Optics and illusions in politics

When people who are addicted to politics talk about “optics”, they mean how something will look at first glance, without the public necessarily knowing the full story. It is also known as “the front page test”. On those terms, the Government’s $2.9 billion tax break for landlords is very bad optics indeed. It fails the front page test.

There must have been at least some degree of political discomfort about a tax break for landlords coming when so many New Zealanders who don’t own rental properties are “doing it tough”, as Prime Minister Christopher Luxon likes to say. It didn’t help that it came just days after a previous optical failure. That was when Luxon was tangled up in an entirely foreseeable story about claiming a $52,000 accommodation allowance rather than staying in Premier House, in order to live instead in his own mortgage-free Wellington apartment.

Luxon kept repeating that he was “entitled” to the allowance until he saw the light. “Entitled” proved to be an unfortunate choice of word.

Another problem is that the tax break was initially expected to cost $2.1b over four years. How has this blown out by $800 million? Again, it is poor optics. Luxon and Deputy Prime Minister Nicola Willis pitched themselves during the election campaign as good managers of the economy. In another favoured Luxon phrase, their numbers were “rock-solid”. Or solid-ish, it appears.

There was another blow-out this week. The IRD estimates that revenue from online gambling will be lower than the Government predicted. Instead of $716m over four years, the IRD puts the figure at $155m.

We have been softened up for bad news, as Luxon and Willis have repeatedly said the economy they inherited is weaker than they thought. While no-one likes austerity, the public can probably accept it as long as there is consistency. But to have stories about underpaid police officers and schoolkids going hungry sitting side by side with tax breaks for landlords and income tax cuts that favour those earning more implies there is a form of cognitive dissonance, or just basic indifference, at work at the policy level.

Some of Luxon’s media appearances this week, including with TVNZ’s Anna Burns-Francis and Stuff’s Tova O’Brien, suggest he is struggling with that cognitive dissonance. Luxon has already developed a tendency to look impatient when questioned by journalists, and he falls back on repeated, rehearsed lines when cornered. In the Stuff encounter, it was quickly revealed that Luxon had a weaker grasp of numbers, including police pay rates, than the interviewer did.

The irony behind Luxon’s unsuccessful media appearances is that he was really fronting for a policy announced by David Seymour in his capacity as Associate Finance Minister. The policy reverses the previous government’s removal of the ability of landlords to claim tax deductions on mortgage interest payments.

The previous government had hoped to deter investors from the housing market and level the playing field for first-home buyers. From National and ACT’s perspective, the reversal is merely a restoration of the status quo, aligning landlords with other businesses, and did not deserve such scrutiny.

Yet there has been an improbable attempt to spin it as a bonus for the struggling renter. One can imagine the workshopping that led to that claim.

Luxon repeated his assertion that the tax breaks will put downward pressure on rents. That would probably not mean an actual drop, but it may mean slower increases.

But the spin was clumsy and obvious. Luxon told the public that “we care about renters” and that renters will be “grateful” for the new policy. He even claimed that underpaid police officers, nurses and teachers will especially welcome the eased pressure that comes from their landlords getting a hefty tax break.

It is no surprise that a renters’ advocacy group called the comments “out of touch” and “insulting”. The majority of landlords are not monsters, but nor are they driven by altruism.

In reality, it will have little effect on rents. Research from the Treasury, the Reserve Bank and the Housing and Urban Development Department showed that rents are more affected by wage inflation, housing supply and population growth than a landlord’s costs or taxes. Luxon’s belief in a “trickle-down” from landlords to tenants seems fantastic at best.

To be blunt about it, you can wonder how Luxon said some of that with a straight face.

While no-one likes austerity, the public can probably accept it as long as there is consistency.