Why wealth tax will never happen

Don’t panic, homeowners. The Green Party’s wealth tax will never come knocking at your door. There have been attempts to link Labour to the wealth tax in the past few weeks. That’s unsurprising from opponents such as Act, National and their support networks.

But this week it’s been Labour’s coalition partner NZ First sounding the alarm. Referencing the Greens’ wealth tax, Deputy Prime Minister Winston Peters described them as “away with the fairies”. He says a Labour-Green coalition would be a “nightmare” for New Zealanders.

It would certainly be a nightmare for him, to end his time in Parliament with the country headed down the culturally progressive path he has spent his career railing against.

But when it comes to economic policy, Labour is unlikely to be under much pressure to bend.

The Green Party will enter any coalition talks with a long list of environmental and social policies Labour could comfortably accept as MMP concessions. Tax won’t be top of any bargaining list. The vagaries of MMP mean it’s unlikely to be explicitly ruled out, but the current Labour Party will never support it.

NZ First can reasonably claim to have curbed some of Labour’s more ambitious policy.

But it’s naive to assume that without them Jacinda Ardern wouldn’t have maintained her razor-sharp focus on middle New Zealand voters.

If there is to be any radical reform of tax policy, Labour would have to want to drive it. Ardern emphatically ruling out a Capital Gains Tax on her watch hardly suggests an appetite to do that.

Apart from that line on CGT, Labour hasn’t yet ruled anything in or out on tax policy because it has not yet launched any of its campaign policy.

Finance minister Grant Robertson has refused to be drawn into commenting on the policy of other parties. He has, however, indicated that he sees current tax-setting as broadly “fair and balanced”.

That also suggests we shouldn’t expect anything radical in Labour’s tax policy in this campaign.

Longer-term, there is still an important discussion to be had about tax. The Government is expected to borrow an additional $60 billion to get through the Covid-19 crisis. That means it will need to find more revenue in the year to come or significantly cut spending. Centre-left Governments, however pragmatic, don’t much like the latter.

Robertson, like all good finance ministers, will say the coffers can be filled in time by policy that boosts our overall economic performance.

Without key drivers such as immigration, tourism and dairy exports, that’s not easily done.

And with monetary policy stuck on settings that continue to boost the wealth of homeowners and sharemarket investors, a serious effort to address social inequality may eventually require something more radical from central government.

But after the shock of the past six months, voters may be leaning in towards stability and security. Labour is unlikely to do anything that shakes faith in its ability to deliver that.

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