Why Is This Man Smiling? Is Sir Michael Cullen's Capital Gains Tax really worth this government dying in a ditch for? Especially if that means all hope of making progress on the issues ordinary Labour and Green voters really do care about will be lost. Even though it will allow the Right to come storming back to power on populist promises of saving the family batch and making it possible, once again, for hard-working Kiwis to cash-in their dreams.
THE LABOUR-GREEN TECHNOCRATIC LEFT is clearly preparing to die in the very same ditch in which the Right hopes to bury the proposed Capital Gains Tax (CGT). This is unfortunate, since one of the more annoying, if unintended, consequences of such folly is likely to be the fall of the Coalition Government. Assuming, of course, that Winston Peters and NZ First are willing to die alongside their Labour and Green comrades. The sheer improbability of that happening is really the only ray of hope illuminating what is otherwise a pretty dreary situation.
It is to be hoped that the partisans of a CGT are stockpiling their rhetorical and evidentiary weaponry with the same eager energy as the National Party, Act and the Taxpayers Union. This latter trio can barely contain their glee that Sir Michael Cullen and his Tax Working Group are preparing to gift them such a large consignment of political dynamite.
Presumably, the advocates of a CGT are confident that this dynamite will explode in the Right’s face. That a CGT, opposed (according to Reid Research) by 54 percent of voters, will nevertheless rouse the “Missing Million” voters from their slumbers and send them marching towards the barricades. Because, according to these same advocates, the CGT is about “fairness”, and fairness is as Kiwi as … umm … voting National and grumbling about tax.
Strangely enough, the Right’s campaign against the CGT will also be based on “fairness”. They will be arguing that it’s only fair that people who have worked hard all their lives to make a success of a farm, a small business, or a rental property, are entitled to be rewarded for all that effort and self-sacrifice by pocketing the capital gain – tax free.
Will the Right focus on the multi-millionaire who invests $10 million, walks away with $50 million, and pays not one cent of tax on his ill-gotten capital gains? Of course not! They’re relying on most New Zealanders not knowing anyone like that. The sort of people most Kiwis do know, however, is the couple who set up their own business, slogged their guts out, and then cashed it in for a tidy sum. Do most Kiwis begrudge these folk their windfall? Not at all. They know what it cost them to get it.
The Right is also betting that the Kiwi dream of becoming one’s own boss remains as strong as ever. At least as strong as any desire to stick it to the rich. That confidence is in no way misplaced since neither the Labour Party, nor the Greens, were willing to make “sticking it to the rich” a central plank of their respective election policy platforms.
Certainly, an invitation to come up with new and inventive ways to “stick it to the rich” formed no part of the Tax Working Group’s terms-of-reference. If it had, then I strongly suspect Sir Michael Cullen would have refused to serve!
In fact, if we think about them, those terms-of-reference were pretty damn lame. The Working Group was not permitted to consider increasing income tax on the very wealthy. They were prohibited from investigating a land tax, or recommending the re-introduction of inheritance tax. Even worse, it was soon made clear by Michael Cullen’s protégé, and Finance Minister, Mr Grant (Budget Responsibility Rules) Robertson, that any revenue raised from a “broad-based” CGT would have to be offset elsewhere in the fiscal system.
So much for the fond hopes of misguided progressives that the additional billions raised by a CGT would be used to fund desperately needed increases in social expenditure.
Nope. Labour and the Greens were having none of that. All they wanted was a CGT. Indeed, so badly did the Greens want it that their male co-leader, James Shaw, recently declared that they didn’t deserve to be re-elected if a CGT was not delivered.
Certainly, when it comes to causes for which activists are ready to endanger their party’s grip on power, the Labour-Green Technocratic Left’s determination to die in a ditch for a CGT is equalled only by the Alliance’s Left’s determination to die in a ditch over the USA’s post-9/11 intervention in Afghanistan. There were many causes for which the Alliance Left might honourably have committed political suicide, but saving the Taliban wasn’t one of them!
The common factor here: what links the Labour-Green Technocratic Left with the old Alliance Left; is a peculiar kind of political tone-deafness. The suggestion that a Western political party eager to be re-elected should stand in the way of punishing those responsible for the atrocities of 9/11 should have sounded absurd in the ears of practical political activists. Similarly, the notion that the single most important change for which ordinary New Zealanders are clamouring is a CGT. Not effective action to eliminate poverty and homelessness; not immediate and drastic measures to combat climate change; not cleaning up our rivers and streams; or improving our mental health services. None of these things – judging by the lethargy and prevarications of this government and its technocratic supporters – are worth dying in a ditch for.
But a CGT is, apparently, deserving of the ultimate sacrifice. Even if it means that all hope of making progress on the issues ordinary Labour and Green voters really do care about will be lost. Even though it will allow the Right to come storming back to power on populist promises of saving the family batch and making it possible, once again, for hard-working Kiwis to cash-in their dreams.
This essay was originally posted on The Daily Blog of Thursday, 21 February 2019.
"any revenue raised from a “broad-based” CGT would have to be offset elsewhere in the fiscal system."
Pity, but if it's going to be offset somewhere perhaps they can get rid of that awful regressive GST, that hits the working classes harder than anyone. Not likely I suspect as it has bugger all costs in the collection it's basically done for you – it's really the lazy government's tax. But getting rid of that would make a lot of working class and poor people's lives a hell just a bit easier.
The fact that is the lazy government's tax is why it is so good.
Our current paye tax is an abomination as it has so many dammed exceptions.
Add on top of that working for families etc and you have at least 10,000 additional expensive government employees required to administer the abortion.
Better to have a greatly simplified tax system that doesn't soak too much out of the economy for what is little more than busy work.
Any CGT they put in place will be abound with busy work for both the government and accountants.
Regardless of your philosophy regarding this, the reality is that is simply a bad idea due to the issues with implementing it.
"Our current paye tax is an abomination as it has so many dammed exceptions."...WTF?
Our PAYE is in fact one of the simplest systems in the world, simpler than the American all the British for sure. In the complexity stakes its 82nd out of 94, not far above the Cayman Islands. God help us, where do you people get these ideas from.
GST is convenient for the government, not necessarily good. It's regressive – although you might not mind that. And what many people don't seem to realise is that whether it's 10,000 government servants, or increased prices we all pay for the collection of tax. You don't think these companies collect it then handed on to the government for nothing do you? If you do I have a bridge I want to sell you.
The main purpose of the CGT I would have thought, is to halt speculation on houses (homes), not necessarily as an important source of revenue.
Of course a simpler, cheaper means of collecting taxes is the 'moving money' tax - Financial Transaction Tax
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