I live in a part of the Mt Albert electoral area. As you read this, the results of a byelection in my area would have been announced. It is an interesting byelection as National are not putting forward a candidate, but Gareth Morgan's new Opportunities Party is.
This is interesting to our industry and many others because cats are not the only things that irritate Gareth Morgan. For many years housing has also caused him a lot of angst. He does not like homeowners living in their own homes without paying rent to themselves and paying tax on that rent. He calls homeowners tax avoiders. Rental property owners are not quite as bad as homeowners, but we don't charge our tenants enough rent and therefore don't pay as much tax as the Opportunities Party would like us to. I imagine farmers are in a similar position.
The Opportunities Party intends to close this "tax loophole" and make asset owners pay tax on the assets they hold.
"Closing the tax loophole that owners of capital are allowed to exploit will go a long way to making New Zealand a fairer society and our deployment of scarce productive capital far more economically successful". It is interesting that he uses the word "fairer" when financial assets such as those held by Gareth Morgan Investments are exempt from the proposed tax.
Morgan has also acknowledged that it isn't fair on elderly home owners who have a fixed and low income. They still have to pay the tax, but without an income to pay it they will be given mortgages that they will have to pay back when the property is sold.
However what about others who lose their jobs or get sick? Is it fair that they still have to pay income tax on their theoretical house rent when they no longer have an income?
Morgan is also using the "we will stop speculators" tactic in promoting his new tax. It is hard to see how this will happen given that property speculators are already required to pay income tax on their profits. In addition, property traders sell their properties so Morgan's new tax would not apply to them.
Looking specifically at rental property, Morgan says that his party wants rents to be fair, however his tax will incentivise owners to increase their rental prices to avoid the tax. Tenants may have little option than to pay, as it is considerably cheaper to rent a home in New Zealand than to own it. (perhaps this isn't such a bad policy?) The only other option is to have people move in to share costs, but overcrowding is already a problem for many tenants.
Morgan is selling his policy on the basis that only 20% of the population will pay for the tax. He is using Trump like bold claims such as we will "restore the Kiwi tradition of being the most equitable or fair society on the planet". But if not paying an income tax on owning your own home is such a rip off, why isn't this policy in place in other countries?
The truth is that this tax is designed to reduce people's choice. Many New Zealanders choose to put their tax paid savings into home ownership rather than financial services like the Gareth Morgan Investments.
This is a crude attempt to force people to spend less on their home and more in financial services by taxing homes and other investments over and above financial assets. The financial services industry has always wanted to tax other investments to make theirs more attractive. It is a shame they don't put more effort into improving their products so that we actually want to invest with them.