OLIVER HARTWICH: Everyone is a winner with TOP
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- 1 hour ago
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The Opportunity Party wants to be known as the party of ideas. Now polling near five percent, I decided to test one.
The party’s website offers a calculator. You enter your income and land value, and it reveals how much better off you will be under its radical tax proposal. Their so-called ‘Tax Reset’ promises a cash payment of $19,400 a year to every adult, the ‘Citizen’s Income’, funded by a 1.75 percent annual tax on land.
I tried to invent someone who would pay more net tax under the scheme. I failed.
Tenants would be way better off. They would receive the free cash but pay no land tax. That is one way of cooling the housing market.
Retirees could defer the tax until they die.
Farmers would pay just 0.5 percent, with conservation exemptions and weather deferrals.
And homeowners? Most would be better off, TOP explains, once their Citizen’s Income is factored in.
But I was determined to find a net loser. I invented a couple TOP could not possibly love, each earning $500,000, with their house on a million dollars of urban land.
Still, the calculator awarded them a net tax cut of $5,455 a year.
Why? It had charged them more income tax (because TOP wants to increase it for top earners), yet their land tax of $17,500 was no match for their $38,800 of free cash.
The tax falls only on land, not on buildings. By TOP’s own rule of thumb, land makes up 70 percent of an average freestanding home’s value. That means few couples’ land tax would outrun the free cash until their house passes around $3 million. And once introduced, land prices would fall, so the new land tax raises even less revenue.
Yet, the scheme must somehow raise $24 billion a year to pay for the ‘Citizen’s Income’. The party estimates one in ten New Zealanders will pay more.
The scheme seems to punish families with multiple earners or high land value, while rewarding those who shift their resources elsewhere. But given how seldom the calculator produces a tax increase, even that seems a stretch.
Milton Friedman warned there is no such thing as a free lunch. Indeed, the oldest lesson in economics is that somebody, somewhere, always pays. Still TOP, the party of ideas, has built a shiny policy and calculator that cheerfully disagree with him.
Perhaps they know something that Friedman missed. Or maybe it is just a policy that is not properly costed?
Dr Oliver Hartwich is the executive director of The New Zealand Initiative
Over-equity does not work in physics. Therefore it can't work fiscally. Logic rules the day.
Do the Maths.
Reminds me of a perpetual motion machine. Although come to think of it, maybe that's their trump card, free energy, forever. Brilliant, Labour voters at least, who know a good deal when they see one, should come flocking.
I am sure that people at TOP 'feel' that what they have created is just wonderful, almost like paradise on earth in fact. As if no one has ever had such and idea before......
So TOP wants to drop the age of retirement down to 18 (or is it 20) and before that you get free schooling, health, lunch and a baby bonus for being born - and any extra's Labour and the greens want to add like subsidised housing and power. And nobody has to pay. UTOPIA
What am I missing!! - we could of course extend the free lunches to everybody as it is after all a bit of a drag having to make my own sandwiches
So retirees can defer the tax until they die - how clever, how modern and kind of TOP. Just dust off the old Death Duties and pop a wee splash of Max Factor on it.