Capital gains tax is a big topic of debate at the moment, although David Cunliffe's Labour camp may want to forget his policy fumble in the recent debate.
On the face of it you can understand the reasoning behind the tax. It can be galling for young people still unable to buy a home to watch asset-rich baby-boomers cash in the tax-free gains their rental properties have created over recent decades.
It's not unusual for Auckland properties to have doubled in value many times. But because that is a capital gain, not income, there's no tax payable on the resulting windfall when it's time to sell.
But, and this is a really big but, I can't see how a capital gains tax is going to be workable.
It seems to me that as soon as you start adding exceptions to a tax it becomes ineffectual. And this policy has a lot of exemptions. There's the family home, for a start. Then personal assets, collectibles, small business assets sold for retirement and payouts from KiwiSaver. There's even an exemption for people who've built up a small business and sell it: They'll get their first $250,000 gain tax-free. Homes in trusts apparently won't be taxed.
I see this sort of thing and think, great, there'll be queues around the block of people wanting accountants' help negotiating the rules. But that's surely not Labour's intention.
I also can't see how taxing shares (outside KiwiSaver) is going to help their stated goal of moving investment into productive assets. All it's going to do is encourage people to put their money into things that don't generate capital gains - term deposits or savings accounts, to lock up their money in KiwiSaver, or to hold on to their investment properties much longer and hike up the rents to make it pay off.
We need to encourage investment of all sorts in the economy, not try to meddle with inefficient, cumbersome taxes.
Traders and speculators are already caught in the income tax rules.
They already pay tax at marginal rates of up to 33 per cent.
If house prices are the concern, it would be better to tackle the root cause of soaring prices than to try to dump an inefficient tax on those who make profits from the market.