Capital Gains Tax debate should have been a godsend for Simon Bridges

by Bevan Rapson / 17 April, 2019
Opinion

Bridges called the CGT an “attack on the Kiwi way of life”. Photo/Getty

Interminable debate over a new tax should have been a godsend for Simon Bridges.

For a tiny community of policy wonks, bean counters and economics geeks, this is their happy place: a world awash with talk about tax. Running their models, crunching the numbers, spying the likely loopholes – they’ve been having a blast.

The rest of us? Not so much. Death and taxation are said to be the world’s only certainties, but like death, tax is a topic most of us don’t really want to think about too often.

For one thing, it can be fiendishly complicated. For another, it creates a flashpoint for discord over who’s paying what. And among those who believe they pay enough to the government already, hackles rise in particular at any talk of a “new tax”. Their self-interested – but heartfelt – protests and warnings of unintended consequences generate plenty of noise, but also a wider uneasiness, even among people unlikely to be much affected.

A general reluctance to even contemplate fundamental changes to the tax system may be wrong-headed, even downright disadvantageous for some, but it’s real. That sentiment has helped preserve a broad policy consensus for the past 30-odd years, and can’t just be wished away.

Which is why the Ardern Government’s long, slow shuffle towards a possible capital gains tax has seemed such terrible politics.

Labour’s flipping and flopping on the topic in Opposition was bad enough. In power, the Prime Minister and her lieutenants still haven’t been able to settle on a coherent policy, instead consigning the issue to a working group before further wasteful weeks of dithering over how to respond to its recommendations.

Throughout, they’ve failed to truly engage in a battle of ideas and instead, stuck in a quagmire of their own making, offered month upon month of free shots for their delighted opponents. Whichever way they eventually flop – or flip – they would seem to have consumed unnecessary quantities of political capital to get there. 

It’s easy to recall a time or two when New Zealand’s policy status quo has been overturned by deployment of a more crash-bang-wallop approach to political strategy.

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That was certainly how we got the major tax shift to GST, and the rest of the 1980s Rogernomics revolution. You might recall the odd round of “consultation” offered as window-dressing over those years, but the likes of Roger Douglas and Richard Prebble stood for few delays in doing what they thought was required, however loud the objections to their programme. 

A more current example of blunt-force change is the way Lime scooters suddenly landed in Auckland and Christchurch last year, and in Dunedin in January. In a country where all sorts of public health-and-safety provisions have in recent years loomed ever larger, unhelmeted riders travelling at up to 27kmh – sometimes faster – were suddenly let loose on our footpaths.

It seemed scarcely believable that something with so many ramifications for public safety could arrive as a fait accompli. Keen to embrace an apparent brave new world of personal transport, local politicians and commentators tripped over themselves to laud the Lime arrival, all but drowning out those who questioned the wisdom of having the machines mingling with pedestrians, and found themselves derided as “fun police” for their trouble.

As with any revolution – as opposed to boring old evolution – drawbacks have since revealed themselves, not least with the scooters themselves, and concerns about safety have had to be faced more squarely. As with Rogernomics, the excitement of sudden change has been followed by the unfolding of less palatable consequences.

Between the poles of crash-bang-wallop and interminable indecision, a middle ground is usually preferable.

Talk of a capital gains tax hits a particular nerve, but changing the tax system doesn’t always have to be like pulling teeth. Former revenue Minister Peter Dunne popped up in the recent debate to criticise Ardern and co’s defensiveness, and remind us that he oversaw changes related to student loan repayments and the Child Support Scheme, the introduction of KiwiSaver and Working for Families tax credits, along with personal and corporate tax cuts.

Both the Clark and Key Governments in which Dunne served specialised in a cautious incrementalism, underpinned by a steely determination to remain in office. But has their conservatism – and the compromises demanded by MMP – conspired to leave some policies set in aspic, unsuited for tackling the challenges we face in 2019? 

If so, it’s incumbent on Ardern, Finance Minister Grant Robertson and their colleagues to show greater mettle and intent than they have so far. They were meant to represent generational change, remember?

If Winston Peters chooses to stymie a meaningful capital gains tax, they might just have to put that on the record and move on to something achievable. But for now, Labour is being lambasted for something it may never do, which seems the worst of both worlds.

grant robertson

Finance Minister Grant Robertson (right) at last year’s New Zealand International Business Awards. Should he and his colleagues be showing greater mettle and intent over their mooted capital gains tax? Photo/Getty.

Lambaster-in-chief Simon Bridges greeted the Cullen working group report by immediately turning the hyperbole knob to 11, declaring the proposed capital gains tax an “assault on the Kiwi way of life”.

This gave the National Party leader’s critics on the left the opportunity to point out how the number of extra houses owned by some National MPs suggested a “way of life” far removed from what most New Zealanders can aspire to. And what about those whose Kiwi lifestyle involves cold, damp rental housing and sick kids as a result?

If Bridges’ claim came across as unduly melodramatic, the concept behind it is actually pretty well-worn National Party positioning, usually cast in terms of Kiwi battlers who work a bit harder to achieve their goals, whether that be to send a kid to a private school, or put some money towards a boat or a bach.

National’s remarkable record of election successes since first taking office in 1949 (47 years in power out of 70) suggests it hasn’t just been people in the bach-owning category who appreciate that kind of sentiment, but also others – two-bob capitalists, as a disgruntled old Labour supporter once described them to me after another election defeat – who share the philosophy, if not the prosperity, of their fellow blue-rosette wearers.

It is only to be expected that Bridges will trot out the lines his base expects to hear, even if it makes him sound a little like a blast from the past. But his real fear must be that his attacks will prove ineffectual.

For the reasons above, not everyone is tuned into the tax debate; Ardern’s popularity has so far given her some of Teflon John Key’s power to ride out unfavourable issues, while Bridges’ personal polling has refused to achieve lift-off.

But a Newshub-Reid Research poll in mid-February found 54% of voters oppose a capital gains tax, with only 32% in support. Even 42% of Labour voters are opposed, while 44% backed a new tax.

If Bridges can’t make progress with numbers like that running in his favour and the government suffering paralysis by analysis, his caucus will wonder if the voters’ phone is off the hook.

On the plus side, he could find himself with more time to enjoy his own Kiwi way of life.

This article was first published in the March 2019 issue of North & South.

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