there is a valid point behind what he what he was trying to say. Main benefits, such as the unemployment benefit, are income tested. They are not asset tested. There is no expectation in the welfare system that people sell assets to get by before they become eligible

This is why the welfare system is fundamentally fucked up. It’s not meant to be some elaborate game that people who can “work the system” can extract as much largesse from the taxpayer as possible. It was intended to ensure that those in need were provided for.
It’s completely irrelevant how much this guy’s wife earns – they are obviously able to sustain themselves either by selling one of their additional homes or through borrowing against their assets.
It’s a complete joke to think that someone with more than $1m in assets would even be held up as a poster boy by the left for extending the welfare system. It just goes to show how totally out of touch Labour are.

In the case of a house, it would clearly be ludicrous to say to someone “we’ll tax all rent you receive, but allow no deduction for the interest you’re paying on the mortgage.” Similarly, it would be ludicrous to say to a taxi driver “we’ll tax the full value of your taxi fares, but allow no deduction for the cost of the petrol in your taxi.”

Where this is out of whack with property is that you can organise things such that you have almost no income (hence no profit and no tax). This would be a pretty dumb thing to do – lose money so that I don’t pay tax. Kind of like saying “I’m not going to work because for every dollar I get paid, the government gets 39%.” Except with property (and with some shares), you can make it back on the capital gain. And the capital gain is tax free. So you organise things so that you lose money on an ongoing basis, and get it all back when you sell the (renovated and mortgage free) property. So a capital gains tax is the answer to this problem, and is an answer to the same problem with respect to highly leveraged share investments.

However, I do agree that on some level a capital gains tax would be helpful, but it would have to be part of a wider range of tax reforms.

1. If you had the standard open because you slavishly read it every 5 seconds, then you probably had a cached ip address, and wouldn’t notice the domain was gone until the validity of that dns entry timed out in your local cache

2. If you hardly ever visit the standard, and went over there for a giggle, it wouldn’t be able to resolve the name

3. Different isps would have different periods of outage, depending on how their dns servers are configured.

racer is still a tool though.

Note that I don’t particularly agree with our current policy settings around the amount of tax, but if we’re going to have tax I consider it inefficient that some people (who have largely assets and little cash income) manage to avoid tax, whilst other people (who have a lot of salary income but little assets) get taxed hard. Essentially our maximum tax rates apply to the upper middle class, the truly wealthy avoid most tax.

In detail:

1. Fully support a capital gains tax. Investments that generate cashflow get taxed, investments that generate capital gains don’t. That is a flaw in the system, and drives investment decisions to be less efficient than they would otherwise be.

2. Any capital gains tax needs to be well designed, and take into account inflation and the risk free rate of return, and needs to account for timing issues (e.g. if I make a capital gain on paper relating to some land I own, it is unreasonable to ask me to pay tax on that if I haven’t actually sold it).

3. I see no reason why the benefit system should be used to bail out property speculators who aren’t actually in trouble. If they’ve reached a point where their investment properties are sold, and they remain with debts over a relatively standard family home that they cannot pay, then I think it makes sense that there is some government support (and, in fact, the accommodation supplement will do this). But if the problem is that they cannot service the loan they took out to buy some investment properties, then they should sell the investment properties and pay off the loan. If they make a loss in selling the investment properties, then that is unfortunate. Shit, I made a loss on some shares I own, should I now be eligible for some sort of government benefit to make up that loss? I’m pretty sure we aren’t (or at least shouldn’t be) paying taxes so that investors can be guaranteed to never lose money.

4. Property speculators are investors. They add liquidity to the market, and they take risks in doing so. I don’t agree with Toad that it isn’t work – it is work, and it is a necessary function in leveling the market. If you wanted to sell a house and there were no speculators, you run the risk of being unable to make a sale if there are no buyers. When there are speculators, someone will take it off your hands at a fire sale price, and plan on selling it again when prices recover. That is a useful function, and that person needs to spend time doing that, and sleep at night knowing that they might lose everything tomorrow. I don’t, however, agree with Murray that they should be somehow entitled to government tax breaks or benefits that someone working for a salary doesn’t get.

“Mr Key’s staff have been in touch with Mr Burgess, and the Prime Minister urged him to work with Work and Income…But Mr Burgess told the Herald he had met a Work and Income staff member early yesterday and been told he was ineligible for a benefit.”

So who is out of touch now? I guess a Work and Income office would be a foreign place to Key. He assumes that WINZ will help Burgess, possibly becuase Key would expect help if he were in Burgess’ position. I wonder if the PM has learnt anythng from this exercise, or will he continue argue that a couple earning 21K should not be entited to a brass razoo.

You mean property speculators, Murray? What “work” do they do? They don’t produce anything useful – just take advantage of an unfair tax system to make their money.

expat said: just get rid of the laqc tax dodge, there is no need to add more tax just remove incentive to cheat, oh thats right labour are cheats

My recollection is that the LAQC tax dodge came in when a National government was in power. Fair point that Labour didn’t do anything to wind it back though.

You mean punish people for working hard so the sick lame and lazy assholes who can’t be arsed getting out of bed in the morning can get a free ride off everyone else. YOU are whats wrong with this country toad.

Socialism is evil, pure and simple.

Which is why the Greens support a capital gains tax to level the playing field and encourage people to invest more in productive enterprise rather than property speculation.

And while Goff has made a pigs arse of this mediawise, there is a valid point behind what he what he was trying to say. Main benefits, such as the unemployment benefit, are income tested. They are not asset tested. There is no expectation in the welfare system that people sell assets to get by before they become eligible for the benefit. Whether you agree or disagree with that is another issue, but it is a fact and always has been since the unemployment benefit was first introduced.

So if Mr Burgess were a single man, he would be eligible for the unemployment benefit, regardless of his assets. It is his wife’s rather meagre income that disentitles him, so the law is discriminatory on the basis of marital status.

Accommodation supplement, by contrast, is asset tested, which is the reason he would be ineligible to receive that irrespective of his family status.

Watch closely while I give a crap.

If true I find this unbelievable. Has the welfare net really got this wide?

Joe Plumber!

This is the downside to risky property investors and this couple should have been smart enough to understand this before borrowing to buy and hope.

However, what I find even more upsetting is that this couple tried to pay “less tax” by negative gearing these properties. Now they want the taxpayer to bail them out when it did not go their way. Is this the type of people Goof Off wants to help?