This article was first published by RNZ
A Māori economist says Labour’s proposed capital gains tax is a “weak” but necessary step toward a fairer tax system - one that could help rebalance wealth in Aotearoa.
Matthew Roskruge (Te Ātiawa, Ngāti Tama), Professor of Economics at Massey Business School and the Associate Dean Māori, told RNZ the policy - which would tax gains on second homes and some commercial properties - makes sense in principle but does little to address deeper wealth inequality.
“Capital gains are a form of income, and every other form of income is taxed," he said.
“People who make money from capital gains are disproportionately those who already have wealth. So, those able to buy investment properties and the like.”
New Zealand already has a limited version of a capital gains tax through the Brightline test, he said, which taxes profits on properties sold within a certain period after purchase.
Roskruge said Labour’s proposal effectively extends that approach, targeting those with multiple homes and investment properties.
“It’s the bare minimum of what a capital gains tax could look like,”
“There’s a huge amount of detail missing, and there are all sorts of exceptions - farms, first homes, and so on.”
Impacts for Māori
For Māori, Roskruge said the effects would be mixed.
With lower rates of home ownership and fewer investment properties, most whānau Māori would see little direct impact.
According to 2023 Census data, 27.5 percent of Māori owned or partly owned their own house, compared to 47.8 percent of Europeans.
“It’ll mostly hit high net-worth individuals, who are mostly non-Māori,” Roskruge said.
However, Roskruge said that Māori entities, such as iwi and hapū collectives, could face new costs depending on how the policy is applied to commercial investments.
“Our iwi invest heavily in farms and commercial property. Farms are exempt, but commercial portfolios like Ngāti Whātua Ōrākei or Tainui could feel the sting,” he said.
“If there’s going to be a negative impact on the Māori economy, that’s where it’ll show up.”
Roskruge said the proposed tax would largely affect people with multiple residential or commercial properties, a small portion of the population.
“Once you take out the first home, there’s a relatively small number of New Zealanders who’ll actually pay capital gains tax,” he said.
“They’re the ones already wealthy and earning untaxed income from capital gains.”
According to Stats NZ latest household net worth data for the three years to June 2024, New Zealand’s wealthiest 20 percent of households had their wealth increase by 19 percent in the period, to a median of $2.4 million
There was no significant statistical changes in the two lowest income groups.
It found that those aged 15 to 24 had the lowest median, at $4000. While people aged 75 and over had the highest median, at $590,000.
After standardising for the different age profiles, Pākehā had the highest median individual net worth at $222,000, compared to $52,000 for Māori and $26,000 for Pacific people.
Labour paired the tax announcement with a new healthcare initiative, showing how the revenue could fund three free GP visits a year for everyone via a “Medicard” scheme.
Roskruge supports free healthcare but said linking the two policies “cheapened both announcements.”
“Free GP visits are a great idea, and we don’t consume enough primary healthcare. But I don’t think it needed to be tied to the capital gains tax,” he said.
“The cost of going to a GP is becoming prohibitive. Even for people who are wealthy, they’ll put off going because they don’t want to spend the extra $60 to $80 for something they think is trivial.”
“But we know that when people end up in hospital, they cost us a lot of money, or if they end up in an A&E, or in ED.”
Roskruge has an academic background in health and population economics, with current research projects in health economics, effective health systems and service delivery.
He said it will be a “great use” of the country’s “limited” resources in the health sector, to pull some pressure off the hospitals and the A&Es, and get people seen and treated earlier - which he said would be “particularly beneficial for Māori.”
“I’m really supportive of that.”
Roskruge said while the idea of CGT is “overdue,” its timing raises questions of fairness - particularly for Māori.
“Māori had huge amounts of land and asset wealth taken through colonisation. For nearly 200 years that land’s been traded and accumulating capital gains for others,”
“Now that the Māori economy is growing we’re investing in property and farms...suddenly there’s a tax on those gains.”
He believes the policy would have been more effective if introduced earlier, during the peak of the property boom.
“Better late than never, but it is late, and yes, you could argue it hurts Māori Inc just as we’re growing.”
According to the Te Ōhanga Māori 2023 report, Māori entities grew from contributing $17 billion to New Zealand’s GDP in 2018 to $32 billion in 2023, turning a 6.5 percent contribution to GDP into 8.9 percent.
The Māori economy asset base grew from $69 billion in 2018 to $126 billion in 2023 - an increase of 83 percent.
What equity could look like in a tax system
Roskruge believes a fair tax system would focus on redistributing wealth and building intergenerational equity.
“We have a wealth distribution problem,” he said.
“We need to build wealth in families and whānau that currently don’t have any, because inequalities are persisting across generations.”
He supports the idea of inheritance taxes and other progressive measures, saying they can help shift wealth from those who already have it to those who don’t.
“Ultimately it comes down to where New Zealand wants to see equity and wealth distribution go,”
“It’ll be interesting [next] election to see what voters decide.”
By Layla Bailey-McDowell of RNZ
