Capital gains tax plan a shot in the arm for Labour

Chalk this one up as something of a triumph for Phil Goff. So far, at least.

You can question the merits of a capital gains tax. You can question whether Labour's promotion of such a tax will turn out to be the "game-changer" that party is so desperately praying it will be.

However, indisputably, in the 10 days or so since it became apparent a capital gains tax would be a major component of Labour's election manifesto, Mr Goff has for the first time, and at the right time, tactically outmanoeuvred John Key and National.

It is hard to envisage Mr Goff handling the very difficult politics that follow promoting such a complex and contentious tax any better than he has.

National thought Labour had committed political suicide with the concept, and saw its task as hastening Labour's demise. The public's antipathy to new taxes, especially this sort, would do the rest.

Things have not worked out in quite that fashion.

National has found it extremely difficult to land a substantial hit on Labour, because Labour has anticipated the direction of the attacks and moved to smother them in advance.

Take Thursday's official launch of the new tax at Wellington's Westpac Trust stadium. For starters, the afternoon scheduling of the launch left National little time to analyse the detail of Labour's package before the television news bulletins went to air.

While Mr Goff was heading for Auckland to push Labour's cause on Campbell Live, National was frantically scrutinising a table of numbers Labour had compiled to show how its package would allow New Zealanders to keep state enterprises in public ownership while still paying down public debt.

What the table actually showed was how a capital gains tax would allow Labour to introduce a tax-free zone on the first $5000 of income, remove GST on fresh fruit and vegetables and lift New Zealand's abysmally low spending on research and development.

The table did not address how Labour would fill what National calls the "$12 billion hole" in Labour's version of the government accounts caused by Labour's spending plans and its intention not to sell shares in state assets.

In May's Budget, National cunningly "booked" the money from its planned post-election sell-off of such shares, even though the money has yet to be realised. Some of that "money" has been set aside for $900 million in capital spending.

Labour has exacted revenge for this trickery by simply ignoring it.

Labour can still credibly argue it will get government books back into surplus at the same time as National, because the measure of that is the Budget's operating balance, which does not include the proceeds from asset sales.

Labour has also deliberately avoided outlining its spending plans until closer to the election. There were no figures covering that, except the already announced lift in the Budget for research and development. Labour's strategy is to provide just enough data to persuade people it is fiscally credible, and avoid revealing anything that might be less than robust and therefore open to attack from National.

However, introducing a new tax leaves Labour vulnerable to Bill English's charge that it is still the "tax and spend" party. Labour's answer to this will be to show that when it comes to spending, it is now a tightwad. Labour knows that is the mood of the electorate. It is not going to buck it.

For its part, National is handicapped in attacking a capital gains tax because the real reason for its opposition is not particularly edifying: Its members and supporters would skin Mr Key and Mr English alive if they introduced one.

National had to fall back on weaker arguments, such as saying the tax would raise little revenue in the short term, be bad for economic recovery and discourage investment and that measures were already in place to penalise those indulging in property speculation.

Mr Goff has claimed the high ground by arguing a capital gains tax is justified both fairly and economically.

National knew the concept would be endorsed by some, but not that the endorsement would be so strong. It has come from across the political spectrum, making Mr Goff's motivation for it look less political and more in the national interest.

National has comforted itself that any Goff-driven consensus on the introduction of a capital gains tax is internal and that ordinary voters are pathologically averse to any new tax.

That may be so. But the internal backing Labour has got for such a measure must make it slightly easier to sell to suspicious voters.

Labour has also done its best to make its version as palatable as possible by not touching personal assets other than land or buildings.

A lot depends on voters' willingness to work out whether they will ever have to pay such a tax. Likewise, Labour has to hammer home the fact that most will be better off under its plan.

Labour's own polling shows disapproval of a capital gains tax running about 43% against 31% approval, however. At best, it may get grudging acceptance of the need for such a tax but that does not automatically lead to a vote-switch to Labour.

What the policy has definitely done is revitalise Mr Goff. He is suddenly making the running. Maybe people will start listening to him.

Labour might not yet win the war over a capital gains tax. Mr Goff sure as heck has won the early battles. The question is whether he can keep doing so.

 - John Armstrong is The New Zealand Herald political correspondent.

 

Add a Comment

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter