Quote Originally Posted by Daytr View Post
The point you appear to be missing is to tame inflation more quickly and more fairly.
The cost of high interest rates on the economy and those paying the interest is huge and is drawn out because it takes years for the full impact to roll through the fixed term mortgage book.

By having a floating top tax rate and yes up or down, the impact would be much quicker.
If the economy was sluggish and inflation was in check, yes the top tax rate would be lowered to encourage more spending etc.

The reason NZ has a fixation with property is as you say, because of the lack of a CGT. I'm not suggesting one without the other.

Productivity issues however are a little more complicated than just the deficincies of the tax system
As I Have explained previously, I think your variable windfall income tax would increase tax unfairness.

Also I am not sure how extra tax on interest “windfall” boosted income would help tame inflation. Two main factors causing inflation in NZ tend to be supply constraints and labour force constraints.

I suspect any extra tax raised would be used either for public works or to reduce tax elsewhere. Extra money for lower income earners would be spent on consumables and would boost CPI inflation, whereas extra money for higher income earners would tend to go more towards investments - not part of the basket of items whereby we measure inflation in NZ.

Productivity issues have several causes. I think tax system issues are an important factor. However electorally dangerous for the party in power to fix!