Capital gains tax: Political capital but for what gain?

2019-04-17 19:46:22

EDITORIAL: Cowardice or pragmatism? Sometimes in politics it can be hard to tell the difference.

One thing is obvious. The Government's decision to not implement a capital gains tax almost certainly wins a Labour-led coalition another term in 2020. It blunts the only weapon beleaguered Opposition leader Simon Bridges had with which to needle or irritate the Government and there will be new questions about whether his time is up. It is smart politics in a long-term, strategic sense.

But there is also a failure of nerve. Will Prime Minister Jacinda Ardern ever again have the political capital she has had in the past five weeks? The response to her masterful handling of the Christchurch attacks has won fans around the world and uplifted us at home. If there was ever a moment when significant change to the tax system could have happened, as the fairness and transformation her Government promised, that moment was now.

Ardern has said she personally wants the capital gains tax that Labour has campaigned on since 2011, but recognises the public does not and will not campaign on it again as Prime Minister. A coalition consensus was impossible. In other words, NZ First could not be budged.

In the lead-up to the announcement, pundits said that a watered-down capital gains tax would be a clear victory for NZ First. Most expected to see a compromise along the lines of the minority view of the Tax Working Group that suggested limiting a capital gains tax to rental properties. That even Bridges expected to see this option shows that the Government's complete abandonment of a capital gains tax took almost everyone by surprise.

In the wake of the announcement, success had many fathers. National, ACT and right-wing anti-tax lobby groups all tried to claim they influenced public mood, but those are delusions.

NZ First is the real winner. Winston Peters has been clear about his opposition to a capital gains tax since day one, which might also cause some to ask if the Tax Working Group was merely an expensive waste of time with a predetermined outcome.

While Ardern has made her own position clear, a poll in February said Labour voters were evenly split on the pros and cons of a capital gains tax.

It is a situation where brave political leadership and persuasion were required but for whatever reasons, a deep and thorough debate about fair and unfair tax failed to eventuate.

The conventional wisdom that calls a capital gains tax political suicide seems to have prevailed, along with a vague Kiwi mythology about our hard-won right to buy and sell multiple homes without being taxed on the profits.

Of the coalition parties, the Greens were known to be the strongest backers of a capital gains tax. Co-leader James Shaw turned around the calculations of political pragmatism when he said, "The last question we should be asking ourselves is, 'can we be re-elected if we do this?' The only question we should be asking ourselves is, 'do we deserve to be re-elected if we don't?'"

Those words might continue to ring in the ears of Greens supporters and the portion of disappointed Labour voters who expected the Government to deliver fairness, as they see it.

But in the end, a nearly decade-old policy collapsed under the harsh reality of MMP politics. Hopes and dreams mean nothing if you don't have the numbers.

Back to the top ^

Related Articles (30)