Friday, 1 March 2019

Who Possesses The Plain, Old-Fashioned Common Sense To Say “No” To Labour’s CGT?

Yay Sayers: Prime Minister Jacinda Ardern and her Finance Minister, Grant Robertson, who recoil in horror at the very suggestion that Labour should tax the incomes of the very wealthy without mercy, remain absolutely convinced that taxing the local dairy owner’s capital gains will produce nothing but sweetness and light. They’ve run their blue pencils through Inheritance Tax, Land Tax, Financial Transaction Tax and Carbon Tax: but in spite of its emphatic rejection in two successive elections, they continue to give their CGT the big tick.

WHY CAN’T LABOUR take “No” for an answer? When the party first offered voters a Capital Gains Tax (CGT) in 2011 they responded by giving Labour 27 percent of the Party Vote. Undaunted, David Cunliffe and his team doubled-down on the CGT in 2014. Labour’s Party Vote slumped to a risible 24 percent. Point taken?

For a while it looked as though Labour’s ears had started working again. Cunliffe’s successor, Andrew Little, moved swiftly (if unilaterally) to take the twice-rejected CGT off the table. Which should have been the end of the story. But, it wasn’t. Within Labour’s caucus there remained a tight little clutch of CGT supporters who simply refused to let the policy go.

That tight little clutch: led by the current Finance Minister, Grant Robertson; which recoils in horror at the very suggestion that Labour should tax the incomes of the very wealthy without mercy; remains absolutely convinced that taxing the local dairy owner’s capital gains will produce nothing but sweetness and light. They’ve run their blue pencils through Inheritance Tax, Land Tax, Financial Transaction Tax and Carbon Tax: but in spite of its emphatic rejection in two successive elections, they continue to give their CGT the big tick.

Jacinda Ardern’s unopposed election to the Labour leadership provided a huge fillip to the CGT promoters’ club. With Little out of the way, the great crusade to tax the family bach could resume in earnest. Some insist that Jacinda’s “captain’s call”, to enact a CGT in the first term of a Labour-led government, was all her own work. Others claim that her dramatic policy adjustment was made at Robertson’s urging. Whoever was responsible, the sudden decline in Labour’s poll numbers was enough to give both politicians serious pause.

The upshot, of course, was the peculiar, two-stage, policy process whose radical recommendations New Zealanders are currently attempting to get their heads around. The most puzzling aspect of “Stage 1” – the Tax Working Group – was why the former Labour Finance Minister, Sir Michael Cullen, was roped-in to chair it.

In the media “lock-up” which immediately preceded the release of the Tax Working Group’s report, Sir Michael vouchsafed to journalists the following, typically cryptic, observation:

“I had a brief period as finance spokesperson for the Labour Party for some 17 years. You will not find a single comment by me publicly advocating a capital gains tax. You might draw your own conclusions from that fact.”

You think!

Cullen’s aside, properly decoded, offers up just one meaning: “This is a damn fool’s political errand, which I only accepted so that I could deliver these twerps a CGT of such breadth and bite that only a complete idiot would consider implementing it!” If that is not what it means, then we must, reluctantly, conclude that the former Finance Minister has lost his wits.

The problem exercising voters, now, is whether or not the behaviour of the CGT promoters’ club, consistent over an entire decade, admits of its members being anything other than twerps and idiots? In all that time, only one Labour politician, Andrew Little, has demonstrated the plain, old-fashioned common-sense to hurl the electorally and economically toxic CGT out the window.

What does it say about the Prime Minister and her Finance Minister that the very first thing they did following Little’s very own “captain’s call” (inspired, presumably, by Captain Oates’ heroic, if unavailing, act of self-sacrifice at the end of Robert Falcon Scott’s doomed Antarctic Expedition) was to rush outside, pick up the discarded CGT, dust it off, and replace it reverently on Labour’s table? Clearly, Ardern and Robertson are not the sort of Gen-Xers who enjoy being told that they are wrong!

The Greens, however, are much, much worse. Co-leader James Shaw has declared that, if the 2020 General Election arrives and a CGT has not been enacted, then his party does not deserve to be re-elected. The problem which he and his party may be forced to confront is that if the CGT proposed by the Tax Working Group is enacted next year (effective in 2021) then the electorate may feel moved to give the Greens exactly what they deserve!

Which leaves the responsibility for demonstrating plain, old-fashioned common sense to the politician who has spent 25 years insisting that only he and his party possess it.

Winston Peters.

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 1 March 2019.

22 comments:

Andrew Nichols said...

A socialist opposed to a wealth tax? You dont happen to own a couple of investment houses do you Chris?

Anonymous said...

Calm down Chris!
I don't think that labour had any intention of doing anything other than a cgt on investment property.

Chris Trotter said...

Sorry to disappoint you, Andrew, no. My wife and I have only the one property, our family home.

I do, however, know a number of small business owners, and grew up on a farm. So, the enormous potential for this measure to damage the Labour-NZ First-Green Government is, possibly, a lot clearer to me than it is to you.

Also, I'm very keen to understand why, when the electorate has twice (or, if you count the 2017 back-down, thrice) rejected the CGT, you nevertheless appear to regard it as proof of socialist rectitude that an obdurate faction of Labour's caucus remains committed to its introduction.

Mango said...

You really need to calm down Chris!
I don't believe labour ever intended to do anything other than a cgt on investment property. It's a classic bait and switch, get the working group to propose something radical and then what you really want to do will look moderate.

greywarbler said...

Socialist rectitude, makes me think of constipation. CGT is the next new
thing that is calling out to Labour as being 'the right thing to do to make the country great again'! They want to clean out the Augean stables every now and then and throw the accumulated laws and mores out. That desire to move on the lump from the past becomes a fixation and TINA. It is their leitmotif, they have embraced it, they must not back down in the face of this onerous duty, e'en if they lose their (political) lives.

The Sanchos at home watch with mixed feelings as Don Quixote ventures forward with gusto. Or is it like The Charge of the Light Brigade. How's that for mixed-up references - I would think that reflects the minds of the general public. Mixed up. Will this be the rueful result.

Someone had blundered.
Theirs not to make reply,
Theirs not to reason why...


Will it work and solve all our problems? They have it in other countries! Is it although, a bad tactical move in our situation? How much tax will it raise? Will it slow house inflation or is that driven by demand because of our lack of controls preventing foreign buyers, and unwise high immigration levels? Have all these factors been taken into account and pondered over carefully? And consequences calculated: for the Labour Coalition, for NZ; and what unintended consequences are likely to occur that are not favourable to us all? Que'?

BWK said...

I have been a voter for 35 years and have voted for a range of parties, including Labour. I enjoy friendships from across the political spectrum. The CGT is being enthusiastically championed by friends and acquaintances from the hard left of Labour. It is clearly a policy that is easy for the Government to sell to its ideological rump and should be seen in that light. Political realities of being in a coalition and having to win the support of a wider spectrum of voters will naturally contradict this. My friends towards the centre or right of the political divide suggest Labour has moved too far to the left at times and could struggle to be re-elected.

BWK said...

The question as you put it is why Labour should die in a ditch over this policy, when there is simply the option of increasing income tax on high income earners, as Helen Clark did in 1999.

Nick J said...

Knuckle brained fuckwittery. Big win for Jacinda if she says no. Big loss otherwise.

Anonymous said...

Labour will not have the numbers to get CGT through parliament in its current form.
And I bet that there are more than a few in the Labour camp who will be getting very cold feet about the CGT.
Especially those who have slim majorities.

Maybe they will get the minority view through parliament, but even that depends on Winston Peters NZF vote.

Kat said...

People may finally realise that National and poodles will say and do anything to be in power. That is ALL they are about, managers of the status quo and piss poor at that. At least Labour/NZ First/Greens have new ideas and policies to put before the electorate for discussion. National loves playing the hard nose political game and likes to be seen as the power brokers and superior economic managers. National and poodles are in for a surprise. Labour/NZ First/Greens are enjoying being in govt and I doubt have any intention of dying in a ditch over negative "fish wrap" commentary on the TWG report and subsequent discussions on a CGT. Common sense really.

Monique Watson said...

Labour is abandoning its core constituency by running with CGT. I’ve been watching Andrew Little and how he is getting the job done with Pike River snd wondting what is he thinking about Taranaki’s prospects? Does he feel hostage to the whims of the Gen Xer’s and their Captsins Cslls? Or is he biding his time with the long game in mind?
He got lumped with a bad PR image but he’s more core Labour than Labour’s Cover Girl and Robertson snd the Green urban dwellers. Labour is not about finding an excuse to tax and grab like a pill for all occasions. I’d say Little gets it and the effect on Kiwisavers (workers) and small business owners.
Cullen’s all Bait and Switch. He looked like the Fucking Cheshire Cat saying what he did. If he hadn’t been running calculations on a CGT since Ardern became leader, I’d be surprised.

BlisteringAttack said...

I remember being in Aussie during the 90's when GST was an election issue. Keating won the election in one sentence: 'GST is poison for Australians'.

And he won.

Trev1 said...

Student politicians consumed with the false doctrine of inter-generational disadvantage. They are still angry over paying student fees when boomers had "free" university. The CGT is their weapon of choice to bring down the boomers. Unfortunately for them they have miscalculated and the greatest burden will be borne by their own cohort and those to come. And most people can now see this.

Guerilla Surgeon said...

"Labour is abandoning its core constituency by running with CGT."
Only if its core constituency is middle-class. Which is quite possibly as these days. I repeat – few if any working class people are going to be harmed by a capital gains tax. Certainly a lot fewer that are harmed by the regressive GST.

greywarbler said...

Thought I would follow up blisteringattack with what transpired?

The goods and services tax (GST) in Australia is a value added tax of 10% on most goods and services sales, with some exemptions
(such as for certain food, healthcare and housing items)
and concessions (including qualifying long term accommodation which is taxed at an effective rate of 5.5%).
Goods and services tax (Australia) - Wikipedia
https://en.wikipedia.org/wiki/Goods_and_services_tax_(Australia)


Our politicians have to look for clever and practical ways of introducing taxes that benefit everybody, and explain it in simple, understandable ways. The inclination is to launch a tax and set it off with all sails up without looking at a reliable weather report.

So brash, so clueless, without the key to the treasure chest on the far from desert-ed island, that we all hope for but which Labour financials just keep cullen!

Tauhei Notts said...

There are a couple of silly things in the Cullen Report, which, hopefully, will be fixed up. But overall, the trust of the Capital Gains Tax is correct and proper. Hopefully I will have to pay a sh*tload on my share portfolio.
My thoughts have been influenced by a bloke who employs 90 people, has had no tertiary education, but knows how many beans make ten. He has been surprised at the hysterical comments raised on the capital gains tax.
Silly things?
1. The inflation factor on stuff owned more than five years must be brought in.
2. The holding costs of an asset must be brought into account. Example; Janet & John bought a rundown place on the Coromandel peninsula for $600k they spent $40k on repairs, paint, insurance, interest, rates and other incidentals. Purchase costs were $20, what with lawyers, valuers, mortgage brokers, etc. They sold the place for $700 just eight months later and the real estate agents took $30. Then Cullen says pay $16.5 capital gains tax (33% of 700 - (20 + 30))because the purchase and sale expenses were deductible, but the do up expenses weren't.
Fix up the anomalies, go to the nation and Labour will defaecate upon the naysayers from a great height.

Robert Singers said...

I think you'll find Ardern is too special to be Gen-X (or a Millennial).
I'm sure she has uttered phrases like "I had an analogue childhood" and more correctly should be placed in her very own micro-generation (https://en.wikipedia.org/wiki/Xennials).

John B. said...

And who possess the logical and moral sense to say yes? When has the electorate explicitly said no to the CGT? Never.

Most polls that include the family home exclusion show a divided electorate. With the exception of the Project the day the tax proposal was announced and a few editorials, for the most part people are not getting the correct information. for example, after the announcement chief pundit Tova O'brien runs after Wisnton Peters in an ambush interview yearling at him over and over that this "tax does not work!!". No matter that most every country uses this same tax. none have abandoned it because it doesn't work".

New Zealand remains one of the outliers in the world - along with Belize and the Cayman Islands, that does not have a capital gains tax. It is a glaring loophole. A capital gains tax exempting the family home is a progressive tax. This tax on shares and multiple real estate holdings affects the wealthy far more than the middle class.

Indeed, that is why billionaire Warren Buffett famously said that he’s still paying a lower tax rate than his secretary. His wealth, like most of the super-rich, are primarily earned through capital gains, not income tax. (And his secretary is paid very well.)

https://www.odt.co.nz/news/election-2017/kiwis-divided-about-capital-gains-tax-poll http://www.propertyclub.co.nz/new-poll-shows-half-new-zealanders-support-capital-gains-tax-properties-family-home/

Tauhei Notts said...

Silly typing mistake. I meant thrust, not trust, in my first sentence.

sumsuch said...

We're the only country in the what's-it's-name wealthy countries group without a CGT? So I expect you're talking about what is possible rather than what is right. Come on now, ideally it's right?

sumsuch said...

OECD. 'Come on...' is an almost automatic de-legitimiser of what follows next. In logical analysis it would be a nothing. I expect I'm asking under the goldenest of suns would the Commission's recommendation be mostly OK with you? In our Arcadia.

charlese said...

Chris you are exactly right and once again, why on earth are you not running the Labour Party? I mean it. Instead the idiots are listening to bitter old Christ's College OBs like Cullen who clearly was bullies by farmer boys plus the sons of property developers in the 1960s..... Put him in a home!
Here's what your 'innocent' PM has achieved so far: My rich friends (and even me, very very grudgingly..) are saying: Winston must be the happiest MP on the planet these days, and thank God for that!
Labour, not just the Greens, keep handing it to him on a golden plate, the Cullen CGT just being the latest carefully prepared meaty dish. He will 'save' all small biz and farms from it along with a raft of other horrors etc etc.... Yuk! Has it really come to this? Winston ****ing Peters! Now he's the Messiah!