Keith Melville

No amount of anger directed at residential landlords will disguise the fact that they received a raw deal from the previous government.

I say that in reference to Dave Stewart’s letter last Friday, Win-win for ratepayers and taxpayers, when he claimed National gave landlords including me a $2.9 billion tax break.

Just to correct Dave’s misconception, I do not receive interest deductibility, known mischievously as the landlord tax break, because I, and many other landlords, do not qualify for it.

Dave will never believe my argument that the so-called tax break was really the removal of a penalty imposed solely on landlords with mortgages. To call it a tax break is a stretch of the imagination spread by the left or anyone with a grudge against landlords.

It is more like an unjustified envy tax imposed by Labour, which will end up costing taxpayers $2.9 billion to fix.

I refer Dave and other landlord bashers to an article written by Alison Pavlovich in December 2023. As a senior lecturer in the School of Accounting and Commercial Law at Victoria University, she wrote that the previous Labour Government’s policy of withdrawing interest deductibility from landlords was “extremely punitive to some”. Labour’s law was fundamentally flawed, was opposed by Inland Revenue, and eroded the coherence of the tax system, she added.

There was a fundamental and long-standing principle in tax law that the costs associated with producing taxable income could be offset against that income, Alison said.

She said removing interest deductibility, “an often substantial and very real cost to landlords” was a significant departure from this principle and was likely to cause financial hardship for some landlords.

Dave believes, judging by what he wrote last week, that the tax system panders to landlords, and being the undertaxed creatures that they are, they don’t deserve the leniency they are getting now.

He argues they benefit more than others from capital gain, and they should be made to pay extra by withdrawing their right to interest deductibility.

However, bludgeoning some landlords, the ones with mortgages, but not the mortgage-free ones, does not fix the problem. In my view it makes it even more unjust.

Alison said rather than introducing a comprehensive capital gains tax to address the problem of tax advantages for residential property investors, Labour chose an incoherent and distortionary measure partly as compensation.

Do I believe a tax expert who says landlords were being unfairly punished or do I believe a retired trade unionist, who says landlords have been given a tax break they don’t deserve?

I go with the tax expert.

My interest in this issue is not so much as a landlord, but more as a retired journalist. I regard media coverage on this subject as one of journalism’s big failures in the past few years. Commentators throughout New Zealand often refer to the landlord tax break as if it were the gilded truth.