How much tax is fair? Labour Party proposes Capital Gains Tax

I thought we already had a capital gains tax. That is, if you own an investment property and you sell it and you make a profit, you get taxed on that. Oh hang on, now I remember what it was my [some people who shall remain unnamed] used to fear - if you buy a property, do it up and sell it for profit, then you pay tax. In other words, if you are trading shares or property for income, then like any other work or business for profit, you have to pay tax on the profit. So, what they used to do is move in to the houses while they did them up. They'd ensure they stayed for at least 3 months and it was often longer, and they did actually move in and live there, so it was their home even if for a short while.

Now if people own a property and rent it out - they have to pay tax on the profits if there are any. I was thinking that the house has been bought for business purposes, so capital gain on the sale of the asset would also incur tax.

We've just formed a company and developed a house to rent. This is a long-term plan. We're not planning to sell the house. If you buy shares for your retirement/long-term portfolio you don't have to pay capital tax on them, so it should be the same at least for property which is going into that portfolio (as opposed to the trading portfolio).

I wonder how capital gain would be calculated. The cost of the development would have to be settled: the section, house and all the costs associated with development. Now, none of that is tax deductable because it is considered a capital expenditure. To complicate matters, the house will depreciate in value over time. If it's cost us $300,000 today, and we sold it for $350,000 in 8 years time - that's only a 2% (roughly) increase in value per year. If we get taxed 15%, i.e. $7500, that reduces the capital gain per year to 1.4% per annum capital gain. That'd be below the rate of inflation - so actually the house has reduced in value over the 8 years. So if anything we should get a refund on loss of capital! 

Everyone is focusing on mega-rich, thinking that the have-it-alls are the ones that will pay. It's not the rich that will be harmed by Labour's proposed capital gains tax. It's the mum and dad investors who have one or two rental properties, who are trying to salvage some of their hard-earned salaries (yes they both work now) so that they can look after themselves in retirement (because don't forget, we are constantly threatened with the end of the New Zealand retirement pension system; we are regularly told that New Zealand will not in the future be able to sustain it).

The lower to lower-middle and middle socio-economic classes in New Zealand pay proportionately more of their incomes in tax than the upper-middle and rich do. We pay more via income tax (the highest form of tax, higher than companies pay - companies are one of the structures the rich use to lessen the amount of tax they pay); GST - 15% on all goods and services (GST is another structure the rich use to reduce the amount of tax they pay). Poorer people pay proportionately more in GST because they have to spend the majority if not all of their income on goods and services. People with residual income (money left-over after the necessities are paid for) get to put that residual into the bank, or buy assets (shares, property, bonds) none of which attracts GST. Richer people are only charged gst on a small portion of their income.

It fair hurts the brain, so I'll revisit the issue again later when I've looked up more on the capital gains tax. I believe however, that the proposal is another way in which the masses (who are largely financially illiterate) are going to be being duped into handing over ever more of their income, like they were with Kiwisaver - robbery on a grand scale.