Labour leader Chris Hipkins with Ayesha Verrall, left, and Barbara Edmonds, right. Photo: RNZ / Mark Papalii
An economics academic says the success of Labour's capital gains tax policy will rely on house prices going up, as property investors urge Labour not to reinstate a ban on interest deductibility.
Labour will campaign on a 28 percent tax on gains made after July 2027, with the family home and farms exempt.
It is expected to raise on-average $700 million a year over a four-year forecast period, with the money going towards three GP visits a year for everyone.
Ryan Greenaway-McGrevy, an associate professor of economics at the University of Auckland, said it was good to see some fiscal balancing, but it was predicated on house prices going up.
"If house prices don't go up, then we won't have any capital gains taxes at all available in order to fund those GP visits. So we have to just be a little bit wary of the fact that a lot of the taxing and spending that will be going on will become more dependent on the housing market going forward," he said.
Greenaway-McGrevy said it was unclear whether the goal was to keep a lid on house prices or to raise revenue.
"Given so much policy from Labour and National is targeted at getting house prices down, and ideally ending three decades of house price appreciation, that should be their number one goal and I believe it still is. It does draw into question how much money is going to be raised through a policy like this?"
The value of commercial and residential properties will be set on a 'valuation day,' with profits after that time able to be taxed. Different options would be available for the valuation, in line with the Tax Working Group's recommendations.
Labour's policy document states any capital losses would be carried forward and used to reduce future capital gains.
They would be ringfenced, so they could only be used to offset gains from the same type of asset, and not against salary or other incomes.
That means in order to claim losses, someone would have to buy another investment property, which is the way things work under the current brightline rules.
Robert MacCulloch, Professor of macro economics at Auckland University, Photo: Supplied
Professor Robert MacCulloch, the Matthew S. Abel chair of macroeconomics at Auckland University, said the policy was "half-baked" and questioned whether Labour would raise anything at all, saying it could hurt people with lower incomes.
"It's a trivial amount of money. It's not going to change a whole lot of anything," he said.
"You could get with this a very rich person with a $20m house on Paritai Drive... which is not subject to any tax at all providing you're living in it, and someone who's worth a few hundred thousand with their own house and a rental property worth $100,000, they pay this tax."
Meanwhile Tax Justice Aotearoa, a group calling for more equality and transparency in the tax system, said the policy was "unambitious" and it wanted to see a more comprehensive CGT.
"The policy does represent a small step towards a fairer tax system and give us something to build on, including supplementing the CGT with other tax changes that would improve outcomes for New Zealanders," said spokesperson Glenn Barclay.
'Marginalised' - property investors hit back
Labour leader Chris Hipkins said the policy encouraged a shift away from speculative investment in property, and into more "productive" areas.
But Matt Ball, advocacy manager for the Property Investors' Federation, said property speculators were a small part of the industry, and long-term investors were a productive part of the economy as many spent money improving their properties.
He said investors would not be happy they were singled out.
"Most people who support a capital gains tax support a comprehensive capital gains tax on a wide range of assets. Here, I think all Labour has done is chosen a group of people that can be marginalised and can be taxed without, they hope, fear of electoral retribution," he said.
Hipkins would also not be drawn on whether Labour would reinstate a ban on interest deductibility, preferring to announce further revenue measures closer to the election, after Labour has seen the books.
When last in government, Labour removed the ability for investors to claim their mortgage costs against their rental income.
The current government overturned the ban, saying it would ease pressure on rents.
Ball wanted Labour to rule out bringing back the ban.
"If they introduced a capital gains tax, targeted on property investors, and said as a quid pro quo we won't go back and reintroduce the ban on interest deductibility, I think a lot of people would have said OK fine," he said.
"But if you have one and the other, it's a disaster. The loss of interest deductibility makes investing in residential property unprofitable. So people will exit the industry, there's no doubt about it."
Public onboard with free GP visits
The announcement the money would go towards three free GP visits a year was welcomed by people RNZ spoke to in the Auckland suburb of Greenlane.
"That would be good, because I do spend a lot of time going there," said Hinemoa Turahui.
Aria Kalra said people were often put off from going to a GP, pointing to a three-week wait only to be told it was not something they could address.
"Those things add up, or people don't get them checked out."
Jason Thorpe said his wife had just changed from a GP that charged $70 to one that charged $30.
"If it's $70 for a visit I would probably go once a year, or just not go unless I really, really need to. But there are some small things for my health that could be better taken care of if it didn't come with a big price tag just to find the answer."
Mau Pene said some in her whānau would rather go to after-hours or ED because of the wait for an appointment.
GPs welcome announcement but warn of increased demand
The general practice sector has welcomed the announcement, but was keen to hear more details about funding for the sector.
The Royal College of GPs has said it supported anything that increased access to healthcare and decreased barriers, but was concerned GPs did not have the capacity to deal with any increased demand.
Blenheim GP Dr Buzz Burrell, who is also chair of advocacy group General Practitioners Aotearoa, did not expect a "flood" on the system, but said the problem was with the system itself.
He praised the announcement, but said general practice was in crisis. He said estimates showed the sector was around 500 GPs short.
"It is a start, it is a gesture. However, what it's doing is basically saying someone else will pay somebody to go and visit their general practitioner under the system as it stands at the moment. And the system at the moment is flawed."
Too many practices were not viable, and were over-enrolling and under-servicing, with hospitals having to pick up the slack, Burrell said.
"If we do have three visits paid for by the government, how much is that going to be? Is it the genuine full cost of seeing a doctor, or is it the subsidised cost? Is it going to be enough, or is it going to be a gesture? It will be nice to know the details of that."
Labour is confident the policy can be met within the current workforce.
It has said GPs would be funded through capitation increases, which alongside funding for more clinical triage systems and AI tools was estimated to free up 4.58 million appointments a year.
Photo: Elise Manahan/ University of Auckland
Pacific health leader Sir Collin Tukuitonga said three visits a year would be more than enough for some, but for others with more complex needs it probably would not be.
However, he said, the government had to land somewhere and three looked to be the average.
"I like the fact that it's a simple idea. They've targeted one of the pressure points in our health system. They're redistributing the wealth in Aotearoa, so I think on a number of fronts it's a good decision. Time will tell, of course, what happens in practice."
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