Tax gains not house purchases

The Herald reports:

Independent economist Shamubeel Eaqub was concerned about New Zealand’s ranking. “We’ve got a tax system with a very light touch when it comes to property, whether it’s capital gains tax or stamp duty,” Eaqub said.

“It would be a very good thing for New Zealand to tax property purchases because we can ring-fence that tax income. It wouldn’t be just a revenue grab but would be used to make houses more affordable and increase the supply of housing.”

It would be a very bad thing. A tax on purchases would make houses more expensive just as GST makes goods and services more expensive.

And using the extra revenue to increase government spending just reduces economic growth.

I’m all for introducing a comprehensive Capital Gains Tax, but it should be revenue neutral – so income and company taxes should reduce to compensate.

New taxes to increase the size of Government are the wrong answer.