Tagged: wealth

Breaking news: Occupations extremely likely to be property speculating

Cartoon by Vincent Konrad for Socialist Review - used with permission

Cartoon by Vincent Konrad for Socialist Review – used with permission

I have undertaken cutting-edge statistical analysis of the Register of Pecuniary and Other Specified Interests of Members of Parliament, which has revealed some shocking information.

People of the following occupations are all extremely likely to own real property beyond the family home and Māori land interests:

Labour MP: 50%

National MP: 76.27%

Green MP: 50%

NZ First MP: 58.3% or 61.54%*

United Future MP: 100%

These rates are all extremely high – far higher than any ethnic or national group, for example. It is clear what we must do to curb property speculation and solve the housing crisis: Ban MPs from buying property in NZ.

*Info not available for new MP Ria Bond.

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Don’t believe the scaremongering on capital gains tax

capital gains tax first world problem

The unholy trinity of National, right-wing blogs and the mainstream media are scaremongering about Labour et al’s proposed capital gains tax again. Because it’s new and because it’s a tax, it seems scary and there’s easy political points available in opposing it. But in fact most countries have capital gains taxes. New Zealand’s tax system is one of the most generous to the rich, and part of that is our anomalous lack of CGT.

The current scaremongery relates to inherited family homes of deceased family members. The impression John Key et al are putting across is that a grieving, struggling family will have to scramble to sell their deceased parents’ family home to avoid being stung with a hefty capital gains tax they can’t afford. IF that were the case, a one-month “grace period” certainly doesn’t sound like long enough to grieve, get organised & sell the house to avoid financial ruin.

But it’s NOT the case. Even without a grace period, only profit since inheritance – I repeat, profit since inheritance – would be taxable (and at a modest 15%). If a family inherited a house worth $400,000, and sold it a year later for $430,000, they’d incur tax of $4,500, but they’d get to keep the other $25,500. They’d still be $25,500 better off than if they’d sold the house straight away, and $425,500 better off than if they hadn’t inherited the house.

This is no different from inheriting any other profitable asset. Currently, if you inherit a company, and it makes $30,000 profit over the next year, you’ll be liable for 28% ($8,400) company tax on that profit. There’s no “grace period” there. And more importantly, there’s no “grace period” on the profits – 72% of which you’ll keep and no doubt enjoy.

So it’s extremely dishonest of Key to portray families inheriting profitable assets as somehow hard-done-by, simply because they’ll incur tax on those profits. Truly hard-done-by families are the families of (increasingly numerous) people who’ve never managed to buy a house (largely because of tax-free property investment). Those families will receive no inheritance (let alone profitable inheritance), and many struggle to pay for (increasingly exorbitant) funeral and burial costs.

Years from now, if my siblings and I inherit my parents’ house and it makes capital gains by the time we get around to selling it, we’re not hard-done-by if we incur tax on those gains. We’re lucky my parents own their home in the first place, and have something to leave us (in fact, something that continues gaining value until we sell it).

That said, I do tend to agree there should probably be a grace period of maybe six months, because the tax is supposed to target people who buy extra houses for profit, not people who gain an extra house by accident because a relative died. Besides, it may take some months to decide whether they’ll sell it, keep it as a rental, or have other family move in (in which case it remains a family home, thus exempt from CGT). But a grace period would be an act of compassion to people who don’t really need it; certainly not a demand of justice or need.

Of course, Cunliffe didn’t help his own cause by remembering the policy wrong and declaring unequivocally that the grace period will be one month. In truth, the length of the grace period is a detail that they’ll leave to an expert advisory group to work out. It was incompetent of Cunliffe not to know this.

Anyway, despite those two caveats: don’t believe the hype. Look into it, listen to David Parker’s explanation, think about it, etc. After doing so, no right-thinking person would think there’s anything to worry about.

On worshipping money and thanking the rich for being rich

doublefacepalm

Just when I was thinking corporate media was starting to say some good things about inequality, I saw this infuriating defense of inequality from Damien Grant.

Grant writes off Max Rashbooke’s book, and indeed all concern about inequality, as “the zero-sum fallacy; the idea that there is a set amount of cash in the economy.”

This is one of the worst straw man attacks I’ve seen in a while.

In fact, Rashbrooke et al understand better than our government that money is a relative measure, only meaningful insofar as it represents access to wealth/resources. It doesn’t matter how much total cash there is in the economy… what matters is:

a) how much resources/wealth there are in the economy, because that’s what determines how big the pie is.
b) how much cash you have in relation to others, because that’s what determines how big or small your slice of the pie is.

Total cash doesn’t affect the pie at all (if it did, Zimbabwe would be the richest country in the world).

Total cash and total resources are not ‘zero-sum’ phenomena. But percentage of access to cash and resources is (that’s the whole point of a percentage – it always sums to 100).

Rashbrooke (and, like, actual evidence and stuff) are concerned with inequality because when one person’s percentage of cash goes up, someone else’s ability to access available resources necessarily decreases. And when that’s too unequal (even when the pie’s huge) it causes numerous health and social problems across the whole society.

Grant is the one guilty of a fallacy: the idea that money is an absolute, not just a relative measure; so if there’s more total money in an economy, that automatically means there’s more wealth/resources available to people. This is more than just a fallacy, it’s a properly religious phenomenon – idolisation of money.

Post-script – extra responses to a few of Grant’s stupidest comments

“There’s no evidence that rising social and health problems are a result of income disparities.”

I’m actually astonished to see this much wilful blindness, even in corporate media. Huge amounts of research – very widely available – offer compelling evidence that inequality causes many social/health problems – from murder to community breakdown to high teen pregnancy rates. A journalist doing their job would acknowledge this evidence even if they disagree with its analysis. Grant doesn’t indicate whether he disagrees, whether he’s ignoring it, or whether he doesn’t know it exists … he simply says there’s “no evidence.”

The fact that the next sentence peddles an evidence-free stereotype (“Poor people get diabetes because they eat junk food, not because Sir Peter Jackson is rich.”) is the icing on the bullshit cake.

“Key to the inequality fantasy is that New Zealand is a neo-liberal rich-man’s paradise but the facts do not support this. Bill English said… [bla bla bla] Half the population are net beneficiaries.”

He goes on to uncritically parrot Bill English’s dishonest press release that I addressed a couple of blogs ago. If Grant was doing his job as a journalist and applying some critical thinking, he’d realise English’s figures show the opposite of what he claims.

Grant thinks workers should be grateful for being “net beneficiaries” of state assistance… grateful for a situation where their subhuman wages mean they don’t contribute much to the tax coffers, let alone to their own families, and Working for Families subsidises their employers to keep paying these sub-human wages. How much more grateful should the rich be for being “net beneficiaries” of a system that facilitates and supports such grossly unequal wealth?

“Economic growth is driven by innovative entrepreneurs adding to the total economy. They sometimes become rich by retaining some of the extra wealth they created.”

I don’t even know where to start with this statement, except to note that it’s pure ideology. He equates economic growth with ‘wealth,’ ignoring the fact that economic (GDP) growth doesn’t just include productive, wealth-producing activities, but destructive ones like crime, pollution and credit card debt. And he simplistically suggests ‘wealth’ is created by “innovative entrepreneurs,” rather than by the contributions of all workers; those who’re given the opportunity to utilise their creative/innovative skills, and those who aren’t.

The next sentence, where he uses a doctor as his archetypical example of a rich wealth-creating entrepreneur, reveals his ideological assumption that the rich become rich by doing good for the world. A better example of the very highest income earners would be a currency trader who makes much more than a doctor by producing nothing, just manipulating pieces of paper and numbers on computer screens.

Later in the article he again waxes lyrical about how much wealth the rich create, and how grateful we should be for their work. He also mentions how hard-working they are – predictably failing to provide any statistics linking hard work to high income. In fact, income and wealth distributions are way out of proportion to how hard people work… (unless the richest 1% percent work 10-16 times as hard as the average NZer).

“Poverty has many causes, welfare dependency amongst them, but blaming the hard-working for the failings of the indigent is not a solution.”

Grant is doing even worse – blaming the hard-working poor (like people working two jobs cleaning toilets on minimum wage to feed their families) for their own poverty. Despicable.