a recession we could “stimulate activity” by saying we will increase taxes IN THE FUTURE.  This isn’t what he is saying, and I’m not saying it is a good idea, but it is another potential way of viewing things.

Ultimately, there are incentive problems with the tax system and when Bill English says he is interested in a CGT it is because he realises that these problems exist and that they are causing structural imbalances.  Good on him for being brave and admiting he is willing to do look at these difficult issues.

  • David

    I realize that 9 years of Cullen and Clark has stunted any intellectual debate but instead of calling for taxes (speculators and frequent participants pay CGT anyway) how about following the rest of the western world and ecourage savings. USA have their 401k, UK have their ISES but here in NZ we end up with an appalling tax system on our savings and we couple that with one of the most generous state pension schemes on gods green earth.
    NZ would do better to strengthen their capital markets, have a functioning commerce commission with a more litigous investor class. We could also stop flogging off our best to overseas investors and letting them de list our best companies.
    It is intellectually bankcrupt to call for a CGT when it hasnt worked anywhere else on earth. You give me somewhere else to invest and I will happily leave property investment behind as would a lot of others, we are forced there because of lack of alternmatives.

  • @David

    Ok, just because someone doesn’t agree with you doesn’t mean you can imply they are stupid. We don’t tolerate that sort of rubbish here and if you keep commenting in that vein I will ignore you.

    If we want to “incentivise savings” or “deepen capital markets” we need a reason. What is the market failure?

    The government doesn’t “make” things for people to invest in – we aren’t a communist country. There are other investment options. Currently government policy skews peoples incentives towards housing, this isn’t good policy.

    If we are going to keep the current tax system, implementing a CGT such that different forms of income are captured equally is better than the current system which has a systematic bias to housing investment.

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  • ken

    I think most goverments think housing is the best way to increase tax income. They get taxes from home owners but then give them tax breaks. Reminds me of places that give tax breaks for new jobs. Sometimes the tax breaks are worth more than the new jobs will provide in revenue or taxes.

    Home owners do buy more so it does increase comsumption but i would be interested in seeing how much revenue they get from that compared to tax breaks.