Labour’s ideas open door for debate

LABOUR’S tax policy is modest. Some party supporters will say it is too soft, but Labour’s leaders are clearly pitching it at the centre ground. There is no way that this policy can be called the ‘‘true red’’ regime promised by David Cunliffe. His rhetoric is one thing; his actions are another.

Increasing the top tax rate from 33c to 36c is not an ‘‘envy tax’’, as John Key claims. It is a tiny impost on the top 2 per cent of taxpayers. Someone earning $160,000 a year will pay an extra $6 a week in tax. They simply won’t notice it. It is similarly daft for Steven Joyce to claim that this will somehow have an effect on the brain drain. It will have no effect whatever.

The related move to increase the tax rate on trusts is sensible. Trusts are widely used to avoid tax, and the tax gatherers are justified in trying to claw back the money. Labour estimates that by 2020 the two measures – higher top taxes and the trust rate change – will bring in nearly $700 million a year. That is a useful amount.

Labour believes its capital gains tax will by 2020 be bringing in about $1 billion a year. Overseas experience, especially Australia’s, suggests this is a plausible estimate. It would also be good policy. The tax on houses other than the family home would discourage excessive investment in housing, one of the great and abiding imbalances in the country’s economy.

Labour claims it could get an extra $200m a year by cracking down on tax evasion and avoidance, especially by multi-nationals. This is a favourite promise by parties looking for a catchall category that isn’t entirely spurious. Labour shouldn’t bet on getting anything like that amount, and voters should be sceptical. Labour’s fiscal plan also includes a costing for as-yet unannounced policies of $500m next year rising to $1b the year after. This is an expensive promise that the voters have yet to see or judge, and they will make a difference to how they see Labour as an alternative government.

Labour promises to increase spending on health and education while reducing debt substantially. Whether it can do this is unknowable, and frankly depends on many things largely outside its control. However, reality is once again a different thing from political rhetoric. It is an outdated cliche to call Labour a tax-and-spend party or some sort of fiscal profligate. Michael Cullen drastically reduced debt while he was finance minister, and resisted National’s campaign to cut taxes. New Zealand has benefited from his fiscal dryness, and from his establishment of the Cullen super fund.

Will the voters buy Labour’s alternative Budget? The party’s approach is moderate and centrist, and so there is no reason why it should frighten off middle-of-the-road voters. But the polls suggest National still holds the upper hand. Perhaps, however, policy will one day become a serious part of this election campaign. At that point, the voters might see that Labour offers a wide range of genuine policy alternatives to National. And then perhaps there will be a serious debate about what really matters for New Zealand and its future. At that point cliches and outdated slogans might give way to actual debate.

But don’t hold your breath.