COMMENT:

The noise around the Tax Working Group's proposal has become deafening.

Sorry if I've been part of that.

I've done previews, reviews ... radio, video, podcasts. I'm thinking of doing a helpful explainer in the medium of interpretive dance.

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I've never seen this level of public interest in tax policy.

There's been a frenzied, PR-fuelled reaction from business and property groups – very little of it positive.

Responses range from "good in theory but too hard to implement" to "they want to steal all my money and sell my children".

Much of the latter variety is coming from people who don't like tax much in the first place.

Conversely, the demonising of property investors is unhelpful. The bulk of New Zealand's landlords are mum and dad operators.

Their nervous reaction to change on this scale isn't unreasonable.

The Government says it isn't "a major overhaul" of the tax system.

True, if we consider its fiscal weighting compared to income tax and GST.

But downplaying the scale of this cultural change seems disingenuous.

Beneath all the noise there are points about this proposal I find reassuring, others that worry me.

The starting point should be that the proposal is revenue neutral. It is not a tax grab.

It is a rebalancing, though - some people will pay more and others pay less.

The Government needs to own that. It talks about "fairness", but that's a politically loaded word.

Broadly though, the Government has opted not to fight the first round of this battle.

That's created a vacuum which opponents are filling with assumptions about who this tax hits and by how much.

Who will it hurt most?

Not the baby boomers who currently seem cast as primary victims.

Baby boomers are already approaching retirement. Many will look to realise gains on assets around the proposed CGT start date of 2021.

But the capital gains they've made over the years are safely locked away from the IRD's Sauron-like gaze.

It bears repeating: the tax is not retrospective. It only applies to gains made after 2021.

The bulk of the burden falls on younger generations - most of whom haven't yet acquired assets.

Will it cause a crash in the property market in 2021 as investors rush to sell? I doubt it.

If property is generating strong returns in 2021 then why sell? If it is flat or falling, then there will be no tax to pay.

More likely it will – and it's designed to – influence future investment decisions.

We may see fewer investors enter the property market if post-CGT gains look marginal.

Those used to big gains may be disappointed but others are keen to see the market become more affordable for first-home buyers.

If we see less investment in property, where will the money go?

This is where it hits problems with people - like me - who think New Zealand's capital market and innovative business sector hold the key to economic transformation.

This capital gains tax proposal doesn't rebalance the system towards investment in the productive economy the way many in the business sector hoped it would.

The NZX is not happy that local shares will be subject to a higher tax rates than foreign shares.

And young, innovative companies may be hit hard because they tend to retain and grow capital rather than paying dividends.

Are we comfortable with tax that might disincentivise investment in New Zealand's next Xero?

I'm not sure I am.

It's less fashionable but - given our continued dependence on agriculture - I'd expect to see similar arguments from the farming sector.

KiwiSaver is another area of contention.

A capital gains tax on shares will lower the growth path of KiwiSaver funds by tens of thousands of dollars over a working life.

But there is a proposal to address that with tax breaks for those on low incomes and a $250 lift in the annual tax credit for every member.

That means that most lower- and middle-income people would be better off.

Another proposed option to balance the ledger is an income tax break.

The Tax Working Group recommended lifting the bottom income tax bracket.

That would mean about $16 a week back for all wage earners.

That seems like a bigger deal to those on low incomes, small change to high earners.

But high earners don't need to use it for food, rent or school shoes.

If you're smart and can afford to reinvest it, your retirement savings will look even better.

It's another $832 a year that I can have compounding away for the next 20 years until I retire - almost $20,000 more on my savings. The numbers are even bigger if applied across a full working life.

Perhaps people will squander their tax break on beer.

My numbers are based on certain assumptions but so too are those being used to scaremonger.

There are better arguments critics could make. For example, that this "give and take" system is not an efficient way to encourage wealth creation.

That's a debate worth having.

But it is more nuanced and right now is not cutting through.

Hopefully, given we could be arguing about capital gains tax through to the 2020 election, the noise will die down a bit. Then the pros and cons of this change can be debated with more realism and clarity.