What Doctors, Landlords And Economists Make Of Labour’s Tax Plan

Giles
Dexter, Political Reporter
Lucy
Xia, Journalist

An economics academic
says the success of Labour’s capital gains tax policy will
rely on house prices going up, as property investors urge
Labour not to reinstate a ban on interest
deductibility.

Labour will campaign on a 28
percent tax on gains made after July 2027, with the family
home and farms exempt.

It is expected to raise
on-average $700 million a year over a four-year forecast
period, with the money going towards three GP visits a
year for everyone.

Ryan Greenaway-McGrevy, an
associate professor of economics at the University of
Auckland, said it was good to see some fiscal balancing, but
it was predicated on house prices going up.

“If house
prices don’t go up, then we won’t have any capital gains
taxes at all available in order to fund those GP visits. So
we have to just be a little bit wary of the fact that a lot
of the taxing and spending that will be going on will become
more dependent on the housing market going forward,” he
said.

Greenaway-McGrevy said it was unclear whether
the goal was to keep a lid on house prices or to raise
revenue.

“Given so much policy from Labour and
National is targeted at getting house prices down, and
ideally ending three decades of house price appreciation,
that should be their number one goal and I believe it still
is. It does draw into question how much money is going to be
raised through a policy like this?”

The value of
commercial and residential properties will be set on a
‘valuation day,’ with profits after that time able to be
taxed. Different options would be available for the
valuation, in line with the Tax Working Group’s
recommendations.

Labour’s policy document states any
capital losses would be carried forward and used to reduce
future capital gains.

They would be ringfenced, so
they could only be used to offset gains from the same type
of asset, and not against salary or other
incomes.

That means in order to claim losses, someone
would have to buy another investment property, which is the
way things work under the current brightline
rules.

Professor Robert MacCulloch, the Matthew S.
Abel chair of macroeconomics at Auckland University, said
the policy was “half-baked” and questioned whether Labour
would raise anything at all, saying it could hurt people
with lower incomes.

“It’s a trivial amount of money.
It’s not going to change a whole lot of anything,” he
said.

“You could get with this a very rich person with
a $20m house on Paritai Drive… which is not subject to any
tax at all providing you’re living in it, and someone who’s
worth a few hundred thousand with their own house and a
rental property worth $100,000, they pay this
tax.”

Meanwhile Tax Justice Aotearoa, a group calling
for more equality and transparency in the tax system, said
the policy was “unambitious” and it wanted to see a more
comprehensive CGT.

“The policy does represent a small
step towards a fairer tax system and give us something to
build on, including supplementing the CGT with other tax
changes that would improve outcomes for New Zealanders,”
said spokesperson Glenn Barclay.

‘Marginalised’ –
property investors hit back

Labour leader Chris
Hipkins said the policy encouraged a shift away from
speculative investment in property, and into more
“productive” areas.

But Matt Ball, advocacy manager
for the Property Investors’ Federation, said property
speculators were a small part of the industry, and long-term
investors were a productive part of the economy as many
spent money improving their properties.

He said
investors would not be happy they were singled
out.

“Most people who support a capital gains tax
support a comprehensive capital gains tax on a wide range of
assets. Here, I think all Labour has done is chosen a group
of people that can be marginalised and can be taxed without,
they hope, fear of electoral retribution,” he
said.

Hipkins would also not be drawn on whether
Labour would reinstate a ban on interest deductibility,
preferring to announce further revenue measures closer to
the election, after Labour has seen the books.

When
last in government, Labour removed the ability for investors
to claim their mortgage costs against their rental
income.

The current government overturned the ban,
saying it would ease pressure on rents.

Ball wanted
Labour to rule out bringing back the ban.

“If they
introduced a capital gains tax, targeted on property
investors, and said as a quid pro quo we won’t go back and
reintroduce the ban on interest deductibility, I think a lot
of people would have said OK fine,” he said.

“But if
you have one and the other, it’s a disaster. The loss of
interest deductibility makes investing in residential
property unprofitable. So people will exit the industry,
there’s no doubt about it.”

Public onboard with free
GP visits

The announcement the money would go towards
three free GP visits a year was welcomed by people RNZ spoke
to in the Auckland suburb of Greenlane.

“That would be
good, because I do spend a lot of time going there,” said
Hinemoa Turahui.

Aria Kalra said people were often put
off from going to a GP, pointing to a three-week wait only
to be told it was not something they could
address.

“Those things add up, or people don’t get
them checked out.”

Jason Thorpe said his wife had just
changed from a GP that charged $70 to one that charged
$30.

“If it’s $70 for a visit I would probably go once
a year, or just not go unless I really, really need to. But
there are some small things for my health that could be
better taken care of if it didn’t come with a big price tag
just to find the answer.”

Mau Pene said some in her
whānau would rather go to after-hours or ED because of the
wait for an appointment.

GPs welcome announcement but
warn of increased demand

The general practice sector
has welcomed the announcement, but was keen to hear more
details about funding for the sector.

The Royal
College of GPs has said it supported
anything that increased access to healthcare and decreased
barriers, but was concerned GPs did not have the
capacity to deal with any increased demand.

Blenheim
GP Dr Buzz Burrell, who is also chair of advocacy group
General Practitioners Aotearoa, did not expect a “flood” on
the system, but said the problem was with the system
itself.

He praised the announcement, but said general
practice was in crisis. He said estimates showed the sector
was around 500 GPs short.

“It is a start, it is a
gesture. However, what it’s doing is basically saying
someone else will pay somebody to go and visit their general
practitioner under the system as it stands at the moment.
And the system at the moment is flawed.”

Too many
practices were not viable, and were over-enrolling and
under-servicing, with hospitals having to pick up the slack,
Burrell said.

“If we do have three visits paid for by
the government, how much is that going to be? Is it the
genuine full cost of seeing a doctor, or is it the
subsidised cost? Is it going to be enough, or is it going to
be a gesture? It will be nice to know the details of
that.”

Labour is confident the policy can be met
within the current workforce.

It has said GPs would be
funded through capitation increases, which alongside funding
for more clinical triage systems and AI tools was estimated
to free up 4.58 million appointments a year.

Pacific
health leader Sir Collin Tukuitonga said three visits a year
would be more than enough for some, but for others with more
complex needs it probably would not be.

However, he
said, the government had to land somewhere and three looked
to be the average.

“I like the fact that it’s a simple
idea. They’ve targeted one of the pressure points in our
health system. They’re redistributing the wealth in
Aotearoa, so I think on a number of fronts it’s a good
decision. Time will tell, of course, what happens in
practice.”

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