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An inconvenient truth about capital gains taxes that Labour and the mainstream media covered up

The Attorney General David Parker presented the Inland Revenue "High Wealth Individual Research Project" to a gullible mainstream media that swallowed the political purpose of the report hook, line and sinker. For example, the NZ Herald did a video to explain to its readership of several million Kiwis that the reason why the "super rich" are paying an effective tax rate of 9.4%, compared to 20.2 % for middle earners, is because the wealthy get their "economic income" mostly from capital gains which are not taxed in NZ.

If economics was only that simple. The conclusion our Attorney General, Revenue Minister & Herald jumped to was wrong, at least if you compare our IRD survey with a similar one commissioned by the White House. It concluded that the wealthy in America are paying an effective tax rate (measured in a similar way as the NZ IRD survey) of 8.2%. That survey was referenced in the IRD report which states, "The approach we take is similar to recent work undertaken by the US Council of Economic Advisers that estimates effective tax rates for the 400 wealthiest US families".

Spot the problem? The US has a comprehensive capital gains tax that even includes the family home (which David Parker has declared, "I have never favored"). Yet the effective tax rate of the wealthiest Americans is less than ours (!) A reason, according to the White House, maybe that whilst realized capital gains are taxed in the US, unrealized ones are largely not - a policy also recommended by our Labour government's Cullen Tax Working Group.

So if you think a capital gains tax, as designed by Labour, will increase the Effective Tax Rate of "the wealthy" - which was the conclusion of our media & NZ's "top tax experts" that it consulted - dream on. What is behind the Revenue Minister's crusade? Nothing short of stirring the green-eyed monster of envy as a ploy to gain votes & power.



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