Capital gains tax will benefit economy

The Green Party today welcomed Labour's formal adoption of a capital gains tax policy which will deliver a fairer tax system and create a more efficient and productive economy, Green Party Co-leader Dr Russel Norman said today.

"A comprehensive tax on capital gains, excluding the family home, is a critical component of rebalancing our economy, which is why we've supported it. Labour has had the courage to recognise and implement good tax policy and we congratulate them for that," said Dr Norman.

"This shift in Labour's policy will help lift our long-term economic performance and create a fairer, more progressive tax system.

"We have some concerns with Labour's design of a capital gains tax and look forward to working with the 'Expert Panel' they propose to set up to look at design and implementation issues before the tax is ultimately adopted in 2013."

Labour proposes raising a flat capital gains tax set at 15 percent while increasing the top income tax rate to 39 percent for those on incomes over $150,000. This leaves a significant tax differential between income earned from capital gains and income from other sources such as wages.

"Labour's design for a capital gains tax leaves intact some incentives to continue to invest for capital gains rather than productive returns," said Dr Norman.

"A fairer, more consistent approach would be to tax capital gains at the marginal tax rate of the seller while indexing any capital gains for the effects of inflation. This would make the capital gains tax more progressive while treating all income alike.

"But this is a detail we can address in open consultation with the public and experts alike.

"In the meantime, I congratulate Phil Goff for his adoption of complex but far-sighted economic policy that closes the largest single remaining loophole in our income tax system."