Adviser comments on Greens' plan to levy assets over $2 million
Taxing people on higher incomes and who have higher net assets to fund the Greens’ proposed “income guarantee” is a disincentive for business owners, a mortgage adviser says.
Ahead of the New Zealand election, the Green Party has released a proposed income guarantee aimed at helping families out of poverty through a change in tax rules.
Satyan Mehra (pictured above) is the director and chief adviser for iConsult, which provides lending solutions for small to medium sized businesses, property investors and developers.
Satyan Mehra was awarded for the Best Mortgage Brokers in New Zealand. Read all the winners here.
While there was merit in uplifting lower-earning sectors and promoting social equality, Mehra said that the Greens’ proposal did not consider the impact on those Kiwis who had worked long and hard to achieve their financial position.
“You cannot make the rich poor to make the poor rich,” Mehra said.
Under the Greens’ proposal, every Kiwi would receive a guaranteed income of $385 per week in the first year (including those out of work or studying) and the first $10,000 earnt would be tax-free. Anyone earning less than $125,000 per year would pay less tax, the party says.
To pay for it, those who earn more would contribute more tax, with a 45% tax rate introduced for people earning over $180,000 per year. Additionally, the Greens propose a 2.5% wealth tax on assets, which is estimated to apply to the top 0.7% of Kiwis. The tax would apply to net assets such as property, shares and bonds valued above $2m ($4m value for couples), which is the value excluding mortgages and other debt.
The plan raises questions about whether certain groups of Kiwis would be disincentivised to get ahead, and how cashflow constraints of people with net assets above $2m would be managed.
The Greens say their plan will be “workable” for people who are above the threshold who earn a modest income, and that payment of the net wealth tax could be deferred until their asset is sold.
The family home is not exempt, however the Green Party claims that the tax “won’t affect most family homes or retirement savings”.
Mehra said that such a proposal would likely act as an incentive for hard-working Kiwis to leave the country to live and work overseas.
Having started university at 19, Mehra juggled full-time study with full-time work, while also buying his first home. As a business owner, it’s common to put in excessive hours, particularly when becoming established, he said.
“If I’ve worked really hard to get to where I am, it’s not fair to tax because I’ve accumulated an asset over 10 years ago when I was young,” Mehra said.
Mehra said that the incoming government would be wise to focus on providing everyone with opportunity, making the economy more stable and providing more jobs.
Business owners typically work 50 plus hours per week, and taxing people who work longer hours than what is considered to be average simply isn’t fair, he said.
”I don’t believe that taxing people at the top end to provide [for people further down] is going to help,” Mehra said.
Where a person earns $2.5m in assets, under the Greens’ proposal, they would be taxed at 2.5% on the $500,000 over the $2m threshold. If a person owns $2.5m in assets but has a $1m mortgage, they would not be taxed.
Along with a new tax threshold and 2.5% wealth tax, the Greens are proposing a trust tax of 1.5% and a new corporate tax rate of 33%.
With the NZ election campaign ramping up, National has undertaken to reinstate tax deductibility on rental properties, and to wind back changes to the Credit Contracts and Consumer Finance Act and re-tailor them towards high-cost lenders.
