EVERYTHING WRONG WITH THE GREENS' WEALTH TAX
‘All your problems are caused by someone else’s success. If you vote for us, we’ll take the wealth they’ve hidden away in these mysterious ‘trusts’ and give it back to you.’ That is the Greens’ message and, besides having nothing to do with the environment, it is corrosive to New Zealand’s culture. This week Free Press equips you with all the reasons it is wrong, wrong and wrong again.
A few weeks ago Sir Ian Taylor was lamenting that he isn’t taxed enough. It turns out he wasn’t so keen on what he calls the ‘tribalism’ that the Greens are stirring up. “There goes the tribalism again. Bad people ‘stashing vast sums of money in trusts’ or the ‘wealthy few’ stashing it in their back pockets,’” he says in a devastating Open Letter to Chlöe Swarbrick.
At exactly the time New Zealand needs to be united behind good ideas, like more aspiration, the Greens are doubling down on the politics of division Jacinda was so good at. Farmers, licensed firearm owners, small business owners, landlords, anyone trying to make a go of life in New Zealand has been targeted by Labour. If you want Labour to leave you alone, try crime or a benefit, and they won’t touch you.
As one very high profile entrepreneur and Free Press reader just messaged us. “Shaw’s astonishing tax take I trust will destroy them. If not, there won’t be an entrepreneur left in our country. Me included.” The Greens have no idea how damaging their policy would be.
If our country’s generally great culture has a dark underbelly, it is tall poppy syndrome, but what the Greens may not realise is they’re actually taking on medium-sized poppies, too. Not everyone with assets in a trust, or who would pay the Greens’ wealth tax, is rich. Far from it.
Take your local hairdresser. They have a one million dollar home with a mortgage of $200,000. They put it in a trust in case one of their children has a relationship breakdown (could be married or de facto) and the partner goes after their inheritance.
That’s a perfectly reasonable thing to do, but they’ll now pay $12,000 a year in extra tax for it. That’s 1.5 per cent on the assets in their trust the Greens propose.
Perhaps it’s a plumber or electrician, a little later in their life living in Auckland. They have a home and a rental valued at $3m with a $500,000 mortgage remaining. They put it in a trust because contracting can be a seat-of-the-pants experience, and they’re prepared to take risks but not to find their kids have nowhere to sleep at night. They’re now liable for a $37,500 a year tax on the value in their trust. If they take it out of the Trust, they still pay $12,500 a year in wealth tax on assets over $2 million.
Of course if they were married they’d only pay capital tax on assets above $4 million, so that’s something, but life can be complicated. A partner who lost their spouse to, say cancer, with a home, retirement property, and retirement savings of $3 million would then be charged a yearly wealth tax on their assets. In trust that would be $45,000. Even if they took it out of trust they’d pay $25,000 a year on the million dollars of assets above $2 million.
Then there’s farmers. A dairy farming couple, with a median farm at $5.25 million who have the farm freehold will be facing an extra tax of $81,250. This will be on top of soaring farm expenses. However, much of the value is also in the livestock and other farm capital such as tractors and milking equipment. How this will be assessed is anyone’s guess. We’ll come back to valuation later.
A sheep and beef farmer is also going to be hit. Average farm profit in 2022 was $123,000, but the past year sheep and beef farmers have had 16.3% farm costs inflation. A typical sheep and beef farm at $3 million held in a family Trust will face a tax bill of $45,000.
The Greens’ policy will not end poverty. In fact it will destroy the institutions of wealth creation that Kiwis use as pathways out of poverty.
There is one way to avoid paying the tax. The Green policy exempts Māori land under the Te Ture Whenua Māori Act,’ and ‘the assets of Post-Settlement Governance Entities, such as land returned under a Treaty Settlement or vested in a Treaty Settlement Entity.’ Ngai Tahu ($1.79bn) or Ngati Whatua ($1.2bn in assets) would be exempt, and so they should be, but so should all wealth.
One reason almost nobody in the world proposes the lunacy of taxing unrealised capital values is that, without a sale to realise the capital value, it requires valuation. As one Free Press correspondent put it “Every year everyone in business or even retired with investments has to trudge off and get that business or those properties or whatever valued. It will cost $10 - 20,000 to get a valuation. Then the arguments with the IRD over that valuation. They demand a peer review of the valuation by their nominated valuer. And on it goes. We will need thousands of new valuers. We probably need a Ministry of Value.”
But what if the new policy actually achieved its goal of ending poverty? How plausible is that. Well, the Greens say their policy will increase spending by about $11 billion per year. That’s a lot, right? Well, not really. The Government has increased its spending by $49 billion in the last five years. In other words, Labour have already tried spending $10 billion more than last year to solve poverty… five times in a row.
Altogether the Greens have proposed a policy that is nothing to do with the environment, appeals to the worst of human nature, will harm a far wider range of people than they realise, is impractical to implement, and pretends another $11 billion of extra Government spending will solve poverty where the last $49 billion failed.
It’s the last gasp of a desperate party hoping to buy votes no matter what the impact on New Zealand’s culture and policy settings. It’s also the reason ACT must win this election for the right, put a stop the the lunacy, then push it back hard. Never give up on New Zealand.