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As the Labour Party and other whingers of the left try their best to excite their mainstream media mates about why this country needs a Capital Gains Tax (CGT) perhaps it’s timely to remind the lefties about just who pays the most income tax in this country already.
Before that though, a quick glance at the Crown Accounts for 2023/24 FY published on October 10th. What they comprehensively show is that the country is living beyond its means.
Government income was $167.3 billion. It spent $180.1 billion.
I’m no accountant but you don’t need to be to realize that a country, a company or even a household cannot keep spending more than it earns. Yet that’s what this country has done – at an outrageous rate – since 2017, when Labour came to power.
In those six years, Crown revenue increased from $110 billion to $167.3 billion. The tax take component of that was $80.2 billion in 2017 increasing to $129.3 billion this year.
Seems like we’re paying plenty of tax already eh?
But here’s the killer. Crown expenditure increased from $104 billion in 2017/18 to $180.1 billion in just six years! What the hell did we spend it on??
Between 2017/18 and 2023/24 the Crown increased its income by $57.3 billion - more than a billion dollars extra a week. Where did it go?
Did we put it in the bank? Did we pay down some debt? Did we improve our services?
No, no and no.
We spent it all, and we borrowed some more. While there was more than a billion dollars a week extra coming in during 2024 than in 2018, we were spending more than a billion and a HALF extra each week.
The government has increased its share of spending in the economy by a massive 7.6 percentage points, probably the largest expansion of the state spending in 80 years.
Of course you see the benefits of all that extra spending don’t you? In our hospitals and schools and roads ?
Oh, maybe not.
So don’t tell me this country needs to introduce new taxes or make changes to the way we are taxed. What we need is much better economic and fiscal management so that we spend more efficiently and try to live within our means.
But now let’s see who pays income tax in New Zealand.
Last year Robin Oliver, the former IRD Deputy Commissioner, released a report through his new consultancy OliverShaw which showed that those earning over $70,000 in 2021 made up 21 percent of taxpayers but paid 68 percent of income tax!
Breaking it down even more the figures show those making between $180k and $300K represented less that 2 percent of taxpayers but paid nearly 10 percent of the income tax take.
On the other side of the ledger, a study back in 2016 showed over 660,000 households – around 40 percent of the country – received more in tax credits and other benefits than they pay in income tax.
I doubt those figures have changed in eight years. It might even be a bigger share of the nation’s households.
All up 2,606,670 taxpayers earn less than $50,000 a year.
At the other end of the scale just 51,850 New Zealanders earn more than $250,000 a year.
So what share of the income tax pie do the respective groups pay?
If you’re one of the highly paid 33,000 taxpayers earning over $300,000 a year you’re in a group contributing $6.27 billion to the IRD coffers.
So less than 1 percent of the country’s 3.8 million taxpayers are handing over around 5 percent of the tax revenue.
There are all sorts of statistics to show the so-called “rich” or well-paid already pay their fair share. Four years ago the largest amount of income tax – about a quarter of the total – was paid by the 3 percent of taxpayers who earned more than $150,000 a year.
That year 56 percent of income tax was paid by those making $80,000 a year or more.
Yet the lefties keep on with this endless rant – the wealthy should pay their fair share.
Ever realized that they already do – and then some? How much do the socialist-marxist politicians and their supporters want to rape and pillage the only group in the country that makes a real taxpaying contribution?
Here’s why a CGT is a stupid and unfair idea:
1. The country already collects enough tax. The Government has to learn to spend it better.
2. The family home will always be exempt from a CGT because politically a home is a no-go area for tax.
3. Only assets purchased after a CGT becomes law will be subject to the tax. Otherwise there will have to be a massive valuation exercise on all liable assets, a process which will be time consuming and subject to rorting and appeal.
4. Because of the usual time lag between an asset purchase and a sale, a CGT is likely to take some considerable time before any meaningful revenue is collected.
5. Those in the business of buying and selling property already pay income tax on their profits.
6. Is a CGT only liable on a second house? What about other assets? Art ? Shares ? Cars? For many, their Kiwisaver is their biggest asset. The money invested is after-tax income, the investments inside the fund are taxed and the return is therefore tax-exempt. Surely there wouldn’t be a tax grab on the final payout would there?
A CGT strikes me as nothing more than an envy tax, which will do nothing to close the gap between rich and poor, do nothing to make houses more affordable (based on overseas evidence anyway) and as most assets liable for a CGT would be owned by higher income earners, this is another hit on the group who already pay, by far, most of the income tax in this country.
Anyway, sometimes assets decrease in value. Has there ever been a question asked about a tax credit in that circumstance?
CGT is a nonsense that Labour and the left will preach to their choir.
It’s just confounding that so many business leaders, including those two bank CEOs, think we need it in the interests of fairness.
The numbers above suggest we already have a very fair tax system, which is possibly even skewed against high income earners.
A party campaigning on a CGT in 2026 will be swamped at the polls.
I think they should not touch CGT. People that think it should be paid (Labour and Greens for example) believe that it is multiple house properties. And it isn't. If they really want to even out "tax" how about dropping the some of the corporates listed as charities and there are plenty of those some are multi billion corporations. Do they tax correctly and more prudent spending will help the country.
I'll be honest. I live in a bach which is completely mortgage free, it's my fishing nirvana and I hold no grudge or anger toward someone doing well out of their investment.
What is it now with this awful envy idiocy that one sees fit to place blame on another for them not having the fortitude and the comprehension to get the rewards for property investment?
An aside..
I just caught 2 trout and the last of the last whitebait, and I got offa the stopbank and witnessed 6 young ladies ( children )having a bike race and peddaliing like the devil itself was up their backsides, I marvelled at the way they competed and contested,and I loved it. Kids being kids and just going hard out.
It bought a tear to my eyes. My kids have long have left the roost... but to see this was worth more than my catch.
It reminded me of the way we used to be.
Hard work and self determination used to mean a lot more than likes and self adulation on social media.
I'm 50 this year. I don't have much.
But I have pride, I have self worth and I've taught my kids what I know.
That's enough for me.
I'm sick and bloody well tired of those who choose to drag down and denegrate those who chose to have a crack and have made their own future.
I'm.comfortable and I chose my path. I'm not a millionaire but I never wanted to be so.
But all power to those who strive to be so.and make it .
If the will is there and the determination is evident then you go and you reach for the stars and plenty of
people, like myself that didnt possess such drive will always be right behind you because you deserve support.
You create wealth, you create jobs and put your arse on the line everytime you do so
Aaron 👍