The left lambasts Labour’s CGT capitulation

Labour didn’t just limit what the Tax Working group could include in any Capital Gains Tax, they didn’t just water down the subsequent TWG recommendations, they didn’t just drop any changes to capital gains taxing, Jacinda Ardern ruled out doing any CGT while she remains leader of the Government.

It wasn’t just a capitulation to Winston Peters. Ardern back down from a policy she said she supported. She ruled out going to the next election with any sort of CGT proposal as she had previously promised, presuming she is still leader then.

And the left, who wanted so much to have a ‘fairer’ tax system, and who wanted the Government to live up to it’s own labelling as transformative, are pissed off.

From Political Roundup: Progressives despair over the CGT decision

Danyl Mclauchlan argues that the CGT programme was one of four key policies agendas for this Government – the others being KiwiBuild, the Carbon Zero Act, and the Wellbeing Budget – and there are clear problems now in delivering them – see his column, Four months in, Labour’s ‘year of delivery’ is a disaster.

He despairs that Labour axed the tax after first initiating “one of the most bafflingly disastrous public policy debates imaginable, making John Key’s flag-change campaign look like the Normandy landings”.

He says any strategic wins from ditching the tax, will come “at a cost of one of Labour’s most important, long-term policies, and it was their failure to control their coalition partner or even attempt to make the argument for taxation reform that forced them to pay such a bitterly high price.”

Mclauchlan argues that Ardern could have won the debate and got a mandate for the changes, but simply didn’t bother.

That’s how it appears. She appeared to do nothing to fight for the CGT she proposed. It also appears she left James Shaw and the Greens out in the cold. Shaw has tried to paper over the cracks but sounds unconvincing (see James Shaw on “do we deserve to be re-elected if we don’t?”)

No Right Turn…

…is now calling for a leftwing boycott of the Labour Party: “If you want change, don’t vote Labour, don’t donate to Labour, don’t volunteer for Labour. Give your vote, your money, your time and effort to another party, any other party that promises change, than the one who betrayed you. Because if you don’t, Labour will continue to treat you like a fool, and continue to promise change while delivering none” – see: Don’t get fooled again.

They also argue the decision means the Government won’t have the money to afford many of their future policy goals: “Effective policy costs money, and this government has just robbed itself of that vital tool. Remember this next time they plead “poverty” as an excuse for not doing something: they chose to be poor. They chose to have a government which could not afford things. They chose to not be able to do the things they promised” – see: The cost of cowardice.

Inequality researcher Max Rashbrooke…

…argues that many other Government priorities will now be hamstrung by the lack of future revenue: “building more state homes, eliminating introduced predators, and repairing mental health services, among others – also require significant funds, again well above what will be generated under existing tax settings” – see: Capital gains tax shutdown threatens govt’s other plans.

In particular, “Consider the Prime Minister’s pledge to halve child poverty within a decade, possibly the political priority closest to her heart. It is very difficult to see how that can be achieved without the $3.4 billion a year that the capital gains tax was, according to the most recent estimate, going to raise.”

Some loyal Labourites had tried to put some spin on the backdown, like at The Standard (currently down so can’t link).

And former Labour Party President Mike Williams…

…suggests that although there are “elements of, particularly the unions and the extreme left of the Labour Party, which would be annoyed”, he “did not think the wider Labour Party base would be too worried about the CGT rejection”.

But Newshub’s Anna Bracewell-Worrall reports that…

…”Labour is facing a massive backlash from its base for ditching any hope of a capital gains tax (CGT) – even Young Labour and the ever-loyal unions are fuming” – see: Young Labour furious at capital gains tax backdown, leak reveals.

“Newshub’s been leaked a discussion from a secret Young Labour Facebook group revealing they’re frustrated with the decision. The Labour Party faithful say they’re ‘mighty disappointed’ and ‘exponentially angry at New Zealand First’s role’, and complaining of ‘unfulfilled promises’.”

And media are asking questions too.

Thomas Coughlan asked the very pointed question of Ardern: “Are you worried you now lead the party of capital, rather than labour?” And now he’s followed this up with an article suggesting that rather than Ardern and her Government implementing transformation, it’s actually them who are transforming – into a cautious and weak government not willing to make the hard and necessary decisions – see: Capital gains tax: Let’s not do this.

The Dominion Post asked if the decision came out of “cowardice or pragmatism”, but suggested the two are indistinguishable anyway. The editorial suggested more debate and leadership had been required for the CGT proposals to get off the ground: “Labour voters were evenly split on the pros and cons of a capital gains tax. It is a situation where brave political leadership and persuasion were required but for whatever reasons, a deep and thorough debate about fair and unfair tax failed to eventuate” – see: Capital gains tax: Political capital but for what gain?.

The newspaper says that Ardern had a “a failure of nerve”, and laments that an opportunity has been missed: “If there was ever a moment when significant change to the tax system could have happened, as the fairness and transformation her Government promised, that moment was now.” And there’s the question of “if the Tax Working Group was merely an expensive waste of time with a predetermined outcome.”

Likewise, according to the New Zealand Herald, “The decision has the hallmarks of pragmatism rather than strong leadership”, leaving “little evidence so far that Ardern will make tough but unpopular decisions to deliver on her convictions” – see: Capital Gains Tax surprise raises doubts on coalition.

It is going to be a challenge for Ardern and Labour to recover from this. They may survive in Government, but they have lost a lot of credibility from the left.

Ardern’s ‘pragmatic realism’ doesn’t sit well with political activists and idealists who thought that with Labour and Greens in  Government there would be substantial changes.

NZ First on the Capital Gains Tax capitulation

NZ First have prevented the Government from proceeding with any changes to capital gains taxes, despite a CGT being a core policy of Labour, backed by Jacinda Ardern, and despite it being something Greens have wanted for a long time (and James Shaw stated earlier this year that the Government didn’t deserve to be elected if they didn’t introduce a CGT).

New Zealand First Leader media release:

Tax Working Group Report

New Zealand First Leader Winston Peters has welcomed Cabinet’s decision not to implement an extension of capital gains taxation, following the Prime Minister’s statement in response to the Tax Working Group Report.

“This decision provides certainty to taxpayers and businesses. We in New Zealand First wanted first and foremost for New Zealanders to have time to discuss and debate the contents of the report,” stated Mr Peters.

“During that time we have listened very carefully to the public.

“There is already an effective capital gains tax through the Bright Line test brought in by the last National Government and New Zealand First’s view is that there is neither a compelling rationale nor mandate to institute a comprehensive capital gains tax regime,” said Mr Peters.

“We also welcome the announcement that the coalition government will be urgently exploring options with the Inland Revenue Commissioner, in concert with central and local government, for taxing vacant land held by land bankers and reviewing the current rules for taxing land speculators. Tightening these rules was a priority for New Zealand First.

“Current tax policy, rigorously enforced by an Inland Revenue Department properly resourced will by itself 1) improve the administration of existing tax policy, and 2) target those multi-nationals not paying their fair share of tax,” Mr Peters said.

There was nothing about a CGT in the Labour-NZ First coalition agreement. This was the only reference to tax:

  • Increase penalties for corporate fraud and tax evasion.

Peters via Twitter yesterday:

Despite the claimed hearing and listening, Peters has done what he has said he would do for a long time.

During the 2017 election campaign (Politik): Peters ready to throw spanner in Labour’s capital gains tax plans

Peters says he is not ready to support any moves labour might want to make to extend capital gains taxes.

Finance spokesperson Grant Robertson has arrived at a neat compromise. Labour would set up a Taxation review once it got into Government.

Phil Twyford (on The Nation): “In the first three years we’re going to do a taax working group that will redesign the entire tax system”.

Robertson (on NZ Q&A): “We will have a working group that will have a look at getting a better balance into our tax system between how we tax assets and how we tax income”.

Peters though is adamant.

“I am not for an extension of the capital gains tax” he told POLITIK.

Peters is critical of the review and Labour’s plan to provide details on it’s water levy policy after the election.

“How many times can you get away with this sort of nonsense” he said.

So why did Labour insist on going ahead with the Tax Working Group that had an aim of recommending a capital gains tax?

It seems to have been a wasted exercise, unless the intention was to provide Peters with an opportunity to say NO CAPITAL GAINS TAX.

Reid Research party support poll

A Business New Zealand Reid Research poll on party support slipped under the radar this week. It was taken from 15-23 March, the day of and just after the Christchurch mosque attacks, so it should be treated with more caution than normal.

  • Labour 49.6%
  • National 41.3%
  • Green Party 3.9%
  • NZ First 2.3%

Labour are up from 47.5% in the RR February poll (which was up 4.5% from the previous poll). It isn’t surprising to see an (small) increase in support for Labour at the  time of a major adverse event. Jacinda Ardern’s adept handling of the attack aftermath has been rewarded in the poll.

National have hardly moved, down just 0.3% from the February poll, but had dipped 3.5% to a record low in the previous poll. They may struggle to hold even at that after Simon Bridge’s performance since.

Labour’s gain has been Green’s loss.

Greens have dropped from 5.1% to 3.9%, which must be a concern to them. James Shaw was largely unseen after the Christchurch killings, with Marama Davidson and Golriz Ghahraman being more prominent, and they tend to be polarising – popular in part but also annoying many.

NZ first have slipped 0.5% to 2.3%, after dropping by the same amount in February. Winston Peters and NZ First fully backing the Arms Amendment Bill happened after the poll period so they could easily slip further. They have disappointed a lot of their 2017 supporters.

The Business NZ Reid Research poll of 1,000 voters was taken from March 15-23 and has a margin of error of +/- 3.1 per cent. 750 were interviewed by phone and 250 online.

Source NZ Herald – Claire Trevett: Poll puts Labour support up after mosque attacks but tax is back in debate

 

Labour’s bob each way CGT petitions just double barrelled contact harvesting

With the ease of setting up ‘petitions’ they have become a farce, none more so that Labour’s latest bob each way effort, two petitions with opposite questions.

Yes, I support a Capital Gains Tax

The independent group of experts our Government asked to review New Zealand’s tax system has released their final report. The Tax Working Group (TWG) found that our tax system is simple and efficient – but in some places, it’s unfair.

The TWG has recommended the introduction of a Capital Income Tax – sometimes called a Capital Gains Tax.

If introduced, it would mean people who make money from selling assets like rental properties or businesses would have to pay tax on their profits.

Do you support a Capital Gains Tax?

Alternatively, if you don’t support a Capital Gains Tax – sign here instead.

No, I oppose a Capital Gains Tax

That doesn’t even make sense.

The independent group of experts our Government asked to review New Zealand’s tax system has released their final report. The Tax Working Group (TWG) found that our tax system is simple and efficient – but in some places, it’s unfair.

The TWG has recommended the introduction of a Capital Income Tax – sometimes called a Capital Gains Tax.

If introduced, it would mean people who make money from selling assets like rental properties or businesses would have to pay tax on their profits.

Do you support a Capital Gains Tax?

Alternatively, if you do support a Capital Gains Tax – sign here instead.

What’s the point of this farce? They are trying to harvest names, phone numbers and email addresses, with a poor opt out option in fine print:

This is what they hope you won’t notice:

That’s not being open and transparent. It’s an unfair  attempt to deceive people into signing up to a contact list.

Petitions are pretty much stuffed as a means of people power, political parties have trashed the concept (it’s not just Labour doing it, but this is the first double barrelled farce that I’ve seen.

UMR and other polls – Labour and National even

Note – at best polls are just an approximate indicator of a snapshot of political support, especially individual polls.

Here is some anecdotal and it appears actual poll information.

Matthew Hooton in Capital Gains Tax debate shows Jacinda Ardern’s weakness

National insiders say their polling has NZ First consistently below the 5 per cent threshold, the Greens dicing with death by bouncing around it, and Labour and National locked in a tight battle, both above 40 per cent and within the margin of error of each other.

Care has to be taken with ‘insiders say’ anecdotes, but this is much the same as the last two published polls:

  • Reid Research 24 January-2 February: Labour 47.5%, National 41.6%, Greens 5.1%, NZ First 2.9%
  • Colmar Brunton 9-13 February: Labour 45%, National 42%, Greens 6%, NZ First 3%

The Reid Research poll was very early in the year, before politics cranked up, so favouring Labour is not surprising.

James Last yesterday on Twitter – The latest UMR poll for its corporate clients:

  • National up 5 to 45%
  • Labour down 1 to 44%
  • Greens down 2 to 5%
  • NZ First no change on 4%

While unpublished and verified this looks quite believable, with National back virtually level pegging with Labour.

National haven’t been particularly impressive but Labour have handled the Tax Working Group and CGT poorly so may have eased a bit because of that – but it could be too son to take much from it. If we get polls in the next month they may add too the picture, unless other major issues or events take over influence.

What this means is that hal way through the term (18 months before the next election) there is little in it between Labour and National. I think we can expect ebbs and flows in their support somewhere in the forties depending on timing of polls and margins of error.

Perhaps of more significance is NZ First remaining stuck under the threshold. When NZ First was last in government from 2005-2008 they polled mostly under the threshold and ended up getting 4.07 in the 2008 election, getting them dumped from Parliament.

https://en.wikipedia.org/wiki/Opinion_polling_for_the_2008_New_Zealand_general_election

Greens look a bit safer staying just above the threshold, but are still at risk. They will be keen to be seen to be achieving significant gains on climate, environmental and social issues. They have time for that, but need to start delivering.

 

 

Ruth Dyson not standing again in 2020

Labour MP Ruth Dyson has announced she will not stand for re-election in 2020.

She first became an MP in 1993 so that will make it 27 years in Parliament, but her political history dates back to 1979, forty years ago. She was Labour Party president from 1988-1993, a very challenging time for her and the party as the Labour Government flew to bits over Rogernomics.

Wikipedia:

Dyson joined the Labour Party in Westport in 1979, and worked as a campaign organiser for Labour MP Kerry Burke in the 1981 and 1984 election. In 1985, she moved to Wellington, where she worked with Labour MP Fran Wilde on the Homosexual Law Reform Bill. She worked for Wilde’s re-election campaign in the 1987 election, and later held a number of senior offices in the Labour Party, including that of president.

Dyson didn’t rise to great heights in the Clarke government, being a Minister for ACC and Minister for Senior Citizens.

She is currently ranked above Trevor Mallard (the Speaker) only on the Labour website. She is Senior Whip for Labour.

So this decision is not surprising. She looks to be little more than a place holder in Parliament.

RNZ:  Ruth Dyson will not seek re-election after 27 years in Parliament

“I truly love my job and adore my electorate and constituents,” Ms Dyson said in a media statement.

“This has not been an easy decision to make, but it is one that has been made considerably easier by the fact that I am leaving at a time when Labour is strong and united, with a clear plan to deliver the policies that I have worked hard to develop.”

But Ms Dyson promises that “there are no undisclosed reasons for this decision – it’s just the right time.”

The right time may have been a term or three ago.

I don’t support term limits for MPs, some long standing MPs contribute a lot of experience and keep doing good jobs, but Dyson has had a low profile and has had a limited impact on Parliament for some time.

Tax Working Group, CGT – PR and promises

Through the week there has been a lot written about the released tax Working Group report, in particular about to CGT or not to CGT.

It looks very Labour. The scope of Michael Cuilen’s report was limited by Labour, but includes significant Labour terminology, like fairness and wellbeing.

But I get the impression  that Labour is backing off  introducing a CGT, either because they know they can’t get NZ First support, or they know it is too electorally toxic. Perhaps both.

Or else we are being played.  It proposes a high rate of tax, and includes farms and businesses. This could be an old trick of threatening something more harsh than is intended so the real aim looks acceptable in comparison. There is plenty of scope for  Labour and NZ First to come out with lower tax and a farm and small business exemption and claim they have listened to concerns.

NZ Herald Editorial: Pity if capital gains tax too hot for Labour to handle

If the Labour Party had any illusions about the fight it will face to bring in a capital gains tax, it knows now. Within 24 hours of the public receiving the recommendations of Sir Michael Cullen’s tax working group the hostility was almost drowning out support for the proposal.

The governing parties had the report weeks ago — plenty of time to time to form a response for announcement with the report’s release as often happens. But only the Greens greeted it enthusiastically.

The week before the report was released Green co-leader made a statement (in parliament) – he said that if the Government didn’t introduce a CGT they didn’t deserve to be re-elected. Labour didn’t seem to prepare, and didn’t seem to have a response organised – unless they deliberately left it open to National to attack the proposals.

Heather du Plessis-Allan: Big tax shake-up or big PR job?

It’s been dubbed the biggest tax shake-up in a generation. But it’s all talk. There’s no chance it’s going to happen. At least not to the full extent the Tax Working Group is recommending.

Some of the shake-up will happen. Maybe enough to qualify as a low-level tremor. Maybe it will include capital gains taxes, maybe it won’t. Yup, maybe none at all.

It’s all too early to say. And that’s for three reasons: Winston Peters, us and Labour’s own self-interest.

A CGT was a Labour election promise. It’s all about making the tax system fairer. It’s a Government looking after the poorest Kiwis. Robertson and Ardern have both spent too much time repeating that message to now walk away from their one chance to fix the system.

This is where Peters comes in. If he continues to oppose a capital gains tax, he might be their get-out-of-jail card. They might be able to happily drop a CGT and blame it on him. They could trot out the old you-win-some-you-lose-some argument. They’ve used it before.

It’s of course true that coalition governments require compromise.

But will the Peters excuse be good enough? Ardern and Robertson will have to use all their charm and communications skills to sell that message.

Either this will be the biggest tax shake-up of a generation, or the most convincing PR campaign to explain why it never happened.

We will have to wait a couple of months for the Labour-NZ First decision making and the PR to reveal which way this is going to go.

It’s hard to see how NZ First would support the introduction of a CGT. Winston Peters has condemned it in the past, notably during the last election campaign. The future of his party is at stake, and u-turning on a CGT could be a big nail in NZ Firt’s coffin.

I think Labour have created a dilemma for themselves here.

If they manage to get CGT legislation passed in time for the election they are at major risk of being thrashed by voters.

If they backtrack and pull the plug on CGT they will annoy core left wing support who have bought the promise.

 

Conservative and Labour MPs resign from parties in UK

Two days ago seven MPs in the UK announced they were resigning from the Labour Party: ‘We have all now resigned’: seven Labour MPs quit party – video

A small group of MPs have resigned from the Labour party in order to sit as an independent group in parliament. The MPs delivered an attack on Jeremy Corbyn’s leadership and the party for being ‘institutionally racist’ and betraying its members over Brexit

More from the Guardian – Labour: Watson tells Corbyn he must change direction to stop party splitting

Labour’s deputy leader, Tom Watson, has told Jeremy Corbyn that he must change direction or face a worsening Labour split after seven MPs quit to form a new movement in the party’s biggest schism in nearly 40 years.

Watson’s emotional intervention came as a number of Labour MPs were poised to follow the founders of the new Independent Group – and after reports on Monday night that some Conservatives were also ready to defect.

Saying that he sometimes “no longer recognises” his own party, Watson urged Corbyn to ensure Labour remains a broad church and reshuffle his shadow cabinet to reflect a wider balance of MPs.

The announcement of the group founded by Luciana Berger and Chuka Umunna represented the most significant challenge to party unity since the “gang of four” senior figures quit to form the Social Democratic party in 1981.

But on a day of drama, recrimination and occasional chaos, Corbyn loyalists derided the MPs as fringe figures who were out of touch with the public.

Now another Labour MP has split from Labour, and also three Conservative MPs have joined them. Missy comments:

This morning three Conservative MPs resigned from the party to join the new Independent Group of MPs. It will be interesting as to how these MPs work together, essentially the only thing they all have in common is that they want to stop Brexit, and want the public to have a second referendum now we know more about Brexit, and have seen how things have changed.

Interestingly they don’t want their constituents to have a second vote now things have changed and they are no longer in their party, many vote for party regardless of the candidate, however, these MPs who want to give the electorate the opportunity to change their minds on Brexit aren’t so keen to give their constituents the opportunity to change their minds on their MP.

Guardian:  Eighth Labour MP quits party to join breakaway Independent Group

Joan Ryan has become the eighth Labour MP to resign and join the breakaway Independent Group, claiming Jeremy Corbyn’s party has become “infected with the scourge of anti-Jewish racism”.

Ryan, the MP for Enfield North, said she had been a member for four decades but could no longer remain as a Labour MP.

Echoing Luciana Berger, the Jewish MP for Liverpool Wavertree, Ryan blamed what she claimed was the Labour leadership’s “dereliction of duty” in the face of the “evil” of antisemitism, for her decision to resign.

In a stinging resignation letter, she said: “I cannot remain a member of the Labour party while this requires me to suggest that I believe Jeremy Corbyn – a man who has presided over the culture of anti-Jewish racism and hatred of Israel that now afflicts my former party – is fit to be prime minister of this country. He is not.”

BBC:  Three MPs quit Tory party to join Independent Group

Anna Soubry, Sarah Wollaston and Heidi Allen wrote a joint letter to Theresa May to confirm their departure.

The three held a press conference, criticising the government for letting the “hard-line anti-EU awkward squad” take over the party.

At a press conference on Wednesday, Ms Soubry criticised Theresa May for being “in the grip” of the Democratic Unionist Party and the pro-Leave European Research Group, and allowing Brexit to “define and shape” the Conservative Party.

She said: “The battle is over, the other side has won.

“The right wing, the hard-line anti-EU awkward squad that have destroyed every leader for the last 40 years are now running the Conservative Party from top to toe. They are the Conservative Party.”

The pro-Remain trio will join the new Independent Group – made up of eight Labour MPs who resigned from their party over its handling of Brexit and anti-Semitism – saying it represented “the centre ground of British politics”.

The PM said she was “saddened”, but her party would “always offer… decent, moderate and patriotic politics”.

Brexit continues to split parties in the UK.

Greens versus NZ First and Labour conservatism

Does Labour use NZ First as an excuse to be conservative on economic and other policies to avoid being linked to Green radicalism? They do use the Budget Responsibility Rules to be conservative. They are an agreement with the Green Party to allay fears of a swing too far left in the last election campaign, but there is disagreement over having the Rules within the Green Party.

I have seen dismay expressed from the the left that the Government is nowwhere near progressive enough,.

Henry Cooke (Stuff):  The Greens are looking forward to 2020 already, and the possibility of a world without Winston

At their annual conference last year, a prominent Green Party member gave a speech which called for the party to tear up a central tenet of their partnership with Labour.

He received a standing ovation. Most of the Green MPs present, who had signed off the policy, were in the room. Several agreed with him.

The policy was the Budget Responsibility Rules a set of tight government spending guidelines Labour and the Greens agreed to ahead of the 2017 election. They have gone on to play a huge role in how the parties have governed.

The idea was to blunt the attacks from the right that a Labour-Green government would blow up the surplus and destroy the economy.

Ever since Green supporters and some MPs have been agitating for the party to get rid of the rules. In the last week this began. A “review” of those budgetary constraints has been launched, but this is just a procedural step on the way to either scrapping them or modifying them before the 2020 election.

There always seemed a likelihood that Labour and the Greens would need NZ First to give them any chance of getting into Government last election, and so it turned out.

It’s a long way from the election but there appears to be a greater chance that NZ First won’t make the threshold next year. This would give the Greens more influence over Labour, depending on how many seats they get. If Greens recovered back up to ten to fifteen seats, and were in Cabinet with Labour, they should get significantly more say and sway.

In the same week, co-leader James Shaw made the most forceful argument for a capital gains tax anyone has in years, saying the Government wouldn’t deserve to be re-elected if they didn’t implement one.

That was a big play from Shaw, mostly to his party wanting more reform from Government.

​The election is next year, and the Greens are getting ready by staking out positions on the left. At the same time, some in the party are daring to look forward to a world without Winston Peters.

Fixing this requires not just talking up wins in Government but very clearly pushing left on tax – an issue likely to dominate through this year and into the next thanks to the tax working group – as well as balancing the books. These might seem like small bore issues but they are very important to that core of committed supporters.

NZ First are likely to try to distance themselves from relying on Labour next year to try to fool voters and Labour negotiators into thinking they could go either way.

So Labour+Green will be an important consideration for voters.

Many Greens see Peters and NZ First as the reactionary laggard keeping this Government from truly transforming the country. But it has long been useful for centrist Labour MPs to blame NZ First for their own conservatism. Labour will be extremely conscious of how scared the wider public might feel about a radical Labour-Green government in 2020.

Keeping the budget deal in place might well be Ardern’s plan to placate those fears.

For Labour, yes. And possibly for Shaw. But what about green supporters disappointed with the lack of progress leftwards this term, and impatient for more radical reforms?

Possibly one of the most significant decisions for the next election will be what the Green party decides to do about the Rules, that some see as a brick wall in front of progress and real progressivism.

One thing that may make it easier for Greens pulling Labour left is the conservatism of Simon Bridges pulling National further right.

Unless the Sustainability Party gets some support in the centre.

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.