Mark #10, the insurance of (floating interest rate level) loans to small business would necessarily have to be government subsidised - possibly from funds derived from increasing GST, or a land tax on rental property (and possibly a CGT on holiday homes as well, but without any annual land tax component on this form of property). Though there is the alternatrive option of applying a mortgage surcharge on loans to "rental property investors buying existing property" to provide the funds for the subsidy, or even a full surcharge on all mortgage lending (which in lowering the base OCR would not necessarily increase total home financing cost). This option would prevent upward pressure on the dollar.

The insurance of (floating interest rate level) loans to small business would necessarily be government subsidised - from funds derived from increasing GST, or a land tax on rental property (and possibly a CGT on holiday homes as well, but without any annual land tax component on this form of property).

The process to reduce the number of individuals owning 2,3,4,5 or more houses while others and families are barely able to afford a roof over their heads is to constrain the ever-widening income gap - something which does not appear to concern the high income decile represented on this working group.

The most transparent and equitable tax ( offering the most opportunity for incentives such as for saving and targeting for social justice ) is progressive, marginal, personal income tax with avoidance avenues stymied.

Unless the government expropriates all private ownership of dwellings [Comment (1), NZ Herald editorial, Monday, 11 Jan 2010, Dr Graham Tayler, Ph.D (Accounting & Finance) (England)], someone will need to supply the market requirement for rental accommodation, Mark(#10).

Who will this be if private individual investors are dissuaded ... the government (taxpayer), New Zealand business entities, or foreign investors, or who else ?

You say that Justice(#4) has put his comment well, yet he is obviously of the belief that the Land Tax (which is not the proposed Capital Gains Tax) is directed at property investors. Although Justice(#4) infers it, I am not a property investor, and Bruce(#9) claims it would be a nonsense to impose a Land Tax on the first (or family) home and advocates it would be a sensible impost on investment property.

The Taxation Working Group's suggestion of imposing a Land Tax on the first home will severely impact propensity to save ( an issue which the TWG has given abysmal attention ), discourage permanent residency and creation of community and have a reductive effect on the average net worth of the New Zealand household.

Politically, the voter has to distinguish the taxation policies of the outgoing government which was to give a rates subsidy to pensioners and low income taxpayers to compensate them for paying more towards public services and utilities than non-property owning citizens with this Land Tax recommendation which will be tantamount to an increase in Local Authority rates for the non-business homeowner.

@ Bruce #9 - who would insure the small busienss lending? and why? if you were offering the insurance (i.e. taking the risk....) then surely you would want to be getting the appropriate returns. This is in fact what insurance comapanies do.

@ Justice #4 - agree, well put and bring it on.

Murray is quite right to be concerned about the impact of a land tax applying on primary homeowners - it would even impact on the level of mortgagee sales of working families (as well as those on fixed incomes). The idea is of course nonsense and I have presumed it is merely the opening gambit to prepare the way for a more politically acceptable land tax on rental property.

A CGT in this form ensures that all rental property owners are treated in the same way (including those who operate behind trusts). It also ensures a regular flow of income to government. There would still be a CGT liability when the property was finally sold (but this would depend on how much land tax was paid and how much capital gain there was over this time).

Any increase in price of rent makes home ownership more attractive. It is however important that money raised by the land tax is used to diminish speculation in (rental property) land by creating incentives to invest elsewhere.

I would halve current rates of tax on interest income from bank deposits, company bonds and the like - this to end tax on the inflation component of the interest level. The 39 cents rate to 20%, a 30 rate at 15% and the 19 cents rate to 10%. I would also suggest we need to have an insurance scheme for small business lending - where all loans made at the floating mortgage rate to small business were insured (this would end the need for small business to borrow against their homes and be limited to this level of borrowing when they were trying to become a medium-sized company). Larger companies would be better able to fund-raise if those taking up their bonds were taxed at lower levels.

Dan - Well given we disagree on the issue, of course you don't accept my opinion post and prefer the one where I present my supporting argument.

You overlook that the countries where New Zealanders work overseas - Australia, UK and USA (for higher wages) have higher top rates of income tax than we do and they do not have their top rate down at their company tax level. Other wealthier OECD countries in Europe collect more in tax as a share of the economy than we do. This shows there is no necessary correlation between lower tax rates and productivity increases.

I note that you like to let the market set the "rewards" for jobs - the thing is

1. Why then should the "market" need the help of government (cutting tax rates of those on higher incomes)?

2. Income disparity has a negative impact on economic growth and market globalisation is increasing this trend. So why should not government act to minimise the disparity rather than exacerbate it - that is focus tax cuts at the lower end and continue with WFF and minimise its tax effect by bringing in a less tax distorting concept such as non working partner access to the dole (which would diminish tax drag problems for many one job couples at least).

Professor Buckle talks about a more fair tax system - and clearly states that WFF has caused a problem for this, so he is inferring that WFF is causing unfairness and somehow this should change. As he raises no alternatives to WFF to support (in work) families, he is of course in ideological lockstep with those in National who opposed WFF from the beginning.

As for global market wage rewards for such professionals as doctors, we cannot compete with foreign salary rates - we compete on lifestyle. What government can do is collect enough taxes so it can provide incentives to retain staff. Clearly we need the option of tertiary debt write-offs, so that over 5-10 years of working here their debt is written off to zero. This not only retains graduates, but also provides an opportunity for those already OE to come back and clear their debt by working here, rather than working OE to pay off their debt. But cutting top rates of tax instead could leave us unable to afford this.

PS It's rather presumptuous to presume opposition to the naked greed of the higher income members of society only comes from "uneducated" people jealous of the pay of others. Frankly those who covet jobs for the (higher) salaries should keep their greed out of government policy development and certainly not presume that it is the government's job to increase their incomes any further as part of tax policy.

Dan - Well given we disagree on the issue, of course you don't accept my opinion post and prefer the one where I present my supporting argument.

You overlook that the countries where New Zealanders work overseas - Australia, UK and USA (for higher wages) have higher top rates of income tax than we do and they do not have their top rate down at their company tax level. Other wealthier OECD countries in Europe collect more in tax as a share of the economy than we do. This shows there is no necessary correlation between lower tax rates and productivity increases.

I note that you like to let the market set the "rewards" for jobs - the thing is

1. why then should the "market" need the help of government (cutting tax rates of those on higher incomes)?

2. (Increasing) income disparity has a negative impact on economic growth and market globalisation is increasing this trend. So why should not government act to minimise the disparity rather than exacerbate it - that is focus tax cuts at the lower end and continue with WFF and minimise its tax effect by bringing in a less tax distorting concept such as non working partner access to the dole (which would diminish tax drag problems for many one job couples at least).

Professor Buckle talks about a more fair tax system - and clearly states that WFF has caused a problem for this, so he is inferring that WFF is causing unfairness and somehow this should change. As he raises no alternatives to WFF to support (in work) families, he is of course in ideological lockstep with those in National who opposed WFF from the beginning.

As for global market wage rewards for such professionals as doctors, we cannot compete with foreign salary rates - we compete on lifestyle. What government can do is collect enough taxes so it can provide incentives to retain staff. Clearly we need the option of tertiary debt writeoffs, so that over 5-10 years of working here their debt is written off to zero. This not only retains graduates, but provides an opportunity for those already OE to come back and clear their debt by working here, rather than working OE to pay off their debt. But cutting top rates of tax instead could leave us unable to afford this.

PS It's rather presumptious to presume opposition to the naked greed of the higher income members society only comes from "uneducated" people jealous of the pay of others. Frankly those who covet jobs for the (higher) salaries should keep their greed out of government policy development and certainly not presume that it is the government's job to increase their incomes any further as part of tax policy.

The comment of Justice(#4) further evidences to me that there is a belief that the Taxation Working Group's proposed Land Tax is only applicable to property investors - it is obviously often confused with a Capital Gains Tax about which there has been clear assertion from politicians that there is no intention to apply it to the first (or family) home.

The proposed Land Tax is tantamount to an increase in local authority rates and has been proposed as a taxation impost on the first home.

I have not expressed any opinion concerning a Capital Gains Tax which excludes the first home, but bearing in mind the way rates have escalated to fund all manner of local authority capital and operating expenditure, I envisage a Land Tax inevitably compounding this situation to the extent that homeowners on fixed income are alienated from title to their dwellings by means of an unaffordable imputed rental equivalent.

Apart from affecting those on fixed incomes, I consider that there is a dissuasion accruing towards saving and investing in owner-occupied dwellings which will have wide-ranging adverse economic outcome.

Considering the matter of rented-dwelling investment, I would ask Justice(#4) just whom he thinks will be the alternative provider of the capital if individuals divest and withdraw - the government, New Zealand firms, or foreign investors ?

I would suggest to him that, apart from a drift to more opulent housing as the income gap pervasively widens, there is not over-investment in New Zealand's housing stock.

Bruce #2, #3, if it is the same person, your second post is much better than your first. Prof. Buckle does not say WFF is unfair, he says it is damaging to the tax system. (I DO think it's unfair, having children is a matter of personal choice, and just because I choose not to, or more accurately am having difficulty finding a partner to have them with, I don't see that I should have to subsidise other peoples').

Yes it is the job of employers to make employment in NZ more attractive, but an unhelpful tax system makes this a lot harder for them to do. And the overseas companies that are paying their staff higher wages are doing so upon the backs of more supportive tax systems than we have here.

I disagree with both you and Murray about the income gap scenario, I know it's a pet of Murray's but it irks me all the same. Some jobs are harder to do, require different sets of skills, and the market will set the rate. If doctors' salaries keep going up, more people will study to be doctors, there are more graduates looking for jobs, the rate comes back down. If you feel so desperately hard done by that someone earns so much more than you, upskill and get a higher paying job. Don't just sit there and moan that it's unfair and expect the Government to take from them and give to you.