Brad Olsen: Infometrics Principal Economist talks Capital Gains Taxes and their impact

Labour has made it clear that should they return to power in the next election, they plan to take a look at a Capital Gains Tax in some capacity. 

CGT is a tax on the profits made from the sale of a non-inventory asset such as stocks, bonds, real estate, and property. 

Brad Olsen, Principal Economist at Infometrics, joined Simon Barnett and James Daniels to break down how such a tax would actually impact Kiwis, and whether it would make a material difference to the country’s finances. 

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Episode Transcript

Speaker 1 (00:06):
You're listening to the same in Barnett and James Daniels
Afternoons podcast from News Talk.

Speaker 2 (00:11):
Zedb Infometric's chief executive and principal economist as Brad Olson,
joins us now to discuss the CGT.

Speaker 1 (00:18):
Hello Brad, good afternoon.

Speaker 2 (00:20):
Nice to chat with you again, mate.

Speaker 3 (00:22):
Same to you guys. Nice to come back on.

Speaker 4 (00:24):
Yeah, so we've got you here because we're wondering about
the capital gains tax or the talk of a capital
gains tax. Before we get there, can you tell me
why things are so different from nineteen Admittedly, nineteen seventy four,
I bought my first home. It was a brand new
home at the age of nineteen. No nineteen year old
is going to be able to buy a brand new home.

(00:45):
I was working for a government department at the time.
Why have things changed, Well, I.

Speaker 3 (00:50):
Think because over that period of time we've seen that
people's incomes just haven't nearly kept pace with the increases
in house price value. So all of a sudden you're
having to take out a much much bigger mortgage and
having to pay a much larger portion of your household
income to service at mortgage. So but where did that
come from? Well, effectively because we didn't build as many

(01:11):
homes relative to probably what we needed. And so you're seeing,
you know, more people that are sticking around home longer,
are staying with their parents and similar because of how
expensive things have got. So, I mean it's interesting you
raise that because the number of people that sort of
else didn't come up and ask economy assim was a
good time buy house and normally it was sort of
in the fifty sixty seventies. Anything asked to sort of
the late eighties and things started to get definitely a

(01:33):
lot more difficult for households.

Speaker 2 (01:35):
Right, So, Brad, capital gains tax, clearly, if labor are elected,
they will look at it in some form or another.
Does it bring in much money? From your experience what
a capital gains tax? If it isn't on the primary
home and only on a secondary home or multiple homes,
would it actually make any material difference?

Speaker 3 (01:53):
Well, it's interesting because I think the questionaire is what
are you trying to design the tax for? Are you
trying to design it to make a bunch of cash?
And that sounds like that's what taxes should be poor,
But there is also that part of it where you
want to also on sure that you've got sort of
broadly speaking, as much income as possible that is being
taxed as possible, only so that you don't have people

(02:14):
that part their money in certain specific areas because it's
under tax relative to something else. So the idea there
is that if there's going to be money being made
from anything, that would be a good idea that it's
sort of tax similarly, which is where often this capital
gains tax idea comes from. Now, look from a pure
economiss point of view, that better idea would be to
implement something like a capital gains tax on all forms

(02:37):
of residential investment, including on the family home. Of course,
politics is not keen on that. And the reason you
do that is just it's clean, because otherwise you have
everyone that apparently lives in a different main home every
day of the week so they can claim a few
But I think as well, and the challenge I think
that the Labor Party has with its tax policy and
conversations going forward is that it has not only flip

(02:59):
flopped a lot, but it's also been a little bit
secretive in previous times. Now you'll remember that in Budget
twenty twenty three are undernign to anyone. The government was
sort of a hairsbreadth away from implementing a wealth tax,
and so again there's sort of a lot of I guess,
questions and confusion around what is the Labor Party's expectation
around their tax policy going into the future. But it's encouraging.

(03:21):
I think that they're talking about it because they do
need to go out to the electorate. They do need
to go up to the people ahead of an election
campaign and say this is what we're proposing to do
and this is what we think is necessary.

Speaker 2 (03:32):
Very good, we just got thirty seconds Brad. In Australia,
I think their capital gains tax is fifteen percent or
it's ten percent if you have the asset for longer
than twelve months. Michael Cullen's report was talking about being
a capital gains tax on the top threshold, the marginal
tax thresholder you pay, So for some people thirty three percent,
some people thirty nine percent. Where do you think is

(03:52):
fear and reasonable?

Speaker 3 (03:54):
I think something around that ten to fifteen percent would
probably be a bit more reasonable because you've actually got
that marginal rate at the moment. If you sell a
house and you're currently caught by the bright line test.
You hit that thirty three maybe thirty nine percent marginal RAN.
So current settings aren't good. We do need to, I think,
have a wider text discussion, but we've got to have
it out in the open and with a long lead
time rather than, oh gosh, by the way, I've decided

(04:15):
to change textels overnight.

Speaker 2 (04:17):
Excellently bred, lovely to have you on. Thank you for
your wisdom. Thank you, Brad Olson, Informetric's chief exec.

Speaker 1 (04:24):
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