The loopiest idea to come out of government this year has been a proposal by Dr Cullen to put a tax on fixed interest mortgages. Labour have been investigating how to give themselves the power to add up to 2 percentage points to a mortgage fixed at say 8%, when they think the economy needs to be slowed down.
Labour argues the tax would help exporters by helping the exchange rate to drop. I think they like the idea of getting more money in with a new tax and having more ability to control how people spend their money.
Labour also forget that exporters have mortgages too, and so do the people who run the service industries like transport and farm supplies. A mortgage tax wouldnâ€™t just hit people speculating on houses in Auckland, it would hit the whole export sector. Farm debt has gone up dramatically in the last few years. If the mortgage tax was in place, farmers would be hit with unexpected high interest rates just when they are hardest hit with a high exchange rate
The mortgage tax would be unfair. People take out fixed term mortgages so they can control their monthly budget. The fixed term gives them certainty about their regular payments. They are willing to take the risk of overpaying interest for a while as long as they have certainty.
A mortgage tax would take away the certainty. The household budget would be in the hands of politicians trying to manipulate the economy for their own ends.
The real problem for exporters at the moment is the surge in government spending planned by Labour to try and win the 2008 election. Over the next 18 months Labour plan to spend $5 billion more taxpayers money. That puts pressure on inflation and so on the exchange rate. It means interest rates will be higher for longer than they should be, and so will the dollar.
I believe the mortgage tax idea should be scrapped and the Government should start to be more careful with other peopleâ€™s money. Then the exporters might get the break they deserve.Tweet