Millionaires are the biggest beneficiaries from of the lack of tax on capital gains while the vast majority of New Zealanders would be completely untouched by such a tax, Green Party Co-leader Dr Russel Norman said today.
"Research produced by the Treasury and Inland Revenue shows that those on very high incomes gain disproportionately from the lack of a capital gains tax," said Dr Norman.
"In the USA, those earning $1 million or more derived 40 percent of their income from capital gains. The figure was similar in Australia, with those earning $1 million or more deriving 30 percent of their income from capital gains. Those on average incomes gain negligible income from capital gains.
"Treasury and Inland Revenue therefore conclude that a tax on capital gains (excluding the family home) in New Zealand would fall mostly on those on very high incomes thereby increasing the progressivity of the tax system.
"It's Treasury's way of saying that a capital gains tax is incredibly fair.
The joint paper published by Treasury and the Inland Revenue Department used data from the United States and Australia to draw conclusions about the likely equity implications for a capital gains tax here. They found that a capital gains tax (excluding the family home) would increase the integrity of our tax system while raising an additional $4.5 billion in government revenues over time.
"The research highlights the fact that the bulk of interest and wage income was earned by those on lower incomes. This income is fully taxed," said Dr Norman.
"The largest proportion of capital gains is earned by those at the upper end of the income spectrum. This income currently remains untaxed.
"This tax loop-hole for those that can afford to own multiple properties needs to be closed.
"By defending the status quo, John Key is arguing those earning more than $1 million a year shouldn't have to pay tax on 40 percent of their income while those on the average wage should pay tax on all their income.
"By refusing to implement a tax on capital gains, John Key is not protecting the interests of wage and salary earners.
"A capital gains tax is a fair, progressive tax — one that treats every dollar earned the same."
Link to the Treasury & Inland Revenue's background paper on capital gains tax: