Labour MP David Parker says the bright-line test, which slaps a capital gains tax on investment properties sold within five years of their purchase, isn't a capital gains tax at all.
It's actually an income tax, he told The AM Show on Friday morning, defending the Government's consideration of extending it beyond the present five years.
"I can't tell you if it's in or out," he told host Ryan Bridge. "I heard ACT saying this was a capital gains tax - it was actually introduced by the National Party. It's an income tax. We're not proposing a new tax - the only thing that is being considered is whether we should extend the period for the bright-line test."
This might be splitting hairs. Inland Revenue too refers to the bright-line tax, paid on capital gains, as an income tax. New Zealand doesn't have any form of capital gains tax - any taxes eligible on any gains are considered income taxes.
Before the election, Labour promised - aside from a new top income tax rate for country's highest earners - no new taxes. National sought to cast doubt on this promise, suggesting Labour's potential coalition partners the Greens would force them to adopt capital gains and wealth taxes.
In the end, Labour won enough of the vote to govern alone.
"We were clear - no capital gains tax, no wealth tax," said Parker. "We didn't say that we wouldn't tinker with the detail of existing taxes."
Finance Minister Grant Robertson has written to the Reserve Bank, asking it to consider house prices when it makes monetary policy decisions, and Treasury for advice on how the bright-line test and other measures aimed at cooling the market are working.
National MP Simon Bridges, appearing on The AM Show with Parker, said if the Government extended the test, he would consider it a new tax.
"It will catch a whole lot more people... Jacinda knew that tax was a big issue at the election, so she was pretty clear out there - 'No, we're not going to do anymore, there's not going to be any of these things, you don't need to worry about that New Zealand.' And farmers and middle New Zealand voted for her in their droves."
Parker pointed out when National increased GST back in 2010, it broke an election promise specifically not to raise GST. Bridges pointed out income taxes were cut at the same time.
'More leave, fair pay' driving interest rates down - Bridges
As for the Reserve Bank's role in the recent surge in house prices, Parker said it was partly to blame. Interest rates have been kept very low to assist the economy through the COVID-19 economic shock, but much of the borrowing appears to have been poured into housing speculation, rather than productive investment.
"The monetary policy has been accommodating of business to support the business economy, but the side-effect has been rising house prices. So we're looking at what the Reserve Bank can do to help," said Parker.
Despite the National Party urging the Government to tell the Reserve Bank to limit how much of its cheap lending can go on property investment, then taking credit when Robertson actually did talk to the Reserve Bank, Bridges said Reserve Bank Governor now has too many targets to hit.
"You've got Grant Robertson who's said, 'I'm going to give you unemployment as a problem, Reserve Bank; now we're also going to give you housing.' And you've got poor old Adrian Orr who's sitting there with now three balls in the air, he's juggling them and he can't do them all perfectly.
"I say look actually, this is a Government problem. It's Government that has to find solutions - I don't favour the tax stuff by any means, but to keep the pressure of interest rates, if they weren't doing some of the wacky stuff in employment like lots more leave, fair pay, all of these things - they're driving interest rates down... and there's other things like the RMA."
Parker flatly rejected the idea giving people fair pay and an extra few days' leave a year (at this stage, likely to be an extra public holiday for Matariki and an extra five days' allowance for sick leave) was behind the nearly 20 percent rise in house prices this year.
Giving "working people a bit more money in their pockets [isn't] the cause of current house price rises", he said.
