Labour's 'Bach Tax' a stalking horse for full-blown Capital Gains - and it will make New Zealand poorer

The Taxpayers' Union is slamming Labour's newly announced Capital Gains Tax on investment and commercial property, dubbing it a "Bach Tax" that punishes savers, kills productivity, and opens the door to a full-blown wealth tax.

"This is a tax on inflation disguised as fairness," said Jordan Williams, Executive Director of the Taxpayers' Union.

"Even if your property hasn't increased in real value, you'll still pay up to 28 percent of the paper gain. That's not tax reform, that's daylight robbery."

A tax that pretends to help productivity - but doesn't

Labour claims the policy will make the economy "more productive" by shifting tax away from "work and business." It's a nice talking point, but it's not the policy.

"Labour talks about the 'unfair burden on productive Kiwis' yet this policy doesn't reduce that burden by a single cent," said Williams.

"They're just piling a new tax on top. Not one business owner or wage-earner will pay a dollar less tax under this plan."

Taxing inflation is fundamentally unfair

Labour's CGT doesn't even adjust for inflation, meaning everyday savers, small business owners, and investors will be taxed on imaginary gains.

"If you buy a property today and sell it in ten years for exactly the same real value, Labour wants nearly a third of your nest egg," said Williams.

"That's not a tax on profit, it's a tax on patience."

A political Trojan horse

"Once a CGT is in place, history shows it inevitably expands to family homes, inheritances, and even death duties," said Williams.

"Every country that's adopted a so-called 'targeted' CGT ends up with the full-blown version. This is just the first spoonful."

Bad economics, bad politics

• Volatile revenue: CGT inflows crash in recessions, making it a terrible base for funding ongoing health entitlements like Labour's "free GP visits."
• Distorts investment: Discourages development and improvement - people hold onto assets longer just to avoid the tax.
• Inflated valuations: Tying the system to outdated council Capital Valuations (CVs) is a recipe for inequity and endless disputes. CVs are often materially wrong. A CV, wrong by just $100,000, will result in a $28,000 tax bill.

"The Government doesn't have a revenue problem, it has a spending problem. In 2017, the Government was 27.7% of the economy. Now spending is 32.5%. Labour could easily have looked for savings and spending reprioritisation. Instead Hipkins is doubling down on new taxes. That's lazy, and to dressing it up as something to 'help' the economy is political gas lighting.”