Wednesday, January 22, 2014

Taxing Times with Sticky Housing

David Cunliffe has re-announced old news about Labour dropping two tax policies that never took off. Labour has now officially dropped the income tax free threshold, and the proposed GST exception for fresh fruit and vegetables.

It's unfortunate that no-one could manage to sell the tax-free threshold in Labour. The policy would have largely benefitted Labour's alleged core constituents, as well as gone some way to repealing Bill English's paperboy tax, and more closely alligning with Oz's tax-free income threshold. Labour has moved away from a central part of any Guaranteed Minimum Income policy, throwing all its eggs into the unions' Working Living Wage campaign.

The fruit and vege GST loophole was never a winner, and should have never been approved by the Labour Council. All the policy did was confuse the audience, and show up Labour's brains trust to be fiscally illiterate. It was so poorly designed, it made Working for Families look relatively elegant.

More substantive tax policies are hinted at being foreshadowed in Cunliffe's State of the Nation speech next week. The progressive tax hike for high income earners is still in the mix. As is a capital gains tax on housing, excluding the "family home". Some changes at Working for Families are hinted at. It wouldn't be a Labour party that didn't whip the working classes with more sin taxes on booze and smokes too. No-one in Labour understands the term Tax Churn.

There's a simpler solution to tax reform which is now available to Labour which previously wasn't, due to severe internal consistency flaws. It doesn't require mucking about with entirely new tax regimes and all the grifting and upheaval that requires (Just look at the grief caused by the LVR restrictions). It would take some heat out of the housing bubble, while removing some incentive for short term investment property flippers.

Make all (residential and commercial) property sales subject to GST.