A proposed capital gains tax would hit older Kiwis hardest who have saved money to invest in assets, holiday baches and investment properties.
Any new tax would be passed into law this term but not come into effect till after the next election, which is shaping up as a polarising referendum on the major parties' taxation policies.
The Tax Working Group has recommended the Government implement a capital gains tax, estimated to raise $8 billion over five years.
It would cover assets such as land, shares, investment properties, business assets and intellectual property.
The family home, however, would be exempt – as would cars, boats and art.
A capital gains tax (CGT) would only apply from April 2021 and would mean a person who sells a second property after that date, and makes a $50,000 profit, for example, would face a $16,600 tax bill.
Any capital gain made on a property before 2021 would not be subject to a CGT.
That would worry the tens of thousands of Kiwis who own a second property.
The criticism has been extensive, with National calling it an "attack on the Kiwi way of life" and business groups saying the CGT costs would outweigh its benefits.
But Finance Minister Grant Robertson said any recommendations the Government did adopt, would be done so to support fairness in the tax system.
A CGT would likely have a disproportionate effect on older New Zealanders and baby boomers, who own the vast majority of the assets which would be taxed, under Cullen's proposal.
With the $8b raised from the CGT, the Government would have a number of other options for taxation – one being a tax cut for low and middle-income earners.
The Tax Working Group's chair, Sir Michael Cullen recommended increasing the bottom taxation threshold from $14,000 a year to between $20,000 and $22,500.
This would amount to an extra $15-$16 a week in people's pockets – "which doesn't sound like much, but it's significant for people with a low income", Cullen said.
The report also said the Government could introduce a water tax and a tax on polluters.
Cullen also suggested the way KiwiSaver was taxed could be looked at, with the working group advocating the scheme be tweaked to increase the incentives for low-income earners to save.
It recommended an exemption on the employer contributions for those who earn under $48,000 with a graduated refund for those who earn between $48,000 and $70,000.
Any capital gains would be added to the seller's overall yearly income and would be set at the income-earner's top tax rate, likely to be 33 per cent for most.
The Government will release its official response to the recommendations in April.
But National Leader Simon Bridges was wasting no time yesterday, saying the report's recommendations were an "attack on the Kiwi way of life".
"This would hit every New Zealander with a KiwiSaver, shares, investment property, a small business, a lifestyle block, a bach or even an empty section."
ACT Leader David Seymour said the recommendations were "offensive to New Zealand values."
The response from the other side of the political aisle was far more restrained.
Prime Minister Jacinda Ardern said the Government would now take the time to assess the report and its recommendations.
"We build consensus, and that's exactly the process we will adopt in this case."
Greens co-leader James Shaw was singing a similar tune, as was New Zealand First Leader Winston Peters, for the most part.
"I'm not going to be a loose goose and not stick to the script, and the script is very clear," he told media before going into the House, where he was grilled by National deputy leader Paula Bennett.
Peters was asked if he stood by his previous statements on a CGT.
Bennett listed off a few examples, such as when he told Q&A before the last election a capital gains tax was "off the table" as "it doesn't work".
He also said, during Newshub's ASB's Great Financial Debate in 2017, a CGT "won't work in this country".
"They won't work in any other country. They have never worked."
Peters said yesterday: "Here's the fine point about a democratic, constitutional Government – and that is we're going to consult the people of this country over the next two weeks."
Bennett said his answer showed how much of a problem the Tax Working Group's report would be for the Labour-led Government.
"It proves he is a lion on the campaign trail, but a lamb in Government."
The criticism was not just coming from politicians, with various lobby groups and industry bodies voicing their opinions.
The Employers and Manufacturers Association (EMA) said the key issue in the Tax Working Group's proposal was the cost of its CGT rules would outweigh any benefits.
"Fundamentally the proposed capital gains rules don't address the Tax Working Group's objectives of reducing over-investment in housing and increasing tax fairness," EMA chief executive Brett O'Riley.
Federated Farmers were critical as well. It's vice-president Andrew Hoggard said it was a "mangy dog", that would add unacceptably high costs and complexity.
NZ Property Investors' Federation executive officer Andrew King said it was difficult to say what impact a CGT could have on the property market.
But he said in other countries which did have such a tax, it hadn't had any effect on property prices.
"Anyone that thinks a capital gains tax would be grand elixir to get property prices down is sadly mistaken."
But it was not all negative – Greenpeace called on the Government to accept the working group's CGT recommendation.
• Capital gains tax (CGT) to apply after the sale of residential property, businesses, shares, all land and buildings except the family home, and intangibles such as intellectual property and goodwill.
• Tax rate to be set at the income-earner's top tax rate, likely to be 33% for most.
• Calculation of gains to not be retrospective — tax to be applied to gains made after April 2021.
• Art, boats, cars, bikes, jewellery, personal household items and the family home to be exempt.
• Losses on the sale of assets bought before April 2021 will generally be able to be used to reduce paid on gains from other assets.
• Increase the threshold of the lowest tax rate (10.5%), allowing more income to be taxed at the lower rate.
• Increase social welfare net benefits to allow similar benefits as low-income earners post tax threshold adjustments.
• House on farms and surrounding land up to 4500sq m exempt from CGT, calculated as a percentage of total farm value.
• CGT on small businesses can be deferred (roll over relief) if annual turnover is less than $5 million and sale proceeds are reinvested in similar asset class.
• No support to make company tax progressive, ie smaller companies paying less than 28%.
• Capital gains tax estimated to raise $8.3 billion over five years.
• Expand coverage and rate of Waste Disposal Levy, expand the ETS and use congestion charging.
• Better tax benefits for KiwiSavers on low and middle incomes. But people would also be paying tax on their investment gains through KiwiSaver.