James Shaw slams tax timidity, calls on Labour, NZ First to be bold with CGT

In his opening speech for the year in parliament yesterday Green co-leader James Shaw slammed timid tinkering with tax, and, confronting pontification about whether the current Government can “politically afford to do what no other Government before it has done” and introduce a Capital Gains Tax asks “Can we afford not to?”

That must be aimed at Labour and NZ First, who have to agree with Greens on any tax changes following the Tax Working Group process.

First Shaw illustrated the tax disparity issue wit no tax on the capital gains of property.

Karen is a renter. She’s got a career, and she earns roughly the median wage. Over the last 10 years, she’s earned about $450,000 and she’s paid, roughly, $70,000 in tax. She budgets well, she can manage the rent, and she can manage the other expenses, but she can’t quite have enough left over to save.

And then there’s Paul. Paul also earns the median wage. He’s a bit older than Karen, and Paul got lucky and managed to buy some rental property before house prices really started rocketing—about the time that Karen came into the workforce, about the time that John Key became Prime Minister. On the day that Paul sells that rental property, he makes as much as Karen has in the last 10 years, and he pays zero tax on that income

Now, what does Paul do? He uses that as a deposit to buy two more houses. That is the rational thing to do. And what does Karen do? Well, Karen keeps renting because there is no way on God’s green earth that she’s going to be able to scrape together a deposit on $45,000 a year.

And that, in a nutshell, is why we have a large and growing wealth gap in this country, and it is undermining our ability to pay for the public services that we all rely on, including Karen—including Paul.

There is something missing from this illustration.The implication here is that ‘Paul’ paid no tax, but ‘Paul’ must be earning something to live on for the ten years before scoring a capital gain, and after reinvesting capital gains on more property, so could have been paying some tax.

Now, the Green Party has long been calling for that fundamental imbalance to be addressed, and every single expert working group in living memory has agreed with us, but no Government—no Government—has been bold enough to actually do it. But if we are to be the Government of change that New Zealanders wanted and elected, we must be bold.

The crises that we face on multiple fronts—the wealth gap, climate change, the housing crisis—we cannot solve without fundamental reform. These crises have been allowed to metastasise because generations of politicians have timidly tinkered rather than actually cut to the core of the problem.

And the consequences of that timidity—the consequences of that timidity—are being felt by Karen and by hundreds of thousands of New Zealanders just like her, trapped in “Generation Rent”. So when the commentators pontificate about whether this Government can politically afford to do what no other Government before it has done, I ask “Can we afford not to?”

Can we afford not to?

We were elected on the promise of change. If we want to reduce the wealth gap, if we want to fix the housing crisis and to build a productive high-wage economy, we need to tax income from capital the same way that we tax income from work.

The very last question that we should be asking ourselves is: can we be re-elected if we do this? The only question we really ought to be asking ourselves is: do we deserve to be re-elected if we don’t?

Shaw is effectively throwing down the tax gauntlet to Labour and NZ First, suggesting they don’t deserve to be re-elected unless they introduce a CGT.

I have to say, boldness is needed everywhere, everywhere.

That is a challenge to the other parties in Government with the Greens. The re-election comment is particularly pertinent for NZ First, who were well under the threshold in the latest poll.