At the tax party, everything has a sour taste
Would you like a cup of cold sick with that capital gains tax? For that has always been the way it’s gone down with voters in the past.
Branches of the coalition Government are operating under the impression that New Zealand’s palate for such acquired tastes has matured. It may well have. But that’s unlikely.
And so the policy Labour ditched halfway through its election campaign because it was too distasteful has been served back to it among a smorgasbord of other taxilicious petit fours.
The hope that, if it was delivered back by an independent panel of experts, then New Zealand might not notice the ‘‘blinis’’ they’re trying to serve up are actually just mini pikelets.
Something that sounds good but, when wafted under your nose as a viable option, becomes decidedly disappointing.
New Zealand has swallowed such unappetisers before; former prime minister John Key effectively promised no new taxes in the 2008 election campaign and promptly hiked GST to 15 per cent in his first term.
He was able to because he had political capital to burn and he had a knack of explaining things that brought enough of New Zealand along with him in his messaging.
Key cut income tax – more notably the top rate – and paid for it by increasing the rate of GST. No such policy was flagged at the prior election, and yet he became known as the incremental radical over his time in power as the Government also went on to sell to the public a highly controversial programme of asset sales with very little blowback as well.
Ardern has just as much political capital to expend on a CGT, and the same knack for communication, but she has much less freedom.
NZ First has reverted to type and, although it’s on record as having spent decades railing against the implementation of a capital gains tax, is now ignoring any previous comments while refusing to be boxed into a corner either way.
Leader Winston Peters says he will ‘‘consult’’ and make his decision all in good time, thank you very much.
And any concessions Peters might be willing to make are unlikely to be anything along the vein of what Labour and the Greens would ideally want to implement.
So would the Swiss cheese model of a capital gains tax – with so many holes in it the Government will likely find itself attacked for walking away from any meaningful reform – be rebranded as ‘‘incremental’’ success?
Well, that would be hopeful for a second term.
It was three weeks before the last election that Labour leader Ardern and finance spokesman Grant Robertson threw close to their entire tax policy away and promised a review instead, with no changes coming into force until after the following election.
Because come election time, Peters will no doubt revert to type again and refuse to confirm whether he will or won’t support a second-term Labour Government. What message would be sent on a capital gains tax then – that there’s an easy out?
Given Peters’ penchant for refusing to make bottom lines, and exacting an expensive price for any such compromise should he be back in a position to decide the Government in 2020, even if he does end up supporting a tax he’ll likely try to use the threat of one to bolster his vote.
And if some quarters of Cabinet were thinking they might be able to corner Peters on any element of a CGT, then they only need to refer back to Justice Minister Andrew Little when he tried to do something similar to abolish the three strikes law. His plans have been all but abandoned.
The prime minister’s office is hoping the conversation on tax can be held at a level of relative calm and perspective.
On that, we’re about to see the full extent of dollars National has to spend on 30-second attack adds for social media. A tactic that worked so well during the election, it forced Ardern to throw their tax policy out the window.
And if the Government is hoping to run interference that National is ‘‘out of touch’’ on that, then they’re blindly ignoring the results of two recent polls, which both said more than half of New Zealand does not want to see this go through.
There’s the distinct possibility that, while a good many New Zealanders do indeed think a CGT is at least ‘‘probably’’ fair, whether they’d vote for one is an entirely different question, and one that could only possibly be measured within the privacy of a voting booth.
Many within the centre-Left Government have voiced their opinions that buying baches and holiday homes with the hope of making a profit is just not where New Zealanders are at any more.
Those that already have multiple properties are greedy, and those who maybe aspire to owning more than one home only do it for the lifestyle.
It seems more than a little naive from a Government that may have successfully swept the issue of a sustainable retirement age under the rug, but they’ve far from solved it.
And to dismiss financial motives is to also discount how deeply ingrained into the New Zealand psyche opposition to a capital gains tax has become. It’s inextricably linked with the Kiwi dream and (rightly or wrongly) the preferred savings model for mumand-dad investors.
Wellington has always had a bad habit of downplaying how informed the masses in the regions are on a great many issues. But where it relates to tax and how that affects each individual’s income or potential income, the Government would insult the intelligence of voters at its peril.
It’s a long road before the Government reaches that stage, however – first it needs a package to sell.
That will not come fast from NZ First, and in the interim the Government is vulnerable.
National will undoubtedly use the time to try and pin the Government to complete ownership of a CGT, and if the Government navigates internal negotiations with a pared-back solution then it will switch to attacking Peters for a ‘‘broken promise’’ and the rest for a piecemeal solution.
James Shaw has been bold – declaring the Government doesn’t deserve to be re-elected if it doesn’t implement a CGT – but there is little downside for him, despite some ‘‘words’’ from Ardern.
The Government will have to make a choice before too long, and then we’ll see whether it may have bitten off more than it can chew.
‘‘Any concessions Peters might be willing to make are unlikely to be anything along the vein of what Labour and the Greens would ideally want to implement.’’