A "common-sense constraint" on politicking around taxes anybody?

Under Greens’, we are led to believe there should be a new top income rate of 45% on income over $180,000 and a 2.5% wealth tax on assets worth more than $2m per individual (minus mortgages or other debt).

Let's assume a wealthy punter earns $180k from working hard and so all their investment income beyond that is taxed at the new marginal tax rate of 45%, they have $10m invested in bonds at 6% and inflation is a modest 3.8% (the long run average). The investment income and related tax calculations are thus as simple as possible, including there are no issues of measurement or definition to hide behind:

Opening wealth (bonds) 10,000,000.00 ? ?

Wealth tax @2.5% on $8m (excess over $2m) (200,000.00)

? ? Interest income @ 6% (on $10m - $200k 588,000.00 ? ?

Income tax (264,600.00)

? ? Closing wealth 10,123,400.00

Cash return to wealthy punter 1.234%

Government's cash return (on wealthy punter's assets) 4.766%

And that is before removing the inflation, which means the positive 1.234% cash return for the punter turns into a negative 2.566% real loss of purchasing power. Which begs a couple of questions:

Q1 Is this 'wealthy' punter:

a) Leaving the country?

b) Increasing their required interest rate?

c) Withdrawing all their capital from New Zealand?

d) All of the above?

A1 All of the above.

Q2 And, in terms of Q1 b), what will the required interest rate on their

deposit have to increase to in order to net an after inflation

return of just 2.5% (assuming inflation is running at the long term

average of 3.8%)?

A2 15%! (which is why required investment returns go so high in response

to small increases in inflation)

So this proposal would be like instituting a lotto where the winners give up 80% of their spoils to the government. Noone wants to play. Noone wants to work. Government is pleading for investment.

Maybe Greens' put the decimal point in the wrong place - for our 'wealthy' punter a 0.25% wealth tax would still exceed - by a multiple of six and more - the average annual rates bill in NZ, but at least then it might come short of ushering in a full on totalitarian state.

Maybe we should require the full implications of what political parties propose, especially on such fundamental matters as tax, to be laid out as part of their policies? Maybe, but then does anyone read beyond the headline?

And it's all sold to less-well-off voters on the idea they'll get a universal basic income. We all recognise the dystopia of too few owning too much meaning more and more don't want to play the current economic game - but how's about breaking up monopolies? And how's about moving to universal self sufficiency, where self responsibility and self development remain central and sustainability is thrown in? How's about improving on our dystopia rather than replacing it with a worse alternative? How's about a positive goal for the future?

So, maybe we need to institute a "common-sense constraint" system, but then who to administer it? A few randomly selected small business owners over a well earned beer should suffice for kicking this one to touch ... maybe.

Lest we forget