Of Rich and Poor And Taxes And Earrings

By Mary Holm

Saturday 1st September 2001

No, I promise, this is not another column on home equity tax. We've done enough of that.

But a couple of readers have raised issues in letters about the tax that seem worth discussing.

One Wanganui man says my last column "is yet another example of extremist thinking from the far right."

A home equity tax, he says, "is discriminatory, affecting the less affluent, as is GST and local body 'uniform charges'."

I certainly agree that GST and fixed local body charges affect the poor more.

Less affluent people spend most, if not all, their money on goods and services, while richer people save some. So GST hits the poor hard.

And, clearly, a $100 local body charge is tougher for a poor family to pay.

But equity in houses? Surely the rich have more of that than the poor - especially in New Zealand, where so much of our wealth is bound up in our houses.

We're so house-oriented, in fact, that we assume that if someone doesn't own their home, it's only because they're too poor to buy. And usually we'd be right.

Taxing home equity would, in fact, transfer wealth from the rich to the poor. That's hardly extremist right thinking.

Another reader, from Blenheim, clearly annoyed at what I've written, added, "If you are so good at investing, why do you have to rely on writing for a living?

Given that I've often raised that question about people offering Get Rich Quick seminars or computer programmes, I thought it was fair enough that he raised it about me.

The difference between me and the seminar and programme sellers is that I don't believe we can get rich quick - or at least not without taking huge risks that could also get us poor pretty quickly.

The wise investor hopes to make good, not stunning, returns, and doesn't expect quick results.

If you invest in shares or a share fund over the long term, you're likely to have the occasional great year. But you must also expect some years of losses.

As far as my investing goes, I've practised what I've preached, and I've done well. But I'm not ready to retire yet.

I might also note that I'm not, as the Blenheim reader thinks, an adviser. I'm a journalist. And, much as I enjoy my work, it doesn't pay what many advisers receive, and certainly not what many seminar or programme promoters rake in.

The reader adds, "Did you buy the New Zealand dollar against the US dollar when it was 39c, eh? I did. Did you sell it when it got to 44c? I did. Do you think I may know how to invest?"

No, I didn't make such trades. And no, I don't think it shows that you know how to invest.

Foreign exchange can just as easily move against you as for you. You were lucky.

He adds, "If you are what you say you are, i.e. independent, be so. Get onto something for all of us, like how to dodge paying so much tax."

It depends what you mean by tax dodging. If it's legitimate, I've probably already written about it, and will do so again. I love to bear good news about taxes.

But if you're talking about breaking the law, that's not my scene.

And thanks for your final tip: "Another thing, love, get rid of those earrings. The last female in public profile who wore those lost her job, and house! At least she won't have to pay any tax for a while."

I'll keep it in mind, honey.

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 at maryh@pl.net. Sorry, but she cannot respond directly to readers.

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