Friday, November 11, 2005

Capital Pain Tax

The Real Estate mafioso has recoiled in horror at the suggestion of a Capital Gains tax on second homes. Those who have massive self-interest in the house price insanity continuing like the Banks and the Real Estate institute have called the idea 'insane' and some have even suggested the Government should instead cut spending in health and education to cool off the economy.
But really?
Does the economy have to be held to ransom because lemmings in middle New Zealand think buying a 7th home on 100% finance is a good idea?
Should we really have to choke off 'good' economic growth instead of targeting the problem area? Why bring out the sledgehammer of interest rate rises when a targeted knock on an inflated housing market could produce the same end-result - lower inflation without collateral damage to the entire economy.

2 comments:

Rich said...

Moreover, noone has every explained to me why if I work and earn $90,000, I pay nearly $28k in tax. If I do sit on my ass and collect a windfall profit on a house, I pay exactly *no* tax.

Uroskin said...

If you bought and sold houses for a living you have to pay tax on your earnings, even though it's not called a capital gains tax.
Even so, it would be a good idea to treat saving and investment instruments neutral regarding tax, i.e. at the moment you pay tax on your savings account with a bank, but if you saved instead by paying off your mortgage and then sold your house, you pay no tax on that "saving".
Mind you, if you sold your house at a loss, say, after a property crash causing negative equity, should you be able to claim tax back?