Prime Minister Jacinda Ardern has pronounced there will not be a tax on her watch, assigning the report from former finance minister Michael Cullen to the archives of history.
Ms Ardern has done the right thing for the electoral success of her party and because pursuing the tax as proposed would have created its own issues and anomalies.
The basic argument about fairness had traction. Superficially, at least, it made sense to assert capital gains are income that should be taxed just like wages and salaries and that the absence of these taxes favour the rich and the better-off middle classes.
But unless the tax included the family home along with everything else, the gains would be limited, New Zealand's relatively straight-forward tax system would have become more complex, and anomalies and perverse incentives would have been created.
The absence of a tax on the family home, ruled out from the start, for example, could encourage spending on larger and more expensive personal houses, perhaps at the expense of other investment. There were also concerns - even if the tax dampened the selling price of houses - that the number of rental homes could fall, exacerbating housing shortages.
The tax on capital gains for small businesses could have discouraged risk taking, capital investment and the growth of new enterprises, as well as creating a lot more work for accountants across the board. The period of embedding new taxes could have been especially disruptive.
Issues arose, too, over the likes of lifestyle blocks and what counted as personal home and land. There was contention, as well, over the fairness of inflation being subsumed into the tax.
As for the housing market, the minimum deposits and the "bright-line" test, extended to five years, might already have cooled prices in Auckland, although supply and demand mismatches continue to lie behind continuing increases in Wellington and provincial areas. The bright-line test is itself a capital gains tax.
Until Ms Ardern made her announcement last week, it was widely supposed the Government would cave in on a wider tax and leave it in place for second homes and investment properties. But even then Labour risked strongly upsetting a slice of holiday home owners and their families and the sizeable number with a second investment property, often as a retirement nest egg. These interests could well feel strongly enough to vote against Labour at the next election on the basis of just this policy. In contrast, personal preferences towards the tax among floating voters is likely to be relatively weak. Labour's left, meanwhile, cannot switch sides whatever its disillusionment.
Parts of Labour have been left let down at what they see as lack of political courage and lack of principle. They have also been disappointed Labour delayed its reaction to Mr Cullen's report, allowing opposition to the tax to dominate the debate. Questions have been asked about how much the Government's heart was ever behind pursuing the tax. Was the Cullen group set up with failure to follow through inevitable? So much for Labour as a transformational government.
But pragmatic Ms Ardern in Government rather than opposition secures the opportunity to instigate other change, albeit incrementally in the Helen Clark or John Key manner. These adjustments soon add up.
Labour cannot just put the blame for abandoning the capital gains tax on Winston Peters and New Zealand First. It might have been possible to bargain support for a property capital gains tax. And, if not, Ms Ardern could easily have said the tax was postponed, not discarded. A Labour-Greens Government under her leadership could have resurrected it.
What the Prime Minister has succeeded in doing, nonetheless, is clearing the decks on a potential vote loser. She has increased the likelihood of winning the 2020 election.
