Capital Gains Tax and LGBT Concerns

From Craig Young, 23 February 2019

The Ardern administration's Tax Working Group has reported back and one of its recommendations is a Capital Gains Tax. It remains to be seen whether this becomes official government policy and indeed, whether coalition partner New Zealand First supports the current policies, although confidence and supply partner the Greens already does so.

What is a Capital Gains Tax?

It is charged on capital gains, which refer to profits from other than 'core' assets like family homes. Other forms of property, stocks, bonds and precious metals are particularly subject to overseas equivalents of the proposed scheme. When it comes to the stock market overseas, there have been debates, given taht assets are also subject to earlier forms of company tax payment to central government. Apart from Singapore, Argentina and the Netherlands, traditional tax havens and less developed economies tend to be the ones that lack a capital gains tax- Belize, the Cayman Islands, Barbadoes, Ecuador, Estonia, Hong Kong, Iran, the Isle of Man and Jamaica also lack CGTs. However, apart from Estonia, most of the rest of the European Union does have some form of CGT, as do Australia, Brazil, Canada, China, South Africa, the Philippines, Israel, Japan, Mexico and the United States.

Are LGBT New Zealanders set to be disproportionately taxed as a result?

To be frank, the assumption that this will be the case is based on the mythology of the 'pink dollar'. This argues that as 'we' are 'childless,' we' don't forego employment mobility opportunities and 'don't' have associated family rearing costs, so 'we' climb faster up the organisational and corporate ladder and 'have' more disposable income. This flawed perception is based on unselective magazine readership demographics from the United States and should not be misapplied to any further contexts than marketing to the readership of said publications.

Mary V.Lee Badgett (US) and former Victoria University lesbian economist Prue Hyman have disproven this myth. As Prue Hyman's census data analysis showed a decade ago, actual examination of more detailed and holistic census data suggests a very different picture, as one might guess. Lesbians do earn more than straight women, but gay men earn less than straight men of equivalent age cohorts. This suggests that internal homophobia still plays a role within organisational and corporate cultures, affecting entry interviews, recruitment, promotion and probably unfair dismissal, although this requires more detailed investigation. Much depends on the occupation and whether the organisation's human resoure management sections are committed to anti-homophobia initiatives. Parental responsibilities also impact lesbians and gay men, as we take such responsibilities seriously, so there is an internal community income gap between singletons and parents within our communities. However, it also implies that we would not 'suffer' if we voted for a capital gains tax. For those interested in international perspectives, Mary V.Lee Badgett and Jeff Frank have edited a usefully detailed analysis of what we face.

As for the transgender communities, they face especial challenges, given that gender identity discrimination isn't explicitly recognised within New Zealand anti-discrimination laws as yet, so they are likelier to face stronger educational and employment disruptions, compounding any existing negative impacts from class and ethnicity in their personal lives. Self-employed or professional transwomen might do better than those who come out earlier. However, the benchmark study is Roberta Perkins' Transgender Lifestyles and HIV/AIDS Risk, which occurred before the advent of trans-inclusive anti-discrimination laws in Australia across all states and territories over the last fifteen years.

A capital gains tax would tax income received from sources other than core home assets and would probably raise more government revenue. Obviously, much would need to be spent on government debt relief to overseas financial institutions and governments, but there would also be opportunities for greater investment in public sector capacity and community welfare and health organisation funding assistance. This is good news for LGBT public sector employees and community service clients.

And what about Opposition policies? There is nothing new on offer here. As with the Key and English administrations, we are instead met with the repetitious mantra of "tax cuts" from National and ACT. "Tax cuts" were supposed to provide an economic stimulus, but didn't do so, and unemployment doubled during the Key and English era, before starting to trend back downward, which has continued during the Ardern administration. As well, they reduced government income,with the consequence that the AIDS Foundation was unable to fund HIV social research into the current social and political context of HIV/AIDS during the latter part of the Key/English era.

It will be interesting to see any televised debate that occurs between Treasurer Grant Robertson, Opposition finance spokesperson Amy Adams (and hopefully, Greens co-leader James Shaw, who has supported the advent of a Capital Gains Tax.)

According to the Tax Working Group, the available evidence suggests that Labour's capital gain tax is a better option than still more "tax cuts" and neglect of vital expenditure on public infrastructure and strategic research. There are certainly grounds for New Zealand LGBT communities to unreservedly support this measure.

Recommended:

Mary V.L Badgett: Money, Myths and Change: The Economic Lives of Lesbians and Gay Men:Chicago: University of Chicago Press: 2001.

Mary V L Badgett and Jeff Frank (eds) Sexual Orientation Discrimination: An International Perspective: New York/London: Routledge: 2007.

Prue Hyman: "Lesbians and Gay Men: Flirting With/Disengaging From Vital Statistics: Same-Sex Relationships and the New Zealand Census: 1971-2001:" in Alison Laurie and Linda Evans (ed) Outlines: Lesbian and Gay Histories of New Zealand: Wellington: LAGANZ: 2003.

Tax Working Group: Final Report (21.02.2019): taxworkinggroup.govt.nz/resources/future-tax-final-report

Wikipedia/ Capital Gains Tax: en.wikipedia.org/wiki/Capital_gains_tax