Originally Posted by
Halebop
There was also the removal of depreciation allowances which hit the top end more than the bottom. Most of the people I personally know who are leveraged and invested in the property sector were in the former 39% tax bracket and IRDs cost benefit analysis certainly supported this. So the old system was also regressive to have the highest earners avoiding the highest rates of taxation.
The current mix of policies were designed to encourage debt reduction, discourage additional borrowing to fund property purchases (it also made all investment property less attractive, leveraged or not) and provide a sting to those who wanted to spend the post tax pay rise instead of saving it.
Given private investors repaid more than they borrowed for the first time in 10 years or so I suspect it worked. In light of the global focus on balance sheet risk and private NZ balance sheets being more leveraged the government's, I think they made the right choice. The benefits of risk management might never be known (we probably will never know if we avoid a Greek style debt default scenario for the fact that it was avoided). However, everyone, rich and poor, benefits from this stability, even if the tax restructure was largely neutral for the bottom end.