In this episode, James, Mike, and Matt dive into one of the most politically charged debates in New Zealand’s economic landscape: wealth tax vs capital gains tax. With the economy still feeling the effects of weak productivity, rising costs, and ongoing uncertainty, the team examines whether either option would support long-term prosperity - or simply create another obstacle for households and businesses.
What a Wealth Tax Actually Means for New Zealanders
When it comes to Wealth Tax vs Capital Gains Tax, the conversation begins with the Greens’ proposal: a 2-2.5% annual tax on assets above $2-4 million. The detail is still vague, but one thing is clear this system taxes unrealised capital gains, meaning you can be taxed on increases in value long before you ever see the cash.
Matt put it plainly: an unrealised gain is “a gain that hasn’t been realised” like buying a home for $1m and seeing it valued at $2m. You’re “better off on paper,” but you can’t spend that gain. Under a wealth tax, you’d still be charged for it.
At a 2% rate, a $2m asset equals $40,000 a year in tax. Even with payment delayed until sale, the liability keeps accruing becoming, in Matt’s words, “a terrible idea” that can eat through someone’s retirement nest egg.
Globally, the evidence isn’t promising. Countries like Sweden, Denmark, Germany, and France have implemented wealth taxes only to abolish them due to low revenue and high avoidance. As Mike notes, there’s no clear path where a wealth tax “improves equality without creating huge distortions.”
This is where the concern deepens: wealth doesn’t necessarily mean cash. Many Kiwis with one asset – particularly retirees or long-time homeowners in places like South Auckland – would face tax bills without matching income. And unlike a capital gains tax, a wealth tax begins the moment you own an asset, not when you sell it.
Why Capital Gains Tax Is the “Less Bad” Option
In the Wealth Tax vs Capital Gains Tax debate, capital gains tax is the narrower, more conventional alternative. It taxes profit only when an asset is sold, not throughout the entire period you hold it. That means no annual accrual, no compounding tax liability, and no penalty for simply owning an asset.
Labour’s recent outline excluded family homes, farms, KiwiSaver, shares, and businesses – creating a tightly targeted version that would apply from 1 July 2027 at around 28%. While timing remains contentious, Matt points out that a CGT is more workable if applied evenly across all gains, avoiding distortions and loopholes.
The team acknowledges something important: CGT isn’t perfect, but it’s far less risky than a wealth tax. A broad, fair, and consistent capital gains approach avoids the inequity, complexity, and behavioural distortions that wealth taxes trigger.
But even with CGT, timing matters. With New Zealand still navigating a weak economy, low productivity, rising costs, and a wave of stealth taxes from insurance hikes to road user charges the question becomes: Do we really need another headwind right now?
As Mike puts it: “We just need good times before we get additional taxes on top.”
The Real Question: Should We Tax More Right Now?
Across the conversation, one theme keeps resurfacing: New Zealanders are already grappling with higher rates, new levies, insurance spikes, and cost-of-living pressures. Layering on either a wealth tax or a capital gains tax in the near term risks slowing an economy that’s still recovering.
Mike questions why Kiwis are so quick to accept new taxes – especially when other countries protest fiercely. Meanwhile, uncertainty around future tax policy already affects investor decisions, business planning, and confidence.
And while the team is ultimately pro-capital gains tax over a wealth tax, they’re clear on two conditions:
not now, and do it properly.
As Matt puts it, they’re not “Team Capital Gains”- they’re “Team New Zealand.”
Key Takeaways
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A wealth tax taxes unrealised gains and can create huge liabilities for retirees, homeowners, and business owners.
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At 2%, a $2m asset equals $40,000 per year in tax – accruing annually until sale.
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Wealth taxes overseas have failed due to avoidance and low revenue.
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A capital gains tax only taxes realised profit when an asset is sold, making it narrower and less distortionary.
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Poor timing and policy uncertainty risk discouraging business investment and economic growth.
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The team agrees: if New Zealand must choose, capital gains tax is the better option – but not now.
Overview
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