JD
Amid the current MSM hoopla about TOP, momentarily muted as the press pack rushes off to dig up dirt on Paul Henry and Stuart Nash, there is one key TOP policy winning voter attention that is seldom mentioned.
What’s driving TOP in the polls has nothing to do with them being ‘centrists’, offering a ‘measured alternative’ to Labour or National and claiming to be willing to work with either of them, it is simply that TOP are offering free money, and who can resist that?
Do the sums. If you’re a renter you pick up a Universal Basic Income (UBI) of $19,400 tax free per annum, no questions asked. If you’re a homeowner who will be paying TOP’s land tax, the answer is more complicated but still positive.
The average house in NZ sits on land worth $510,000, so the tax per house will be around $9,000 every year. Offsetting that is the free UBI, so even if you’re a single person homeowner, you’re still $10,400 per year better off. As a married couple that increases to $29,800. What’s not to like?
Nothing, until the moment you pass 65. At which point the UBI is subsumed into the pension: not as an addition, but as a substitute for $19,400 of that pension. But you’re still expected to find that land tax payment on your family home.
AI analysis it gave me the following information. About 750,000 Kiwi pensioners are owner-occupiers – some as singles, others as couples. Around 450,000 of these have only their pension, or pension plus a few dollars from other sources, as their sole income to live on.
Recognising on the one hand that the UBI part of the pension will be tax free, but on the other the bottom tax rate increases to 28 per cent, when you crunch the numbers, it shows:
Single homeowner pensioners will have to find $8,084 per year in extra taxes.
Married couples will, between them, have to find $5,694 per year in extra taxes.
How any pension-dependent pensioner will be able to make these payments is not addressed by TOP. ‘Just look at the free money, don’t focus on the details’ seems to be their mantra.
But hang on you say, can’t these pensioners simply let the land tax build up as a deferred charge against the house when sold or bequeathed to their children? And the answer is yes, but again at what cost?
Firstly, TOP doesn’t specify if this deferral will attract interest but since when has the opportunity to charge more tax ever been denied by a politician? So let’s assume that five per cent interest will be levied.
Secondly NZ life expectancy statistics show that at the age of 65, the average Kiwi will live for approximately 21 more years.
Thirdly, even conservative estimates of land value increases suggest the the average accumulated land tax charge against the house by the time today’s 65 year old reaches their use-by date in 2047 will be $460,000.
To summarise: We have a political party committed to further impoverishing that half of the homeowning pensioner population who rely primarily on their pensions as their sole income.
Alternatively, they will, when you die, interpose themselves between you and your heirs to siphon off $460,000 in deferred taxes: a death tax on the asset value that parents have worked all their lives to accumulate in their family home.
This annual wealth transfer, from the elderly to the under-65s UBI recipients, amounts to more than $2 billion per year now, rising to as much as $5 billion by 2047.
But if you are under 65, should you care? And the answer is maybe not – unless you have pensioner parents, a great many of whom are likely to be hastened to their graves by the stress and worry of dealing with this draconian new tax regime.
In any case why does the government need to get involved in this wealth transfer at all? Over the next 20 years, the Baby Boomer generation, wherein this accumulated wealth lies today, will find the Grim Reaper’s scythe winnowing their ranks, passing this wealth, frictionlessly and in its entirety, to Gen X and the Millennials. Unless of course TOP gets its hands on the money first.
Ronald Reagan’s famous warning – “The nine most terrifying words in the English language are: I’m from the government, and I’m here to help” – will, under TOP, be only partially true.
The new quote will read “I’m from the government, and I’m here to help myself and spend your inheritance better than you can.”
TOP are not centrists. A cursory analysis reveals their socialist colours as they sing that siren song. It’s never worked before, maybe next time it will.
