With 30% of retirees changing address every 5 years, they will have to downsize into hovels because they have to pay IRD the great big new tax on their capital championed by Morgan and his Opportunities Party well before they die.
Morgan’s 1.8% tax on equity capital is not an inheritance tax for the majority of retirees. It is a nest egg tax as they downsize after the kids fly the nest, grandchildren appear or they move to a more convenient place as they become frail.
Because they will have to pay back taxes of tens of thousands of dollars to IRD every time they sell their house, retirees either will not be able to move closer to family because of grand-children or health issues or they will have difficulty moving into a retirement home of their choice.
This is the first in a series of blogs showing how the Opportunities Party is too clever by half in its manifesto development. By insisting on having different policies to everybody else by a good country mile, it ends up having to take up the policies others rejected because they do not work.
In the case at hand, they put an inheritance tax on ordinary New Zealanders at the same rate as the rich including the founder of the Opportunities Party. This tax will be the only capital tax anywhere that is not progressive.
Over 70% of the retired own their own house mortgage free. The majority of that equity will now go to IRD plus interest by the time both members of the couple die given the average capital tax will be about $10,000 per year in Wellington and twice that in Auckland. They face up to 20 to 25 years of deferred capital taxation that will take half the value of their house easily. It will be hardest if they must cash-out their house to go into retirement home.
The purpose of buying a house is to have a nest egg for retirement. You may draw down that capital because of health issues or pass it on to children if you are luckier than that.
Morgan wants to radically change the way in which retirees go into the evening of their days. People who just managed to save for a house will have nothing to pass on to their children. No more bank of mum and dad either.