CGT captain's call by Jacinda Ardern is cynical, political and extremely smart

2019-04-17 08:43:41

OPINION: Capital gains tax is an election killer - always has been, always will be.

That Prime Minister Jacinda Ardern has abandoned her own values to remove it not only from the Government's agenda, but from Labour's for as long as she's in charge, is proof of that.

She is also abandoning a key principle held by much of Labour's base, and there will be many who will be deeply disappointed by her decision.

Ardern herself made it known she believes a capital gains tax is the best long-term solution to reduce inequality in New Zealand.

But winning elections is more important.

That's not to say the Government won't work to address inequality in other ways, but it can't be sold as anything other than a completely cynical move. There's every chance it could pay off.

Ardern has calculated, as many politicians do, next to nothing can be achieved if a party is not in power.

She has also made the calculation she'd much rather tango with the unions and wider party membership, than dice with the country.

She is assured of her power - there is no alternative to her leadership.

In that sense, it's a decision straight out of the John Key play book - a homage to the OG "pragmatic idealist", as Ardern has now also described herself.

But where she might have preferred to emulate him in his ability to raise GST as he did in 2010, even with her levels of popularity following the Christchurch terror attack, she can't turn that political capital into support for a capital gains tax.

It's a no-go.

The PM informed her caucus of the Government's decision via a telephone conference at midday - not something typically done for Government decisions.

It was then she broke the news probably none of them were expecting - they would all be abandoning that principle.

"Disappointed, but accepting", was how Ardern described the response.

On the surface, it might seem like Ardern has conceded ground to NZ First leader Winston Peters. But in reality, she's opened it wide up for Labour - the centre ground to be specific.

Ardern has removed one of the most divisive platforms of the past three elections.

National Party leader Simon Bridges has put on a victorious face; he and the party always have been on the right side of public opinion in this debate. In a sense, they can claim some ownership over this decision.

But the party will have grounds to be deeply worried.

Ardern has swallowed a massive dead rat, yes. But come this time next year, no one will remember it.

National has always done well out of the tax discussion. Never more evident than when Ardern and now Finance Minister Grant Robertson stood one week out from the last election and blew up their entire tax policy.

They kicked it for touch by handing it to the $1.6 million working group, once they made it into Government. The Government effectively tasked the Sir Michael Cullen-led group with building the case for a CGT.

The Government will still face difficult conversations over the housing crisis it's failed to address and the sustainability of superannuation.

A diminishing generation of earners will be forced to take on the increasing tax burden of retirement- all with the prospect of a much smaller nest-egg than the asset-loaded baby boomers, when they reach that age.

But the book is closed on capital gains tax.

On that, Jacinda Ardern is done talking.

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