Cullen’s change of CGT heart

Sir Michael Cullen repeatedly denounced the prospect of a capital gains tax during his parliamentary career.

Although the chairman of the Tax Working Group once called a capital gains tax (CGT) ‘‘extreme, socially unacceptable and economically unnecessary’’, he has since changed his mind.

New documents compiled by the Parliamentary Library for the ACT Party reveal how far he has shifted since leaving Government in 2008. The 84 pages of research included every reference Cullen ever made in the House to a CGT between 1987 and 2008.

The working group, which Cullen chairs, in February issued a report saying the Government should introduce a tax on capital gains from almost all investment classes, saying there were problems of fairness in the current system. But the Parliamentary Library documents paint a broader picture of Cullen’s evolving beliefs.

In one example, in October 2006, Cullen was asked if any work was being carried out by Treasury on a possible link between the lack of a capital gains tax and continuing high house prices. He was also asked if he accepted that a capital gains tax on property sales apart from the family home could help make housing more affordable again.

‘‘I think it is extremely hard to make that connection between a capital gains tax and the affordability of housing, insofar as there has never been a theoretical argument put forward about a capital gains tax on housing. It is more in the direction of a level playing field around investment; it is not around the notion that it will make houses cheaper.’’

Cullen has since told Stuff he was following the Government line at the time and now had heard arguments that had changed his mind.

When asked why he changed his mind, he quoted John Maynard Keynes: ‘‘When the facts change, I change my mind’’.

He had no pre-determined position and listened to what was put forward, Cullen said.

The three key arguments that sold him were: the simple equity argument, the current structure of taxation, and the fact that capital income was rising faster than other sources of income and it was likely to continue, he said.

But he added: ‘‘you would think the way this was reported most people have lots of capital gains ... actually most of them don’t at all.’’ CGT had always been a difficult political issue but the arguments had got stronger as time went on, he said.