WEBVTT - Is Labour's new policy a watered down capital gains tax? 0:00:05.080 --> 0:00:05.480 Kiota. 0:00:05.559 --> 0:00:08.800 I'm Chelsea Daniels and this is the Front Page, a 0:00:08.880 --> 0:00:16.800 daily podcast presented by the New Zealand Herald. Labor has 0:00:16.840 --> 0:00:21.720 announced what Summer describing as a watered down version of 0:00:21.760 --> 0:00:23.000 a capital gains tax. 0:00:23.320 --> 0:00:26.040 Labour's targeted CGT would. 0:00:25.880 --> 0:00:30.680 Affect profit made after July twenty twenty seven from selling 0:00:30.720 --> 0:00:35.040 a commercial or residential property excluding the family home. 0:00:35.479 --> 0:00:38.960 Leader Chris Hipkins promises nine out of ten kiwis won't 0:00:39.000 --> 0:00:40.559 pay tax on what they own. 0:00:40.800 --> 0:00:45.400 And it'll allow everyone to get three three doctors visits 0:00:45.560 --> 0:00:48.959 a year. On the flip side, National's calling it an 0:00:49.000 --> 0:00:54.120 attack on investment and savings, with Finance Minister Nikola Willis 0:00:54.120 --> 0:00:57.400 saying it would put New Zealand's economic. 0:00:56.920 --> 0:00:58.600 Recovery at risk. 0:00:59.240 --> 0:01:03.080 Today on the front, infometrics economist Brad Olsen is with 0:01:03.240 --> 0:01:06.760 us to dive into the details of Labour's latest to 0:01:06.880 --> 0:01:13.120 pitch to the public. Brad, tell me what your first 0:01:13.160 --> 0:01:15.360 thoughts were when you saw this policy. 0:01:16.880 --> 0:01:19.479 Look, it was challenging to see when we got their 0:01:19.480 --> 0:01:21.800 policy announcement. It came out very early in the morning 0:01:21.840 --> 0:01:24.080 five o three am. I think that it didn't have 0:01:24.120 --> 0:01:26.240 some of the fairly basic policies that you might have 0:01:26.360 --> 0:01:30.320 inspected or basic elements of a policy on cats. It 0:01:30.360 --> 0:01:32.280 didn't have any numbers around it. We didn't know how 0:01:32.360 --> 0:01:36.080 much revenue this capital gains tax or limited capital gain 0:01:36.160 --> 0:01:38.000 tax and expected to bring in, So it was a 0:01:38.000 --> 0:01:41.560 bit challenging to start with, alongside the fact that you know, 0:01:41.600 --> 0:01:44.080 looking through the detail, it was clear that this was 0:01:44.120 --> 0:01:46.560 a very narrow capital gain sex. It was focused on 0:01:46.600 --> 0:01:49.720 the lacks of residential property outside the family home and 0:01:49.880 --> 0:01:52.880 commercial property, but it had a much longer list of 0:01:53.080 --> 0:01:55.840 exceptions that weren't included. And when you sort of have 0:01:55.880 --> 0:01:58.200 a policy that includes two bullet points of what is 0:01:58.280 --> 0:02:00.840 in and a whole lot of bullet point of what's 0:02:00.880 --> 0:02:03.080 cast out, you really do start to get the feeling 0:02:03.160 --> 0:02:06.680 that it's sort of quite constrained. The idea generally with 0:02:06.720 --> 0:02:09.119 a tax policy, certainly from an economics point of view, 0:02:09.400 --> 0:02:11.400 is you want it as broad based as possible so 0:02:11.440 --> 0:02:15.000 that reduces those administration costs. It means that income has 0:02:15.040 --> 0:02:17.760 broadly sort of taxed a similar way instead of at 0:02:17.760 --> 0:02:19.720 the moment, we now start to risk having a whole 0:02:19.720 --> 0:02:22.720 lot of different silos that things fall into. Probably one 0:02:22.760 --> 0:02:25.400 of the more challenging ones that we've started to uncover 0:02:25.560 --> 0:02:28.440 as we've started to get through the policy detail is 0:02:28.480 --> 0:02:31.680 the fact that this policy is expected to pay for 0:02:31.800 --> 0:02:34.800 a new healthcare policy for three VP trips per person 0:02:34.919 --> 0:02:37.680 per year. The difficulty is this, it looks like what 0:02:37.720 --> 0:02:40.560 we call a hypothicated tax that the money that is 0:02:40.800 --> 0:02:43.200 coming in from the capital gains taxes ring fenced and 0:02:43.240 --> 0:02:47.120 can only be spent on that new health proposal. So done, 0:02:47.120 --> 0:02:49.079 seeing a little bit odd to tie capital gains to 0:02:49.880 --> 0:02:53.160 health funding. Good to sort of see a connection in 0:02:53.240 --> 0:02:55.680 terms of the government wants to highlight a priority area, 0:02:55.880 --> 0:02:58.320 but seemed a little bit sort of specific to link 0:02:58.360 --> 0:02:59.799 those two parts together. 0:03:01.720 --> 0:03:05.000 First of a couple of things to unpack there. First off, 0:03:05.080 --> 0:03:07.359 can you tell me a little bit more about the numbers, 0:03:07.440 --> 0:03:07.959 how much. 0:03:07.840 --> 0:03:14.280 Do they actually expect to generate from this ring fenced policy? 0:03:14.760 --> 0:03:18.280 And secondly, can you even I mean, is it even 0:03:18.320 --> 0:03:22.920 possible economically to make sure that that specific money goes 0:03:22.960 --> 0:03:24.520 into this specific pot? 0:03:28.280 --> 0:03:31.399 I mean, certainly you can make sure that it goes 0:03:31.440 --> 0:03:34.240 into that specific pot. We have very limited sort of 0:03:34.280 --> 0:03:36.640 direct funding initiatives in New Zealand, but one of them 0:03:36.680 --> 0:03:38.920 is that likes of the National Land Transport Time. So 0:03:39.040 --> 0:03:41.320 all the money that goes from the likes of petrol 0:03:41.360 --> 0:03:43.960 text and similar goes into a separate pot that can 0:03:44.000 --> 0:03:46.760 only be spent on transport. So we do do that. 0:03:47.280 --> 0:03:49.720 It is an option, but it's unusual to link something 0:03:49.760 --> 0:03:52.000 like capital gains and health If you were to link 0:03:52.040 --> 0:03:54.960 health money into health money out maybe, but to have 0:03:55.080 --> 0:03:57.320 something sort of quite different on the INDs and the 0:03:57.320 --> 0:04:00.280 outside as unusual. You can technically do it. But to 0:04:00.720 --> 0:04:03.000 first question around how much is expected to be brought in, 0:04:03.360 --> 0:04:05.320 it's not going to be nearly as much of anyone 0:04:05.640 --> 0:04:08.320 probably would have thought of before. Capital gains just aren't 0:04:08.400 --> 0:04:11.640 nearly as strong forecasts into the future, and so you know, 0:04:12.000 --> 0:04:14.400 the figures are in sort of the low hundreds of 0:04:14.440 --> 0:04:17.119 millions of dollars that have been talked about, and Labor 0:04:17.279 --> 0:04:20.640 themselves highlighted that the expected amount coming in is expected 0:04:20.680 --> 0:04:23.320 to be small and to sort of scar up over time. 0:04:23.400 --> 0:04:25.640 I think that's understandable given where the likes of the 0:04:25.640 --> 0:04:28.920 property market and SMAR is. But we're not talking a lot. 0:04:28.960 --> 0:04:30.920 It's not billions of dollars a year that we're going 0:04:30.960 --> 0:04:33.800 to be generating if from this sort of proposing going forward, 0:04:33.960 --> 0:04:36.400 if it were to come into action. 0:04:37.080 --> 0:04:39.440 Well, if we speak hypothetically as well, if it did 0:04:39.440 --> 0:04:42.160 come into action, I can see everybody selling off stuff 0:04:42.200 --> 0:04:44.040 before the tax takes effect. 0:04:44.560 --> 0:04:45.640 Does that usually. 0:04:45.360 --> 0:04:49.359 Happen Potentially, I think that'll be a little bit short 0:04:49.360 --> 0:04:53.159 sighted from people, I mean, and realistically that's because of 0:04:53.200 --> 0:04:56.160 one of the biggest misconceptions of the capital gains taxes 0:04:56.200 --> 0:04:58.120 that oh, well, I've got all these gains that are 0:04:58.160 --> 0:05:00.720 going to be taxed for the last fifty years. No, 0:05:00.839 --> 0:05:03.440 the policy is quite clear that it's not retrospective. It 0:05:03.480 --> 0:05:06.040 starts from I think the first of July twenty twenty 0:05:06.040 --> 0:05:08.039 seven if it were to be enacted. So it means 0:05:08.080 --> 0:05:10.520 that you could buy a house right here today, it 0:05:10.640 --> 0:05:14.400 might make let's say, fifty thousand dollars between now and 0:05:14.480 --> 0:05:16.960 twenty twenty seven, and then after twenty twenty seven you 0:05:17.320 --> 0:05:19.720 make another fifty thousand dollars, so one hundred k all 0:05:19.800 --> 0:05:21.640 up before you sold it in I don't know twenty 0:05:21.680 --> 0:05:24.640 twenty nine. You'd only pay tax and it would be 0:05:24.640 --> 0:05:27.880 twenty eight percent of the profit. So the additional gain 0:05:28.200 --> 0:05:30.520 that you'd make, which would be the fifty thousand dollars 0:05:30.520 --> 0:05:32.800 made after July twenty twenty seven, so you might have 0:05:32.839 --> 0:05:34.920 had an asset for forty years, doesn't matter how many 0:05:35.160 --> 0:05:37.120 how much of a capital gain it has made. None 0:05:37.120 --> 0:05:39.159 of that would be taxes only sort of going into 0:05:39.160 --> 0:05:42.080 the future. So I'd find it pretty hard to believe 0:05:42.080 --> 0:05:43.560 that there'd be a whole bunch of people out there 0:05:43.560 --> 0:05:45.800 who would have an asset at the moment and he'd go, 0:05:45.839 --> 0:05:47.440 you know what, I'm going to sell it off and 0:05:47.480 --> 0:05:50.240 then do what with the money, presumably buy another APT 0:05:50.360 --> 0:05:53.200 in the future. So there's a lot of talk about it. 0:05:53.240 --> 0:05:55.720 I just don't think it would be necessarily as sensible 0:05:55.800 --> 0:05:58.560 to do it. Quite different though, this proposal from the 0:05:58.600 --> 0:06:01.440 Lakes and All wealth tax, where no matter if you 0:06:01.520 --> 0:06:03.000 sold it or not, you were going to be paying 0:06:03.000 --> 0:06:05.080 a whole bunch of pecks out each and every year, 0:06:05.120 --> 0:06:07.560 which is generally why capital gain sex is a much 0:06:07.600 --> 0:06:10.200 more appropriate way to move things to the tech system 0:06:10.440 --> 0:06:12.120 than to go for something like the wealth tax. 0:06:13.240 --> 0:06:15.000 I only say that because a lot of people sold 0:06:15.040 --> 0:06:17.919 their houses and cars before the rapture was meant to 0:06:17.920 --> 0:06:20.080 be coming, so I know that there will be a 0:06:20.120 --> 0:06:24.520 few people selling off their farm or their commercial property beforehand. 0:06:25.560 --> 0:06:29.120 In terms of so that I know that they want 0:06:29.160 --> 0:06:32.799 they're allowing for I think she's Aishaverel said four point 0:06:32.880 --> 0:06:35.760 five million extra doctor's visits. 0:06:35.560 --> 0:06:38.599 A couple of hundred mil. Do you reckon that that'll 0:06:38.600 --> 0:06:39.080 cover it? 0:06:40.880 --> 0:06:42.960 Well, I mean, look, they've done some costing, so at 0:06:43.040 --> 0:06:45.280 least we've got some numbers now. So far we've sort 0:06:45.279 --> 0:06:47.680 of were operating a little bit in the blind always 0:06:47.760 --> 0:06:49.880 nice and a little bit more detail behind them. But look, 0:06:49.960 --> 0:06:53.120 all sort of work with what we've got for the minute. Look, 0:06:53.360 --> 0:06:55.440 I think going forward, there's a question of, you know, 0:06:55.480 --> 0:06:58.120 how does that sort of change demand for health care 0:06:58.160 --> 0:07:00.560 in general? But also, I mean one of the questions 0:07:00.560 --> 0:07:04.839 and the challenges here why universal? Why do people who 0:07:04.880 --> 0:07:07.000 earn I don't know, two one hundred thousand dollars a year, 0:07:07.040 --> 0:07:09.320 what do they need three free GPS? It's a year 0:07:09.920 --> 0:07:12.360 that seems like an expreme amount of funding to sort 0:07:12.360 --> 0:07:16.800 of put universally for something like that, rather than targeting 0:07:16.840 --> 0:07:18.600 it to those who need it the most. And I 0:07:18.640 --> 0:07:20.320 mean part of that seems to come down to an 0:07:20.320 --> 0:07:24.560 ideological sort of divide. We have some groups and parties 0:07:24.640 --> 0:07:27.160 and similar who going while everything should be universal, others 0:07:27.200 --> 0:07:29.880 who think it should be quite sort of specific and targeted. 0:07:30.320 --> 0:07:33.640 Look generally, personally and economics. So I generally lean into 0:07:33.640 --> 0:07:35.440 more of the let's get it to the specific people 0:07:35.440 --> 0:07:37.880 that need it can because that's where you then can 0:07:37.960 --> 0:07:39.640 reduce some of the costs, so you don't have to 0:07:39.640 --> 0:07:41.520 sort of put it out to everyone. But look, there 0:07:41.560 --> 0:07:43.480 will be a question I think around the likes of 0:07:43.520 --> 0:07:46.440 resourcing and similar in the health system, given it's already 0:07:46.520 --> 0:07:50.520 under pressure, but getting more money into frontline services and 0:07:50.600 --> 0:07:54.160 through that sort of proactive preventative work that GPS do 0:07:54.640 --> 0:07:56.960 is important. If you can get more resource in there, 0:07:57.000 --> 0:07:59.040 then you don't you shouldn't have to put as much 0:07:59.120 --> 0:08:02.120 resource into the other end of the spectrum because people 0:08:02.160 --> 0:08:05.160 will actually go and get their issues sorted earlier rather 0:08:05.160 --> 0:08:08.040 than waiting and waiting, waiting, going to the hospital late 0:08:08.080 --> 0:08:09.800 and then costing a whole lot more. So I can 0:08:09.840 --> 0:08:12.240 see that part of the approach on balance as being 0:08:12.320 --> 0:08:15.160 quite efficient. It's just can you resource it? And look, 0:08:15.240 --> 0:08:17.240 they're the challenge there at the moment. I think there 0:08:17.240 --> 0:08:21.920 will be an ongoing challenge in the future. 0:08:24.080 --> 0:08:27.640 Other countries have been doing this for years across the 0:08:27.720 --> 0:08:31.720 Tasman Australia has had a capital gains tax for decades. 0:08:32.800 --> 0:08:37.359 BIT treats rising wages, better conditions and strong public services 0:08:37.640 --> 0:08:40.560 as signs of success and New Zealand should do the 0:08:40.640 --> 0:08:42.720 same in terms. 0:08:42.520 --> 0:08:46.080 Of the exemptions for family homes, farms, ki we saver 0:08:46.440 --> 0:08:48.160 business assets, that kind of thing. 0:08:49.320 --> 0:08:51.400 Why do you think they've taken this approach? 0:08:53.000 --> 0:08:55.520 Look in my mind, the exemptions that they've made with 0:08:55.600 --> 0:08:58.080 this narrow capital gains tax, it's very much sort of 0:08:58.080 --> 0:09:02.160 politics over economics. There is an argument for a capital 0:09:02.200 --> 0:09:04.480 gains tax at a comprehensive level, and in my mind 0:09:04.559 --> 0:09:07.040 as an economist, that would include the family home, just 0:09:07.080 --> 0:09:08.840 so that you don't have this sort of ability for 0:09:08.880 --> 0:09:11.120 everyone to sort of play games with it, and you know, 0:09:11.160 --> 0:09:13.360 you sort of say, well, my family home is the 0:09:13.360 --> 0:09:15.079 one I grew up in, and my partner's family home 0:09:15.160 --> 0:09:16.560 is the one that they grew up and so we 0:09:16.600 --> 0:09:19.680 get to, you know, all that sort of question around 0:09:19.760 --> 0:09:24.319 inheritance and everything else. You know what happens to that 0:09:24.360 --> 0:09:26.520 sort of farm if you then sort of divide something 0:09:26.520 --> 0:09:28.520 off and you add an extra property onto it, is 0:09:29.200 --> 0:09:30.960 that a second home or is that just a farmster 0:09:31.080 --> 0:09:33.920 which becomes exeent. Like you just get into this really 0:09:34.040 --> 0:09:36.880 big challenge of sort of ruling in, ruling out that 0:09:37.320 --> 0:09:39.839 causes for an administration, you need to get the accountants 0:09:39.840 --> 0:09:42.760 and the lawyers and all that involved. So I find 0:09:42.800 --> 0:09:45.320 that a bit challenging, but I think that's pragmatic from 0:09:45.360 --> 0:09:47.319 the Labor Party because they want to manage the politics 0:09:47.320 --> 0:09:50.800 of this hit. The form glorries around a more comprehensive 0:09:50.840 --> 0:09:53.120 capital gains tax and wealth tax on similar that would 0:09:53.120 --> 0:09:55.400 be quite broad. This time it's sort of focused very 0:09:55.480 --> 0:10:00.439 much into areas that I except they think as a 0:10:00.600 --> 0:10:04.080 political party has a little bit more ability to influence 0:10:04.120 --> 0:10:07.160 the electorate if you're sort of looking to taxing people 0:10:07.200 --> 0:10:10.079 who have a second home that's on a particularly large 0:10:10.160 --> 0:10:12.880 large group, or those commercial properties that's not sort of 0:10:13.200 --> 0:10:16.040 it shouldn't be inhabiting business activity itself and everything else. 0:10:16.120 --> 0:10:18.720 I think that's the argument, and that came through in 0:10:18.760 --> 0:10:21.960 the release from the Labor Party focusing on the fact 0:10:21.960 --> 0:10:24.560 that I think nine to ten people wouldn't be hit 0:10:24.920 --> 0:10:27.199 by this narrow capital gains tax. So again, there's sort 0:10:27.200 --> 0:10:29.400 of a variety there in terms of what they're trying 0:10:29.400 --> 0:10:32.040 to focus on politically as well as economically. 0:10:33.040 --> 0:10:35.559 And the fact of the matter is Labors spent years 0:10:35.720 --> 0:10:38.640 avoiding the issue of a wealth tax or a capital 0:10:38.679 --> 0:10:40.600 gains tax. Will they won't they? 0:10:40.720 --> 0:10:44.319 What do you reckon? Shifted the dial with Hepkins. 0:10:45.960 --> 0:10:48.320 Well, I mean probably a little bit of the response 0:10:48.360 --> 0:10:50.120 to the last time they tried this. I mean, remember 0:10:50.160 --> 0:10:52.480 that last time that labor was in government. I think 0:10:52.480 --> 0:10:54.000 this is probably one of the worst ways you could 0:10:54.000 --> 0:10:57.000 ever go about tax policy, to be clear, is telling everyone, 0:10:57.040 --> 0:10:59.320 telling the electric, telling the people, no, it's not happening, 0:10:59.320 --> 0:11:01.520 We're not looking at it's not going to happen, designing 0:11:01.559 --> 0:11:04.240 a whole system behind everyone else's back, and then done thing. 0:11:04.320 --> 0:11:06.280 It's sort of a month or so before the budget, 0:11:06.320 --> 0:11:08.600 which is exactly what we saw. And I think twenty 0:11:08.600 --> 0:11:13.040 twenty three we need to have a conversation about tax 0:11:13.080 --> 0:11:15.160 and I absolutely think that's true, But we need to 0:11:15.160 --> 0:11:17.560 have a good conversation rather than sort of a bit 0:11:17.600 --> 0:11:19.600 of a bat and switch where you tell everyone one thing, 0:11:19.679 --> 0:11:22.600 do the other, and then you just undermine everything because well, 0:11:22.640 --> 0:11:24.480 at the moment, who sort of would trust what later 0:11:24.520 --> 0:11:27.079 says on tax that That's the challenge that I think 0:11:27.120 --> 0:11:29.240 they has, which is also why I think they've come 0:11:29.240 --> 0:11:31.800 out with this fairly narrow approach and going well, look, 0:11:31.880 --> 0:11:33.960 this is not going to knock this, so of everyone, 0:11:34.000 --> 0:11:37.800 that's a sort of a more quite constrained option. It's 0:11:37.800 --> 0:11:40.719 a constrained tax policy being taken on. It's a more 0:11:40.760 --> 0:11:43.920 sort of and softly approach. The risk, of course with 0:11:44.080 --> 0:11:45.840 that is that what does it do enough to sort 0:11:45.840 --> 0:11:48.280 of change the dial And after a period where let's 0:11:48.280 --> 0:11:50.920 be clear, canceital gains of runne course a little bit, 0:11:51.040 --> 0:11:53.480 maybe not fully, but some of your bigger capital gains 0:11:53.480 --> 0:11:55.520 happened over the last sort of ten twenty years, and 0:11:55.559 --> 0:11:58.960 with house prices currently down on a year ago depending 0:11:58.960 --> 0:12:01.880 on the measure, years not looking particularly strong to have 0:12:02.000 --> 0:12:05.160 those in the future. What I think changed is political polling. 0:12:05.640 --> 0:12:08.160 You know, you've seen continued support actually in the last 0:12:08.200 --> 0:12:10.720 couple of years for a capital gains tax, at least 0:12:10.720 --> 0:12:12.600 at this more sort of narrow level. So it does 0:12:12.679 --> 0:12:15.320 give an ability to say, well, look, people are asking 0:12:15.400 --> 0:12:18.199 for it. It's clearly a want as well to invest 0:12:18.280 --> 0:12:21.199 more into health. So I think that's where coming bringing 0:12:21.200 --> 0:12:23.920 everything together, there was an economic reason as well as 0:12:23.920 --> 0:12:24.760 a political reason. 0:12:29.880 --> 0:12:32.720 Now I watched Chris Hipkins stand up. There were three 0:12:32.800 --> 0:12:40.680 words he refuses to say capital gains tax. Mark my words. 0:12:41.200 --> 0:12:45.040 That is what labor is proposing and far from what 0:12:45.200 --> 0:12:48.800 Hipkins and Edmonds have claimed. This is a broad capital 0:12:48.840 --> 0:12:53.360 gains tax. It will include all commercial property that is 0:12:53.400 --> 0:12:57.800 to say, land and buildings that are not residential. That 0:12:57.960 --> 0:13:01.160 is effectively a tax on every are you business in 0:13:01.480 --> 0:13:02.160 New Zealand. 0:13:03.040 --> 0:13:04.920 It's a disappointing that they haven't gone the. 0:13:04.880 --> 0:13:08.840 Full hog though, oh as an economist, I think it 0:13:08.880 --> 0:13:11.760 is a missed opportunity to not have done the whole thing, 0:13:12.080 --> 0:13:13.760 or to be honest, have thought about what we could 0:13:13.760 --> 0:13:16.600 do or should do more broadly around the likes of 0:13:16.640 --> 0:13:19.240 the tax system in terms of how you sort of 0:13:19.280 --> 0:13:22.679 support more economic activity, but also sort of the efficiency 0:13:22.800 --> 0:13:26.640 and the equity of the tax system. Like the idea 0:13:26.720 --> 0:13:29.400 here right should be that you bring together as much 0:13:29.480 --> 0:13:32.240 money as you need to fund the government from as 0:13:32.360 --> 0:13:34.400 broad of a set of sources as you can, so 0:13:34.480 --> 0:13:36.800 that there's sort of no one area that doesn't get text, 0:13:36.840 --> 0:13:38.640 which means that another area has to get text a 0:13:38.640 --> 0:13:40.680 whole lot more to make up for it. And so 0:13:40.760 --> 0:13:43.560 in my mind, having something like the comprehensive capital gains 0:13:43.640 --> 0:13:45.920 tax does seem sensible. It might not make a lot 0:13:45.920 --> 0:13:48.560 of revenue at the moment, that's fine, but also looking 0:13:48.559 --> 0:13:51.319 at other options like a land value tax or similar 0:13:51.720 --> 0:13:54.400 or importantly, trying to reduce the top tax rate, which 0:13:54.400 --> 0:13:56.920 at thirty nine percent, really does diminish the ability for 0:13:57.000 --> 0:14:00.520 people to want to or the ability to invest in 0:14:00.559 --> 0:14:03.280 businesses to quite the same degree because when they get 0:14:03.320 --> 0:14:05.520 those returns will once they get over a certain amount 0:14:05.760 --> 0:14:07.840 they get you lose a sort of you know, nearly 0:14:07.880 --> 0:14:10.880 forty percent all at once. So there is a challenge there, 0:14:10.920 --> 0:14:13.200 I think around this sort of cohesiveness of the entire 0:14:13.240 --> 0:14:15.560 tax system. I think it is a missed opportunity to 0:14:15.559 --> 0:14:18.160 have done more. But at least we're having the tax debate. 0:14:18.200 --> 0:14:20.520 The concern, of course, is that this has already started 0:14:20.520 --> 0:14:23.960 to turn into you know, a real misinformation while people 0:14:23.960 --> 0:14:26.640 talking about tax you know, I've seen some parties who 0:14:26.680 --> 0:14:29.360 are opposing this saying, you know, this is coming for 0:14:29.720 --> 0:14:32.200 the businesses, and no it's not. It's coming for the 0:14:32.240 --> 0:14:34.680 profit on someone who's got a commercial holding, so they 0:14:34.720 --> 0:14:38.320 might have a twenty five million dollar factory or something 0:14:38.360 --> 0:14:40.640 that they've had for thirty years, if it makes sense 0:14:40.720 --> 0:14:43.520 for thirty thousand dollars over the next couple they will 0:14:43.520 --> 0:14:46.240 pay twenty eight percent tax on the thirty thousand dollars 0:14:46.280 --> 0:14:48.480 more not on the entire value of the asset. Like 0:14:48.520 --> 0:14:51.320 there is some real stupid scare mungering out here that 0:14:51.360 --> 0:14:53.760 I think misses the issue. But at the same time, 0:14:53.840 --> 0:14:56.040 as an economist, yeah, I would have definitely liked a 0:14:56.040 --> 0:14:59.080 more comprehensive option, if not having thought even more broadly 0:14:59.120 --> 0:15:00.400 about the tax system. 0:15:00.760 --> 0:15:03.680 Yeah, and certainly not small businesses as well, who I 0:15:03.760 --> 0:15:07.400 assume would be renting their premises or or the shops 0:15:07.480 --> 0:15:10.480 or whatever they're working out from. Why do you reckon 0:15:10.520 --> 0:15:15.880 they stopped short at introducing a wealth tax? 0:15:16.080 --> 0:15:17.040 I mean, do you reckon that? 0:15:17.080 --> 0:15:20.160 They had to look at the Greens and saw the 0:15:20.200 --> 0:15:22.640 backlash they got on all of their wealth tax stuff 0:15:23.000 --> 0:15:25.400 from that Green budget, and they just want backed off 0:15:25.400 --> 0:15:27.720 and said no, like, we're not We're not dipping our 0:15:27.800 --> 0:15:28.320 toe into that. 0:15:29.600 --> 0:15:31.960 I mean potentially, I sort of expect as well that 0:15:32.000 --> 0:15:34.080 they will have done quite a bit of work in 0:15:34.120 --> 0:15:35.920 the background, and I know, you know, you've talked to 0:15:35.920 --> 0:15:38.480 people that seem to have a little bit more inside 0:15:38.480 --> 0:15:40.520 knowledge and they highlight that over time they have been 0:15:40.560 --> 0:15:43.000 discussions within the Labor Party over which way the sort 0:15:43.000 --> 0:15:46.600 of tack on this. But the evidence around the likes 0:15:46.640 --> 0:15:49.240 of wealth tex I just I don't think it stacks up. 0:15:49.240 --> 0:15:50.560 I mean, you can see them in terms of how 0:15:50.560 --> 0:15:54.320 many countries developed countries actually have a walth text in comparison, 0:15:54.560 --> 0:15:57.000 a comparison to something like a capital game stick and 0:15:57.080 --> 0:15:59.360 some of the advice that was coming through from Trusury 0:15:59.400 --> 0:16:02.080 when Labor last tried to look at when they were 0:16:02.120 --> 0:16:05.000 in government, there was a much greater focus on careful 0:16:05.000 --> 0:16:08.240 gastacks or doing something more in that area. So I 0:16:08.320 --> 0:16:11.520 sort of think that it's a combination of politics and 0:16:11.520 --> 0:16:14.120 and economics again trying to find the best middle ground. 0:16:14.120 --> 0:16:18.360 But the questions with how narrow a policy this is, 0:16:18.400 --> 0:16:21.120 both in terms of the money it brings in and 0:16:21.200 --> 0:16:24.240 what it pays for. Isn't enough to turn the doll 0:16:24.360 --> 0:16:26.360 because you know, you've seen a lot of calls from 0:16:26.360 --> 0:16:28.600 some political borders saying it needs to be a whole 0:16:28.600 --> 0:16:32.480 lot more investment in government. If there's not the ability 0:16:32.520 --> 0:16:34.040 to sort of raise a huge amount of revenue from 0:16:34.040 --> 0:16:36.160 the policy, are we spending a lot more time on 0:16:36.200 --> 0:16:38.320 a policy then it's actually going to sort of influence 0:16:38.320 --> 0:16:40.119 in our daily lives potentially. 0:16:41.200 --> 0:16:42.920 Yeah, And they could know that as well. 0:16:43.000 --> 0:16:45.520 The hesitancy, you know, tacking it on to such a 0:16:45.560 --> 0:16:46.680 big issue. 0:16:46.520 --> 0:16:48.400 Like health and what. 0:16:48.560 --> 0:16:51.760 I don't know whether you saw the press conference with 0:16:51.840 --> 0:16:57.280 Barbara and Ben's Chris Hepkins and Aisheveril, but a majority 0:16:57.320 --> 0:17:02.840 of it was talking about help right. They started off saying, look, 0:17:03.040 --> 0:17:06.880 they led with aspirations of a better healthcare system. They're 0:17:06.920 --> 0:17:10.399 saying Luxon's bringing the country backwards. There are Kiwis leaving 0:17:10.440 --> 0:17:12.840 the country. And this is all before they mentioned the 0:17:12.880 --> 0:17:16.199 word tax, mind you, So that kind of seems to 0:17:16.280 --> 0:17:19.680 me like they were hesitant with their so they've tacked 0:17:19.680 --> 0:17:21.800 it onto something that Kiwis care about. 0:17:23.320 --> 0:17:25.879 Yeah, definitely. Look, I think the challenge going forward for 0:17:25.920 --> 0:17:28.359 all political partings is how you sort of square the 0:17:28.359 --> 0:17:31.160 current finances that the government has where we are still 0:17:31.200 --> 0:17:34.440 expected to spend more as a government than it will 0:17:34.480 --> 0:17:36.600 earn all the way out to something like twenty thirty, 0:17:37.119 --> 0:17:39.920 but at the same time needing or certainly expecting from 0:17:39.960 --> 0:17:42.399 New Zealand, it's more money going into the healthcare system 0:17:42.400 --> 0:17:44.200 because of some of the challenges. So there's a real, 0:17:44.560 --> 0:17:46.639 I think difficult balance there. We're on one hand, you 0:17:46.720 --> 0:17:48.920 need more money generally to try and balance the book 0:17:49.000 --> 0:17:52.000 seed through higher revenue or not spending as much, but 0:17:52.080 --> 0:17:54.159 you also need to be spending more apparently on the 0:17:54.160 --> 0:17:57.520 healthcare system to increase those outcomes. That means that again 0:17:57.840 --> 0:18:00.200 it's sort of still got this tension there where even 0:18:00.240 --> 0:18:02.399 under these sort of policy settings and still have a 0:18:02.440 --> 0:18:05.200 deficit or half a decade or so, it's still pretty 0:18:05.240 --> 0:18:07.320 unpalatable for a lot of New Zealanders. So a lot 0:18:07.359 --> 0:18:09.720 of difficult choices I think ahead, a lot of balancing 0:18:09.760 --> 0:18:10.560 to be done. 0:18:11.320 --> 0:18:13.560 And lastly, does this latest policy, because I know that 0:18:13.600 --> 0:18:17.400 this is just a nugget of Labor, the Labor Party's 0:18:17.840 --> 0:18:22.719 fiscal policy that they'll obviously announce ahead of the next election, 0:18:22.880 --> 0:18:27.080 does this make you excited for it or a bit hesitant? 0:18:28.040 --> 0:18:30.160 Oh? Look, I don't know if economists ever gets sort 0:18:30.160 --> 0:18:32.560 of too excited before we get details and similar So look, 0:18:32.560 --> 0:18:35.760 we'll continue to open see and assess how that happens. 0:18:35.800 --> 0:18:38.719 And that's true sort of of all political parties. You know, 0:18:38.840 --> 0:18:40.760 all of this stuff is important. It makes a big 0:18:40.760 --> 0:18:44.159 difference to people's lives. It has been consequences for the government, 0:18:44.200 --> 0:18:47.520 so we do look at that and try and understand 0:18:47.560 --> 0:18:50.760 what it means. But look, so far we're always withhold judgment, 0:18:50.840 --> 0:18:53.960 and probably most importantly as economists, we're looking at this 0:18:54.000 --> 0:18:57.359 from a policy perspective. Yes, there's politics involved, and simply 0:18:57.440 --> 0:18:59.560 there's to be some sort of more personal politics involved 0:18:59.560 --> 0:19:02.080 all the time at the moment, but we're looking at 0:19:02.119 --> 0:19:03.480 it from a policy point of view. What does it 0:19:03.520 --> 0:19:05.400 mean for the country, what does it mean for the economy, 0:19:05.440 --> 0:19:07.880 what does it mean for people in society. So that's 0:19:07.880 --> 0:19:09.560 sort of how we're focused on it, and we'll take 0:19:09.560 --> 0:19:12.040