October 28, 2025 • 20 mins
Labour has announced what some are describing a “watered down” version of a Capital Gains Tax.
This targeted CGT would affect profit made after July 2027 from selling a commercial or residential property, excluding the family home.
Leader Chris Hipkins promises nine out of 10 Kiwis won’t pay tax on what they own, and it’ll allow everyone to get three free doctors visits a year.
On the flip side, National’s calling it an “attack on investment and savings” - with Finance Minister Nicola Willis saying it would “put New Zealand’s economic recovery at risk”.
Today on The Front Page, Infometrics economist Brad Olsen is with us to dive into the details of Labour’s latest pitch to the public.
See omnystudio.com/listener for privacy information.
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Episode Transcript
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Speaker 1 (00:05):
Kiota.
Speaker 2 (00:05):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. Labor has
announced what Summer describing as a watered down version of
a capital gains tax.
Speaker 1 (00:23):
Labour's targeted CGT would.
Speaker 2 (00:25):
Affect profit made after July twenty twenty seven from selling
a commercial or residential property excluding the family home.
Speaker 1 (00:35):
Leader Chris Hipkins promises nine out of ten kiwis won't
pay tax on what they own.
Speaker 2 (00:40):
And it'll allow everyone to get three three doctors visits
a year. On the flip side, National's calling it an
attack on investment and savings, with Finance Minister Nikola Willis
saying it would put New Zealand's economic.
Speaker 1 (00:56):
Recovery at risk.
Speaker 2 (00:59):
Today on the front, infometrics economist Brad Olsen is with
us to dive into the details of Labour's latest to
pitch to the public. Brad, tell me what your first
thoughts were when you saw this policy.
Speaker 3 (01:16):
Look, it was challenging to see when we got their
policy announcement. It came out very early in the morning
five o three am. I think that it didn't have
some of the fairly basic policies that you might have
inspected or basic elements of a policy on cats. It
didn't have any numbers around it. We didn't know how
much revenue this capital gains tax or limited capital gain
tax and expected to bring in, So it was a
(01:38):
bit challenging to start with, alongside the fact that you know,
looking through the detail, it was clear that this was
a very narrow capital gain sex. It was focused on
the lacks of residential property outside the family home and
commercial property, but it had a much longer list of
exceptions that weren't included. And when you sort of have
a policy that includes two bullet points of what is
(01:58):
in and a whole lot of bullet point of what's
cast out, you really do start to get the feeling
that it's sort of quite constrained. The idea generally with
a tax policy, certainly from an economics point of view,
is you want it as broad based as possible so
that reduces those administration costs. It means that income has
broadly sort of taxed a similar way instead of at
the moment, we now start to risk having a whole
(02:19):
lot of different silos that things fall into. Probably one
of the more challenging ones that we've started to uncover
as we've started to get through the policy detail is
the fact that this policy is expected to pay for
a new healthcare policy for three VP trips per person
per year. The difficulty is this, it looks like what
we call a hypothicated tax that the money that is
(02:40):
coming in from the capital gains taxes ring fenced and
can only be spent on that new health proposal. So done,
seeing a little bit odd to tie capital gains to
health funding. Good to sort of see a connection in
terms of the government wants to highlight a priority area,
but seemed a little bit sort of specific to link
those two parts together.
Speaker 1 (03:01):
First of a couple of things to unpack there. First off,
can you tell me a little bit more about the numbers,
how much.
Speaker 2 (03:07):
Do they actually expect to generate from this ring fenced policy?
And secondly, can you even I mean, is it even
possible economically to make sure that that specific money goes
into this specific pot?
Speaker 3 (03:28):
I mean, certainly you can make sure that it goes
into that specific pot. We have very limited sort of
direct funding initiatives in New Zealand, but one of them
is that likes of the National Land Transport Time. So
all the money that goes from the likes of petrol
text and similar goes into a separate pot that can
only be spent on transport. So we do do that.
It is an option, but it's unusual to link something
(03:49):
like capital gains and health If you were to link
health money into health money out maybe, but to have
something sort of quite different on the INDs and the
outside as unusual. You can technically do it. But to
first question around how much is expected to be brought in,
it's not going to be nearly as much of anyone
probably would have thought of before. Capital gains just aren't
nearly as strong forecasts into the future, and so you know,
(04:12):
the figures are in sort of the low hundreds of
millions of dollars that have been talked about, and Labor
themselves highlighted that the expected amount coming in is expected
to be small and to sort of scar up over time.
I think that's understandable given where the likes of the
property market and SMAR is. But we're not talking a lot.
It's not billions of dollars a year that we're going
to be generating if from this sort of proposing going forward,
(04:33):
if it were to come into action.
Speaker 2 (04:37):
Well, if we speak hypothetically as well, if it did
come into action, I can see everybody selling off stuff
before the tax takes effect.
Speaker 1 (04:44):
Does that usually.
Speaker 3 (04:45):
Happen Potentially, I think that'll be a little bit short
sighted from people, I mean, and realistically that's because of
one of the biggest misconceptions of the capital gains taxes
that oh, well, I've got all these gains that are
going to be taxed for the last fifty years. No,
the policy is quite clear that it's not retrospective. It
starts from I think the first of July twenty twenty
(05:06):
seven if it were to be enacted. So it means
that you could buy a house right here today, it
might make let's say, fifty thousand dollars between now and
twenty twenty seven, and then after twenty twenty seven you
make another fifty thousand dollars, so one hundred k all
up before you sold it in I don't know twenty
twenty nine. You'd only pay tax and it would be
twenty eight percent of the profit. So the additional gain
(05:28):
that you'd make, which would be the fifty thousand dollars
made after July twenty twenty seven, so you might have
had an asset for forty years, doesn't matter how many
how much of a capital gain it has made. None
of that would be taxes only sort of going into
the future. So I'd find it pretty hard to believe
that there'd be a whole bunch of people out there
who would have an asset at the moment and he'd go,
you know what, I'm going to sell it off and
then do what with the money, presumably buy another APT
(05:50):
in the future. So there's a lot of talk about it.
I just don't think it would be necessarily as sensible
to do it. Quite different though, this proposal from the
Lakes and All wealth tax, where no matter if you
sold it or not, you were going to be paying
a whole bunch of pecks out each and every year,
which is generally why capital gain sex is a much
more appropriate way to move things to the tech system
(06:10):
than to go for something like the wealth tax.
Speaker 2 (06:13):
I only say that because a lot of people sold
their houses and cars before the rapture was meant to
be coming, so I know that there will be a
few people selling off their farm or their commercial property beforehand.
In terms of so that I know that they want
they're allowing for I think she's Aishaverel said four point
five million extra doctor's visits.
Speaker 1 (06:35):
A couple of hundred mil. Do you reckon that that'll
cover it?
Speaker 3 (06:40):
Well, I mean, look, they've done some costing, so at
least we've got some numbers now. So far we've sort
of were operating a little bit in the blind always
nice and a little bit more detail behind them. But look,
all sort of work with what we've got for the minute. Look,
I think going forward, there's a question of, you know,
how does that sort of change demand for health care
in general? But also, I mean one of the questions
and the challenges here why universal? Why do people who
(07:04):
earn I don't know, two one hundred thousand dollars a year,
what do they need three free GPS? It's a year
that seems like an expreme amount of funding to sort
of put universally for something like that, rather than targeting
it to those who need it the most. And I
mean part of that seems to come down to an
ideological sort of divide. We have some groups and parties
and similar who going while everything should be universal, others
(07:27):
who think it should be quite sort of specific and targeted.
Look generally, personally and economics. So I generally lean into
more of the let's get it to the specific people
that need it can because that's where you then can
reduce some of the costs, so you don't have to
sort of put it out to everyone. But look, there
will be a question I think around the likes of
resourcing and similar in the health system, given it's already
under pressure, but getting more money into frontline services and
(07:50):
through that sort of proactive preventative work that GPS do
is important. If you can get more resource in there,
then you don't you shouldn't have to put as much
resource into the other end of the spectrum because people
will actually go and get their issues sorted earlier rather
than waiting and waiting, waiting, going to the hospital late
and then costing a whole lot more. So I can
see that part of the approach on balance as being
(08:12):
quite efficient. It's just can you resource it? And look,
they're the challenge there at the moment. I think there
will be an ongoing challenge in the future.
Speaker 4 (08:24):
Other countries have been doing this for years across the
Tasman Australia has had a capital gains tax for decades.
BIT treats rising wages, better conditions and strong public services
as signs of success and New Zealand should do the
same in terms.
Speaker 2 (08:42):
Of the exemptions for family homes, farms, ki we saver
business assets, that kind of thing.
Speaker 1 (08:49):
Why do you think they've taken this approach?
Speaker 3 (08:53):
Look in my mind, the exemptions that they've made with
this narrow capital gains tax, it's very much sort of
politics over economics. There is an argument for a capital
gains tax at a comprehensive level, and in my mind
as an economist, that would include the family home, just
so that you don't have this sort of ability for
everyone to sort of play games with it, and you know,
you sort of say, well, my family home is the
(09:13):
one I grew up in, and my partner's family home
is the one that they grew up and so we
get to, you know, all that sort of question around
inheritance and everything else. You know what happens to that
sort of farm if you then sort of divide something
off and you add an extra property onto it, is
that a second home or is that just a farmster
which becomes exeent. Like you just get into this really
(09:34):
big challenge of sort of ruling in, ruling out that
causes for an administration, you need to get the accountants
and the lawyers and all that involved. So I find
that a bit challenging, but I think that's pragmatic from
the Labor Party because they want to manage the politics
of this hit. The form glorries around a more comprehensive
capital gains tax and wealth tax on similar that would
be quite broad. This time it's sort of focused very
(09:55):
much into areas that I except they think as a
political party has a little bit more ability to influence
the electorate if you're sort of looking to taxing people
who have a second home that's on a particularly large
large group, or those commercial properties that's not sort of
it shouldn't be inhabiting business activity itself and everything else.
(10:16):
I think that's the argument, and that came through in
the release from the Labor Party focusing on the fact
that I think nine to ten people wouldn't be hit
by this narrow capital gains tax. So again, there's sort
of a variety there in terms of what they're trying
to focus on politically as well as economically.
Speaker 2 (10:33):
And the fact of the matter is Labors spent years
avoiding the issue of a wealth tax or a capital
gains tax. Will they won't they?
Speaker 1 (10:40):
What do you reckon? Shifted the dial with Hepkins.
Speaker 3 (10:45):
Well, I mean probably a little bit of the response
to the last time they tried this. I mean, remember
that last time that labor was in government. I think
this is probably one of the worst ways you could
ever go about tax policy, to be clear, is telling everyone,
telling the electric, telling the people, no, it's not happening,
We're not looking at it's not going to happen, designing
a whole system behind everyone else's back, and then done thing.
It's sort of a month or so before the budget,
(11:06):
which is exactly what we saw. And I think twenty
twenty three we need to have a conversation about tax
and I absolutely think that's true, But we need to
have a good conversation rather than sort of a bit
of a bat and switch where you tell everyone one thing,
do the other, and then you just undermine everything because well,
at the moment, who sort of would trust what later
says on tax that That's the challenge that I think
(11:27):
they has, which is also why I think they've come
out with this fairly narrow approach and going well, look,
this is not going to knock this, so of everyone,
that's a sort of a more quite constrained option. It's
a constrained tax policy being taken on. It's a more
sort of and softly approach. The risk, of course with
that is that what does it do enough to sort
of change the dial And after a period where let's
(11:48):
be clear, canceital gains of runne course a little bit,
maybe not fully, but some of your bigger capital gains
happened over the last sort of ten twenty years, and
with house prices currently down on a year ago depending
on the measure, years not looking particularly strong to have
those in the future. What I think changed is political polling.
You know, you've seen continued support actually in the last
couple of years for a capital gains tax, at least
(12:10):
at this more sort of narrow level. So it does
give an ability to say, well, look, people are asking
for it. It's clearly a want as well to invest
more into health. So I think that's where coming bringing
everything together, there was an economic reason as well as
a political reason.
Speaker 5 (12:29):
Now I watched Chris Hipkins stand up. There were three
words he refuses to say capital gains tax. Mark my words.
That is what labor is proposing and far from what
Hipkins and Edmonds have claimed. This is a broad capital
gains tax. It will include all commercial property that is
(12:53):
to say, land and buildings that are not residential. That
is effectively a tax on every are you business in
New Zealand.
Speaker 1 (13:03):
It's a disappointing that they haven't gone the.
Speaker 3 (13:04):
Full hog though, oh as an economist, I think it
is a missed opportunity to not have done the whole thing,
or to be honest, have thought about what we could
do or should do more broadly around the likes of
the tax system in terms of how you sort of
support more economic activity, but also sort of the efficiency
and the equity of the tax system. Like the idea
(13:26):
here right should be that you bring together as much
money as you need to fund the government from as
broad of a set of sources as you can, so
that there's sort of no one area that doesn't get text,
which means that another area has to get text a
whole lot more to make up for it. And so
in my mind, having something like the comprehensive capital gains
tax does seem sensible. It might not make a lot
of revenue at the moment, that's fine, but also looking
(13:48):
at other options like a land value tax or similar
or importantly, trying to reduce the top tax rate, which
at thirty nine percent, really does diminish the ability for
people to want to or the ability to invest in
businesses to quite the same degree because when they get
those returns will once they get over a certain amount
they get you lose a sort of you know, nearly
forty percent all at once. So there is a challenge there,
(14:10):
I think around this sort of cohesiveness of the entire
tax system. I think it is a missed opportunity to
have done more. But at least we're having the tax debate.
The concern, of course, is that this has already started
to turn into you know, a real misinformation while people
talking about tax you know, I've seen some parties who
are opposing this saying, you know, this is coming for
the businesses, and no it's not. It's coming for the
(14:32):
profit on someone who's got a commercial holding, so they
might have a twenty five million dollar factory or something
that they've had for thirty years, if it makes sense
for thirty thousand dollars over the next couple they will
pay twenty eight percent tax on the thirty thousand dollars
more not on the entire value of the asset. Like
there is some real stupid scare mungering out here that
I think misses the issue. But at the same time,
(14:53):
as an economist, yeah, I would have definitely liked a
more comprehensive option, if not having thought even more broadly
about the tax system.
Speaker 2 (15:00):
Yeah, and certainly not small businesses as well, who I
assume would be renting their premises or or the shops
or whatever they're working out from. Why do you reckon
they stopped short at introducing a wealth tax?
Speaker 1 (15:16):
I mean, do you reckon that?
Speaker 2 (15:17):
They had to look at the Greens and saw the
backlash they got on all of their wealth tax stuff
from that Green budget, and they just want backed off
and said no, like, we're not We're not dipping our
toe into that.
Speaker 3 (15:29):
I mean potentially, I sort of expect as well that
they will have done quite a bit of work in
the background, and I know, you know, you've talked to
people that seem to have a little bit more inside
knowledge and they highlight that over time they have been
discussions within the Labor Party over which way the sort
of tack on this. But the evidence around the likes
of wealth tex I just I don't think it stacks up.
I mean, you can see them in terms of how
(15:50):
many countries developed countries actually have a walth text in comparison,
a comparison to something like a capital game stick and
some of the advice that was coming through from Trusury
when Labor last tried to look at when they were
in government, there was a much greater focus on careful
gastacks or doing something more in that area. So I
sort of think that it's a combination of politics and
(16:11):
and economics again trying to find the best middle ground.
But the questions with how narrow a policy this is,
both in terms of the money it brings in and
what it pays for. Isn't enough to turn the doll
because you know, you've seen a lot of calls from
some political borders saying it needs to be a whole
lot more investment in government. If there's not the ability
(16:32):
to sort of raise a huge amount of revenue from
the policy, are we spending a lot more time on
a policy then it's actually going to sort of influence
in our daily lives potentially.
Speaker 1 (16:41):
Yeah, And they could know that as well.
Speaker 2 (16:43):
The hesitancy, you know, tacking it on to such a
big issue.
Speaker 1 (16:46):
Like health and what.
Speaker 2 (16:48):
I don't know whether you saw the press conference with
Barbara and Ben's Chris Hepkins and Aisheveril, but a majority
of it was talking about help right. They started off saying, look,
they led with aspirations of a better healthcare system. They're
saying Luxon's bringing the country backwards. There are Kiwis leaving
(17:10):
the country. And this is all before they mentioned the
word tax, mind you, So that kind of seems to
me like they were hesitant with their so they've tacked
it onto something that Kiwis care about.
Speaker 3 (17:23):
Yeah, definitely. Look, I think the challenge going forward for
all political partings is how you sort of square the
current finances that the government has where we are still
expected to spend more as a government than it will
earn all the way out to something like twenty thirty,
but at the same time needing or certainly expecting from
New Zealand, it's more money going into the healthcare system
because of some of the challenges. So there's a real,
(17:44):
I think difficult balance there. We're on one hand, you
need more money generally to try and balance the book
seed through higher revenue or not spending as much, but
you also need to be spending more apparently on the
healthcare system to increase those outcomes. That means that again
it's sort of still got this tension there where even
under these sort of policy settings and still have a
deficit or half a decade or so, it's still pretty
(18:05):
unpalatable for a lot of New Zealanders. So a lot
of difficult choices I think ahead, a lot of balancing
to be done.
Speaker 2 (18:11):
And lastly, does this latest policy, because I know that
this is just a nugget of Labor, the Labor Party's
fiscal policy that they'll obviously announce ahead of the next election,
does this make you excited for it or a bit hesitant?
Speaker 3 (18:28):
Oh? Look, I don't know if economists ever gets sort
of too excited before we get details and similar So look,
we'll continue to open see and assess how that happens.
And that's true sort of of all political parties. You know,
all of this stuff is important. It makes a big
difference to people's lives. It has been consequences for the government,
so we do look at that and try and understand
what it means. But look, so far we're always withhold judgment,
(18:50):
and probably most importantly as economists, we're looking at this
from a policy perspective. Yes, there's politics involved, and simply
there's to be some sort of more personal politics involved
all the time at the moment, but we're looking at
it from a policy point of view. What does it
mean for the country, what does it mean for the economy,
what does it mean for people in society. So that's
sort of how we're focused on it, and we'll take
all the information that continues to come through and try
(19:12):
and understand what that means and hopefully add a little
bit more context through what is a usually quite politically
charged conversation. We want to make sure there as economists
that we're bringing a little bit more of the sort
of underlying facts to it.
Speaker 1 (19:24):
By the fact of the matter is this just hasn't
let the world on fire.
Speaker 3 (19:29):
No, And to be honest, maybe that's a good thing
from a text policy point of view, because you know
the way that text policies go, they can either like
the world on fire in a good way. I can't
think of one that's really done that in recent times,
or in various various shades of people getting quite concerned
about it. So potentially a slightly small one, is a
lot more politically experient and more efficient, but certainly economic. Cly,
(19:51):
it feels like a little bit of a missed opportunity
to have sort of more comprehensively laid out how to
structure things in a better way, but as usually, politics
probably will rule the day. There.
Speaker 1 (20:02):
Thanks for joining us, Brad.
Speaker 3 (20:03):
Thank you.
Speaker 2 (20:10):
That's it for this episode of the Front Page. You
can read more about today's stories and extensive news coverage
at enzidherld dot co dot nz. The Front Page is
produced by Jane Ye and Richard Martin, who is also
our editor.
Speaker 1 (20:26):
I'm Chelsea Daniels.
Speaker 2 (20:28):
Subscribe to The Front Page on iHeartRadio or wherever you
get your podcasts, and tune in tomorrow for another look
behind the headlines.
Kiota.
Speaker 2 (00:05):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. Labor has
announced what Summer describing as a watered down version of
a capital gains tax.
Speaker 1 (00:23):
Labour's targeted CGT would.
Speaker 2 (00:25):
Affect profit made after July twenty twenty seven from selling
a commercial or residential property excluding the family home.
Speaker 1 (00:35):
Leader Chris Hipkins promises nine out of ten kiwis won't
pay tax on what they own.
Speaker 2 (00:40):
And it'll allow everyone to get three three doctors visits
a year. On the flip side, National's calling it an
attack on investment and savings, with Finance Minister Nikola Willis
saying it would put New Zealand's economic.
Speaker 1 (00:56):
Recovery at risk.
Speaker 2 (00:59):
Today on the front, infometrics economist Brad Olsen is with
us to dive into the details of Labour's latest to
pitch to the public. Brad, tell me what your first
thoughts were when you saw this policy.
Speaker 3 (01:16):
Look, it was challenging to see when we got their
policy announcement. It came out very early in the morning
five o three am. I think that it didn't have
some of the fairly basic policies that you might have
inspected or basic elements of a policy on cats. It
didn't have any numbers around it. We didn't know how
much revenue this capital gains tax or limited capital gain
tax and expected to bring in, So it was a
(01:38):
bit challenging to start with, alongside the fact that you know,
looking through the detail, it was clear that this was
a very narrow capital gain sex. It was focused on
the lacks of residential property outside the family home and
commercial property, but it had a much longer list of
exceptions that weren't included. And when you sort of have
a policy that includes two bullet points of what is
(01:58):
in and a whole lot of bullet point of what's
cast out, you really do start to get the feeling
that it's sort of quite constrained. The idea generally with
a tax policy, certainly from an economics point of view,
is you want it as broad based as possible so
that reduces those administration costs. It means that income has
broadly sort of taxed a similar way instead of at
the moment, we now start to risk having a whole
(02:19):
lot of different silos that things fall into. Probably one
of the more challenging ones that we've started to uncover
as we've started to get through the policy detail is
the fact that this policy is expected to pay for
a new healthcare policy for three VP trips per person
per year. The difficulty is this, it looks like what
we call a hypothicated tax that the money that is
(02:40):
coming in from the capital gains taxes ring fenced and
can only be spent on that new health proposal. So done,
seeing a little bit odd to tie capital gains to
health funding. Good to sort of see a connection in
terms of the government wants to highlight a priority area,
but seemed a little bit sort of specific to link
those two parts together.
Speaker 1 (03:01):
First of a couple of things to unpack there. First off,
can you tell me a little bit more about the numbers,
how much.
Speaker 2 (03:07):
Do they actually expect to generate from this ring fenced policy?
And secondly, can you even I mean, is it even
possible economically to make sure that that specific money goes
into this specific pot?
Speaker 3 (03:28):
I mean, certainly you can make sure that it goes
into that specific pot. We have very limited sort of
direct funding initiatives in New Zealand, but one of them
is that likes of the National Land Transport Time. So
all the money that goes from the likes of petrol
text and similar goes into a separate pot that can
only be spent on transport. So we do do that.
It is an option, but it's unusual to link something
(03:49):
like capital gains and health If you were to link
health money into health money out maybe, but to have
something sort of quite different on the INDs and the
outside as unusual. You can technically do it. But to
first question around how much is expected to be brought in,
it's not going to be nearly as much of anyone
probably would have thought of before. Capital gains just aren't
nearly as strong forecasts into the future, and so you know,
(04:12):
the figures are in sort of the low hundreds of
millions of dollars that have been talked about, and Labor
themselves highlighted that the expected amount coming in is expected
to be small and to sort of scar up over time.
I think that's understandable given where the likes of the
property market and SMAR is. But we're not talking a lot.
It's not billions of dollars a year that we're going
to be generating if from this sort of proposing going forward,
(04:33):
if it were to come into action.
Speaker 2 (04:37):
Well, if we speak hypothetically as well, if it did
come into action, I can see everybody selling off stuff
before the tax takes effect.
Speaker 1 (04:44):
Does that usually.
Speaker 3 (04:45):
Happen Potentially, I think that'll be a little bit short
sighted from people, I mean, and realistically that's because of
one of the biggest misconceptions of the capital gains taxes
that oh, well, I've got all these gains that are
going to be taxed for the last fifty years. No,
the policy is quite clear that it's not retrospective. It
starts from I think the first of July twenty twenty
(05:06):
seven if it were to be enacted. So it means
that you could buy a house right here today, it
might make let's say, fifty thousand dollars between now and
twenty twenty seven, and then after twenty twenty seven you
make another fifty thousand dollars, so one hundred k all
up before you sold it in I don't know twenty
twenty nine. You'd only pay tax and it would be
twenty eight percent of the profit. So the additional gain
(05:28):
that you'd make, which would be the fifty thousand dollars
made after July twenty twenty seven, so you might have
had an asset for forty years, doesn't matter how many
how much of a capital gain it has made. None
of that would be taxes only sort of going into
the future. So I'd find it pretty hard to believe
that there'd be a whole bunch of people out there
who would have an asset at the moment and he'd go,
you know what, I'm going to sell it off and
then do what with the money, presumably buy another APT
(05:50):
in the future. So there's a lot of talk about it.
I just don't think it would be necessarily as sensible
to do it. Quite different though, this proposal from the
Lakes and All wealth tax, where no matter if you
sold it or not, you were going to be paying
a whole bunch of pecks out each and every year,
which is generally why capital gain sex is a much
more appropriate way to move things to the tech system
(06:10):
than to go for something like the wealth tax.
Speaker 2 (06:13):
I only say that because a lot of people sold
their houses and cars before the rapture was meant to
be coming, so I know that there will be a
few people selling off their farm or their commercial property beforehand.
In terms of so that I know that they want
they're allowing for I think she's Aishaverel said four point
five million extra doctor's visits.
Speaker 1 (06:35):
A couple of hundred mil. Do you reckon that that'll
cover it?
Speaker 3 (06:40):
Well, I mean, look, they've done some costing, so at
least we've got some numbers now. So far we've sort
of were operating a little bit in the blind always
nice and a little bit more detail behind them. But look,
all sort of work with what we've got for the minute. Look,
I think going forward, there's a question of, you know,
how does that sort of change demand for health care
in general? But also, I mean one of the questions
and the challenges here why universal? Why do people who
(07:04):
earn I don't know, two one hundred thousand dollars a year,
what do they need three free GPS? It's a year
that seems like an expreme amount of funding to sort
of put universally for something like that, rather than targeting
it to those who need it the most. And I
mean part of that seems to come down to an
ideological sort of divide. We have some groups and parties
and similar who going while everything should be universal, others
(07:27):
who think it should be quite sort of specific and targeted.
Look generally, personally and economics. So I generally lean into
more of the let's get it to the specific people
that need it can because that's where you then can
reduce some of the costs, so you don't have to
sort of put it out to everyone. But look, there
will be a question I think around the likes of
resourcing and similar in the health system, given it's already
under pressure, but getting more money into frontline services and
(07:50):
through that sort of proactive preventative work that GPS do
is important. If you can get more resource in there,
then you don't you shouldn't have to put as much
resource into the other end of the spectrum because people
will actually go and get their issues sorted earlier rather
than waiting and waiting, waiting, going to the hospital late
and then costing a whole lot more. So I can
see that part of the approach on balance as being
(08:12):
quite efficient. It's just can you resource it? And look,
they're the challenge there at the moment. I think there
will be an ongoing challenge in the future.
Speaker 4 (08:24):
Other countries have been doing this for years across the
Tasman Australia has had a capital gains tax for decades.
BIT treats rising wages, better conditions and strong public services
as signs of success and New Zealand should do the
same in terms.
Speaker 2 (08:42):
Of the exemptions for family homes, farms, ki we saver
business assets, that kind of thing.
Speaker 1 (08:49):
Why do you think they've taken this approach?
Speaker 3 (08:53):
Look in my mind, the exemptions that they've made with
this narrow capital gains tax, it's very much sort of
politics over economics. There is an argument for a capital
gains tax at a comprehensive level, and in my mind
as an economist, that would include the family home, just
so that you don't have this sort of ability for
everyone to sort of play games with it, and you know,
you sort of say, well, my family home is the
(09:13):
one I grew up in, and my partner's family home
is the one that they grew up and so we
get to, you know, all that sort of question around
inheritance and everything else. You know what happens to that
sort of farm if you then sort of divide something
off and you add an extra property onto it, is
that a second home or is that just a farmster
which becomes exeent. Like you just get into this really
(09:34):
big challenge of sort of ruling in, ruling out that
causes for an administration, you need to get the accountants
and the lawyers and all that involved. So I find
that a bit challenging, but I think that's pragmatic from
the Labor Party because they want to manage the politics
of this hit. The form glorries around a more comprehensive
capital gains tax and wealth tax on similar that would
be quite broad. This time it's sort of focused very
(09:55):
much into areas that I except they think as a
political party has a little bit more ability to influence
the electorate if you're sort of looking to taxing people
who have a second home that's on a particularly large
large group, or those commercial properties that's not sort of
it shouldn't be inhabiting business activity itself and everything else.
(10:16):
I think that's the argument, and that came through in
the release from the Labor Party focusing on the fact
that I think nine to ten people wouldn't be hit
by this narrow capital gains tax. So again, there's sort
of a variety there in terms of what they're trying
to focus on politically as well as economically.
Speaker 2 (10:33):
And the fact of the matter is Labors spent years
avoiding the issue of a wealth tax or a capital
gains tax. Will they won't they?
Speaker 1 (10:40):
What do you reckon? Shifted the dial with Hepkins.
Speaker 3 (10:45):
Well, I mean probably a little bit of the response
to the last time they tried this. I mean, remember
that last time that labor was in government. I think
this is probably one of the worst ways you could
ever go about tax policy, to be clear, is telling everyone,
telling the electric, telling the people, no, it's not happening,
We're not looking at it's not going to happen, designing
a whole system behind everyone else's back, and then done thing.
It's sort of a month or so before the budget,
(11:06):
which is exactly what we saw. And I think twenty
twenty three we need to have a conversation about tax
and I absolutely think that's true, But we need to
have a good conversation rather than sort of a bit
of a bat and switch where you tell everyone one thing,
do the other, and then you just undermine everything because well,
at the moment, who sort of would trust what later
says on tax that That's the challenge that I think
(11:27):
they has, which is also why I think they've come
out with this fairly narrow approach and going well, look,
this is not going to knock this, so of everyone,
that's a sort of a more quite constrained option. It's
a constrained tax policy being taken on. It's a more
sort of and softly approach. The risk, of course with
that is that what does it do enough to sort
of change the dial And after a period where let's
(11:48):
be clear, canceital gains of runne course a little bit,
maybe not fully, but some of your bigger capital gains
happened over the last sort of ten twenty years, and
with house prices currently down on a year ago depending
on the measure, years not looking particularly strong to have
those in the future. What I think changed is political polling.
You know, you've seen continued support actually in the last
couple of years for a capital gains tax, at least
(12:10):
at this more sort of narrow level. So it does
give an ability to say, well, look, people are asking
for it. It's clearly a want as well to invest
more into health. So I think that's where coming bringing
everything together, there was an economic reason as well as
a political reason.
Speaker 5 (12:29):
Now I watched Chris Hipkins stand up. There were three
words he refuses to say capital gains tax. Mark my words.
That is what labor is proposing and far from what
Hipkins and Edmonds have claimed. This is a broad capital
gains tax. It will include all commercial property that is
(12:53):
to say, land and buildings that are not residential. That
is effectively a tax on every are you business in
New Zealand.
Speaker 1 (13:03):
It's a disappointing that they haven't gone the.
Speaker 3 (13:04):
Full hog though, oh as an economist, I think it
is a missed opportunity to not have done the whole thing,
or to be honest, have thought about what we could
do or should do more broadly around the likes of
the tax system in terms of how you sort of
support more economic activity, but also sort of the efficiency
and the equity of the tax system. Like the idea
(13:26):
here right should be that you bring together as much
money as you need to fund the government from as
broad of a set of sources as you can, so
that there's sort of no one area that doesn't get text,
which means that another area has to get text a
whole lot more to make up for it. And so
in my mind, having something like the comprehensive capital gains
tax does seem sensible. It might not make a lot
of revenue at the moment, that's fine, but also looking
(13:48):
at other options like a land value tax or similar
or importantly, trying to reduce the top tax rate, which
at thirty nine percent, really does diminish the ability for
people to want to or the ability to invest in
businesses to quite the same degree because when they get
those returns will once they get over a certain amount
they get you lose a sort of you know, nearly
forty percent all at once. So there is a challenge there,
(14:10):
I think around this sort of cohesiveness of the entire
tax system. I think it is a missed opportunity to
have done more. But at least we're having the tax debate.
The concern, of course, is that this has already started
to turn into you know, a real misinformation while people
talking about tax you know, I've seen some parties who
are opposing this saying, you know, this is coming for
the businesses, and no it's not. It's coming for the
(14:32):
profit on someone who's got a commercial holding, so they
might have a twenty five million dollar factory or something
that they've had for thirty years, if it makes sense
for thirty thousand dollars over the next couple they will
pay twenty eight percent tax on the thirty thousand dollars
more not on the entire value of the asset. Like
there is some real stupid scare mungering out here that
I think misses the issue. But at the same time,
(14:53):
as an economist, yeah, I would have definitely liked a
more comprehensive option, if not having thought even more broadly
about the tax system.
Speaker 2 (15:00):
Yeah, and certainly not small businesses as well, who I
assume would be renting their premises or or the shops
or whatever they're working out from. Why do you reckon
they stopped short at introducing a wealth tax?
Speaker 1 (15:16):
I mean, do you reckon that?
Speaker 2 (15:17):
They had to look at the Greens and saw the
backlash they got on all of their wealth tax stuff
from that Green budget, and they just want backed off
and said no, like, we're not We're not dipping our
toe into that.
Speaker 3 (15:29):
I mean potentially, I sort of expect as well that
they will have done quite a bit of work in
the background, and I know, you know, you've talked to
people that seem to have a little bit more inside
knowledge and they highlight that over time they have been
discussions within the Labor Party over which way the sort
of tack on this. But the evidence around the likes
of wealth tex I just I don't think it stacks up.
I mean, you can see them in terms of how
(15:50):
many countries developed countries actually have a walth text in comparison,
a comparison to something like a capital game stick and
some of the advice that was coming through from Trusury
when Labor last tried to look at when they were
in government, there was a much greater focus on careful
gastacks or doing something more in that area. So I
sort of think that it's a combination of politics and
(16:11):
and economics again trying to find the best middle ground.
But the questions with how narrow a policy this is,
both in terms of the money it brings in and
what it pays for. Isn't enough to turn the doll
because you know, you've seen a lot of calls from
some political borders saying it needs to be a whole
lot more investment in government. If there's not the ability
(16:32):
to sort of raise a huge amount of revenue from
the policy, are we spending a lot more time on
a policy then it's actually going to sort of influence
in our daily lives potentially.
Speaker 1 (16:41):
Yeah, And they could know that as well.
Speaker 2 (16:43):
The hesitancy, you know, tacking it on to such a
big issue.
Speaker 1 (16:46):
Like health and what.
Speaker 2 (16:48):
I don't know whether you saw the press conference with
Barbara and Ben's Chris Hepkins and Aisheveril, but a majority
of it was talking about help right. They started off saying, look,
they led with aspirations of a better healthcare system. They're
saying Luxon's bringing the country backwards. There are Kiwis leaving
(17:10):
the country. And this is all before they mentioned the
word tax, mind you, So that kind of seems to
me like they were hesitant with their so they've tacked
it onto something that Kiwis care about.
Speaker 3 (17:23):
Yeah, definitely. Look, I think the challenge going forward for
all political partings is how you sort of square the
current finances that the government has where we are still
expected to spend more as a government than it will
earn all the way out to something like twenty thirty,
but at the same time needing or certainly expecting from
New Zealand, it's more money going into the healthcare system
because of some of the challenges. So there's a real,
(17:44):
I think difficult balance there. We're on one hand, you
need more money generally to try and balance the book
seed through higher revenue or not spending as much, but
you also need to be spending more apparently on the
healthcare system to increase those outcomes. That means that again
it's sort of still got this tension there where even
under these sort of policy settings and still have a
deficit or half a decade or so, it's still pretty
(18:05):
unpalatable for a lot of New Zealanders. So a lot
of difficult choices I think ahead, a lot of balancing
to be done.
Speaker 2 (18:11):
And lastly, does this latest policy, because I know that
this is just a nugget of Labor, the Labor Party's
fiscal policy that they'll obviously announce ahead of the next election,
does this make you excited for it or a bit hesitant?
Speaker 3 (18:28):
Oh? Look, I don't know if economists ever gets sort
of too excited before we get details and similar So look,
we'll continue to open see and assess how that happens.
And that's true sort of of all political parties. You know,
all of this stuff is important. It makes a big
difference to people's lives. It has been consequences for the government,
so we do look at that and try and understand
what it means. But look, so far we're always withhold judgment,
(18:50):
and probably most importantly as economists, we're looking at this
from a policy perspective. Yes, there's politics involved, and simply
there's to be some sort of more personal politics involved
all the time at the moment, but we're looking at
it from a policy point of view. What does it
mean for the country, what does it mean for the economy,
what does it mean for people in society. So that's
sort of how we're focused on it, and we'll take
all the information that continues to come through and try
(19:12):
and understand what that means and hopefully add a little
bit more context through what is a usually quite politically
charged conversation. We want to make sure there as economists
that we're bringing a little bit more of the sort
of underlying facts to it.
Speaker 1 (19:24):
By the fact of the matter is this just hasn't
let the world on fire.
Speaker 3 (19:29):
No, And to be honest, maybe that's a good thing
from a text policy point of view, because you know
the way that text policies go, they can either like
the world on fire in a good way. I can't
think of one that's really done that in recent times,
or in various various shades of people getting quite concerned
about it. So potentially a slightly small one, is a
lot more politically experient and more efficient, but certainly economic. Cly,
(19:51):
it feels like a little bit of a missed opportunity
to have sort of more comprehensively laid out how to
structure things in a better way, but as usually, politics
probably will rule the day. There.
Speaker 1 (20:02):
Thanks for joining us, Brad.
Speaker 3 (20:03):
Thank you.
Speaker 2 (20:10):
That's it for this episode of the Front Page. You
can read more about today's stories and extensive news coverage
at enzidherld dot co dot nz. The Front Page is
produced by Jane Ye and Richard Martin, who is also
our editor.
Speaker 1 (20:26):
I'm Chelsea Daniels.
Speaker 2 (20:28):
Subscribe to The Front Page on iHeartRadio or wherever you
get your podcasts, and tune in tomorrow for another look
behind the headlines.
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