Rodney Hide: Capital gains nonsense

Opinion 25/02/2019
Money! Photo: Getty.

By Rodney Hide, former ACT Party leader.

OPINION: Don’t buy the nonsense that Kiwis making capital gains don't pay tax. It’s not true. Those making capital gains pay more tax than anyone.

Sir Michael Cullen’s proposal to tax capital gains is ideological. It’s not based on any principle of sound tax policy. It’s all about taxing the “rich pricks” and its politics through divide and rule.

Taxing capital gains would tax savings four times over. It’s a quadruple tax. If you earn a hundred dollars, you pay $33 tax. If you spend it, that’s it. You pay GST but no more income tax.

But save it and invest it and you get taxed over and over. The return you make on your $67 is taxed as income. That original $100 is taxed again. That’s the second tax.

Sell the asset and get whacked with a capital gains tax. That’s the third.

But that’s not the worst of it.

Sir Michael wants you taxed on inflation. That means you are taxed not only on real gains in value but also nominal gains as government devalues our money. That’s the fourth tax.

Sir Michael says it’s not insubstantial: the money raised by taxing nominal gains will be twice that raised taxing real gains.

That means for most investments the government will leave you with less than you started with. The government puts nothing in.

It risks nothing. It does no work.

But it takes a third of your income twice over then taxes any gain plus inflation. To save and invest, will be to go backwards. The only one getting fat on your savings and hard work will be government.

It’s ironic that it’s Sir Michael Cullen wanting to tax savings and investment to our pips pop.

As Minister of Finance he whined that we weren’t saving enough. So he set up the New Zealand Super Fund and stuck our money in it. He’s got $40 billion of our money stuck in a sock, money that we could use far better in our own businesses and on our own lives.

Sir Michael Cullen. Photo: The AM Show.

Sir Michael also bribed us with our money to save in Kiwisaver. These are government approved schemes. Again, not our businesses nor our investments.

There's another $40 billion tied up in Kiwisaver. 

And what does Sir Michael do to those of us who attempt to work and save and invest and make some business and some jobs with the little we have left: why he taxes the living daylights out of us until we are very likely left with less than we started with.

It’s disgusting. Money is taken from us to fund dopey schemes and people who won’t work. It’s taken off us to stick in an old sock because politicians say we don't save enough. And what we have left, gets taken if we try and make something with it.

The truly amazing thing is that Sir Michael says we must tax savings four times over because that’s fair. It’s not simply amazing that he says it. It’s amazing that he doesn’t blush when he says it.

Rodney Hide speaks all things politics on Magic Talk and is the former ACT Party leader.