Still spending OPM


Labour leader David Shearer gave a big speech in Nelson last week, which only three reporters from Wellington bothered going to.

His new big idea was that everyone should have a living wage.

It’s hard to argue against the idea that people should be paid enough to live on but it’s a policy which aims to treat the symptom not the cause, and use other people’s money to do it.

Rather than telling employers they should be paying their staff more, a party that wants to be taken seriously as a government-in-waiting need to be addressing the barriers to higher wages.

One of those is the burden of government and Labour is opposing National’s policies which will reduce that.

Another is high taxation and Labour wants to impose another one – a Capital Gains Tax which will take years to gain momentum and will add another cost to business, redirecting money which might instead be used to increase productivity and wages.

Good question


The tax advisor had just read the story of Cinderella to his four-year-old daughter for the first time.

The little girl was fascinated by the tale, especially the part where the pumpkin turns into a golden coach.

Suddenly she piped up, “Daddy, when the pumpkin turned into a golden coach, would that be classed as income or a long-term capital gain?”

It’s a joke but it does raise a serious point about the complexities of a capital gains tax – ambiguities and complexity create loopholes.

I’m not against a CTG in theory but I am opposed to Labour’s proposal for very good reasons:

We should be aiming at a reduction in taxes not an increase.

Complicated taxes cost too much to administer and divert time, energy and money from productive activity to avoidance strategies.

We need to remove compliance costs and other barriers to productivity not increase them.

Those with sympathy for Labour’s proposal should the truth behind these jokes:

The difference between simple and complex taxes is clear:  If you have simple ones the government gets your money. If you have complex ones, the tax advisor gets your money.

For every tax problem there is a solution which is straightforward, uncomplicated and wrong.

How do you know you’ve met a good tax accountant?
S/he has a loophole named after her/him.

A fine is a tax for doing something wrong.  A tax is a fine for doing something right.

And anyone swayed by the results of the Herald DigiPoll survey which shows 16.5% of peole strongly in favour and  21.4% moderately in favour oc Labour’s CTG should consider the words of Geroge Bernard Shaw:

The government that robs Peter to pay Paul can always depend on the support of Paul.

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