What is it?
A small annual levy, of around 1-2%, on all wealth above a relatively high threshold, perhaps $2 million or $5 million, so that only the wealthiest few percent of the population are taxed.
What is the problem that this change would seek to address?
Wealth inequality is significant: the wealthiest 1% of New Zealanders hold 26% of all assets. Inland Revenue research shows New Zealand’s wealthiest people pay very low rates of income tax (partly because much of their income is capital gains), and a wealth tax could help ensure they contribute more.
What are the advantages?
A wealth tax would reduce wealth inequalities more directly than any other tax. It would help address the fact that accumulated wealth typically grows passively at 4-5% a year, widening the gap with non-wealth-owners.
What are the disadvantages?
People who are asset rich but cash poor may struggle to pay the tax (although they can defer it). It also requires an annual valuation of assets, which can be especially difficult for family assets with no obvious value, creating room for evasion.