Keith Melville

I want to issue a warning about a cleverly designed Trojan horse scam.

The seductive scam is based on word-play trickery and seems to be gaining support among the naive and those who think others owe them a living.

A certain powerful lobby group has already found and named its victims, but needs to canvas sufficient support before being able to force its victims to pay

The scam I am talking about is Labour’s plan for a capital gains tax (CGT), which is just word play for a wealth tax aimed at a class of people Labour hates with a vengeance – residential landlords, with that hatred now extended to commercial landlords.

A bona fide capital gains tax would be aimed at all wealth, which increases in value over time and would be indexed to inflation, which the fake Labour CGT is not.

In reality, Labour’s CGT is simply a deceptive tax grab aimed at investors whose residential and commercial rented properties might realise prices exceeding those for which they were bought.

The tax would apply from July 2027, when the profit from the selling price would be subject to a 28 per cent tax.

That tax rate takes no account of the inflationary loss of value, and that is the Trojan horse part of it, and that is where people are being duped.

In other words, sellers would be paying tax on inflationary increases in value as well as increases above inflation.

Under the Labour plan, all owner-occupied homes would be exempt from the CGT, even if that home is worth $30 million.

That means if you own and occupy any home worth say anything upwards from a few thousand dollars to the highest-valued owner-occupied home in the country, you will be exempt from the tax, even if that home increases in value by millions in the time frame proposed by Labour when you sell it.

The CGT protects the home interests of Labour’s wealthy wage and salary-earning middle and upper-middle class supporters in the central government bureaucracy, the health sector, education and local government.

Also out of reach from Labour’s CGT hook are the ultra-wealthy, the very people the left hates as much as landlords, but Labour knows it cannot impose a CGT on their homes without being accused of extreme hypocrisy.

By contrast, if you own a rental valued at say $400,000 you could be crucified no matter the risks and sacrifices you have made in your journey towards property ownership.

You will be liable for the 28 percent tax on the profit including the inflationary increase, you made when selling.

There are about 100,000 houses in New Zealand valued at between $1 million and $30 million and more, which would be exempt from Labour’s gutless discriminatory tax.

Have you wondered why farms are exempt?  

I strongly suspect that is because Labour realises hitting the family farm with its envy tax would destroy a cornerstone of our economy, the highly successful dairy farming industry.

Hitting the family farm with a CGT could discourage or cripple family succession and Labour’s knows that would be political suicide.

Likewise, taxing the family home would doom Labour into sharing the back benches with its left wing mates in the Green Party.

The lack of justice in it all is the sickening but misunderstood reality of Labour’s CGT, yet Labour seems to have convinced many commentators that owning property and renting it is an unproductive use of capital and resources.

So, in Labour’s mindset, providing a family with a warm and comfortable home in a private rental, and paying electricians, plumbers and others to maintain it, is not productive?

To me, that is staggering ignorance, or is it really beguiling duplicity?

Those readers who think that Labour’s CGT is the bees’ knees on tax should read Auckland accountant Mathew Gilligan’s take on it

In an article looking into the unintended consequences of the tax, he says it is likely to push capital offshore and drive up rents as people are discouraged from providing rentals. He says part of the CGT is a tax on inflation and that amounts to a wealth tax on equity, which is “grossly unfair and under-handed”.

“It is not easy for the average person to understand, so it slips through the left-leaning media like Teflon.”

Keith Melville