In My Defence...

By Mary Holm

Saturday 18th August 2001

In 25 years of journalism, I've never had as strong a response as I did to a column about taxing the equity in people's homes, which ran in late June.

In the meantime, I've been away. So I'll reply now.

The letters ranged from sincere - "This letter is written from the heart" - to hostile - "when you got out of your bed this morning you forgot to take your brain with you", and, "The proposals for a housing tax are nothing short of evil."

One said I was an "ACT type". Another called me "Socialistic".

Then there was the one guy who agrees with me. Thanks!

In response to the unhappy ones:

- I'm not saying people shouldn't own their homes, and should instead rent or "live off the state", spending their money on cars or holidays.

Home ownership, especially if it's mortgage-free, gives you great security. And, yes, I do own my home.

What I am saying is that New Zealanders tend to put too much of their savings into their houses.

The economy, and individuals, would be better off if we had more modest houses and put some of our money elsewhere, perhaps into share funds.

One reader is not surprised at that. "You have a vested interest," he says "in getting people to invest in the Stock Market, as you are sponsored by them."

Can I remind you of all the times I've said to put short-term money not in shares, but in bank term deposits? And all the times I've said to hold on to shares or share funds, rather than trade frequently?

Members of the Stock Exchange must have disliked what I've written many times. But they've never interfered. This is an independent column.

Others of you don't want to invest in shares because you don't like the way New Zealand companies are run.

"Government 'watchdogs' are going to need to be upgraded from poodle to rottweiler before I put my life savings there," said one man.

So go into overseas share funds, which I recommend anyway, to spread your risk.

- Many said, "If you tax equity in houses, why not in cars or art?"

But everyone has to have accommodation. And renters pay tax on income from their savings while homeowners don't pay tax on their saving from not paying rent, which is equivalent to income. There's no similar inequality with cars or art.

While we're at it, several of you objected to my saying, "Avoiding an expense (rent) is equivalent to receiving an income". What, you asked, about shopping at a cheaper supermarket or cycling instead of driving to work?

Well, that, too, is like getting more income. But I'm not suggesting we tax THAT income, because there's no homeowner/renter-type inequality.

- A common cry was, "But homeowners pay plenty in rates and maintenance."

So, too, do tenants, via their rent.

- Another common cry was, "We've worked hard for our home."

But many of those who don't own a home have also worked hard for their savings - which are taxed.

It's important to note that, if home equity were taxed, income taxes could be cut, which would encourage work.

As I said last time, retired people with more house than income would be hurt. So the change would have to be phased in, so the currently retired or soon-to-retire aren't worse off.

The reality is, though, that even then a home equity tax would be hugely unpopular. So don't worry. It won't happen in the foreseeable.

In the meantime, I take heart from one reader who, for all his concern, added, "Keep writing. It makes me think."

That's what this is all about.

Mary Holm is a freelance journalist and author of "Investing Made Simple", commissioned by the New Zealand Stock Exchange to write an independent personal investment column. She can be reached by E-mail at maryh@pl.net. Sorry, but she cannot respond directly to readers.

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