Dying In A Ditch For A Capital Gains Tax That Half The Country Doesn’t Want.

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.