Friday 28 July 2023

A Distracting Tragedy.

Using Kiri For Cover: Ironically, the idea of using a dramatic event to distract the public’s attention from something politically embarrassing was picked up by David Parker. Unwilling to front his party’s “revised” tax policy, Labour’s most progressive cabinet minister quietly relinquished the Revenue Portfolio.

THERE IS AN IRONIC TWIST buried at the heart of the Kiri Allan tragedy.

The word “tragedy” is used advisedly in this instance, since it is always tragic to see politicians of principle and promise dragged down by their own inner demons. Most pundits are assuming that the extraordinary events of Sunday night also spell tragedy for the Labour Government. Certainly, its chances of retaining office appear to have sustained a fatal blow.

The twist of irony in this political debacle is to be found in Chris Hipkins high-handed decision to rule out the one indisputably exciting move that might have distracted the electorate from Labour’s ministerial malfunctions.

Had the Prime Minister, from the Lithuanian capital of Vilnius, not informed New Zealanders that there would be no Wealth Tax or Capital Gains Tax while he remained leader of the Labour Party, “end of story”, then the acute political discomfort occasioned by Kiri Allan’s misadventures would have been swept off the front pages by the release of his government’s radical new tax policy. Flanked by his Finance and Revenue Ministers, Chris Hipkins could have set the terms of the 2023 General Election in a single media conference.

The policy he was supposed to announce – about now – had been quietly developing within the Labour Cabinet, Caucus and Party for several years. The Finance Minister, Grant Robertson made no secret of his support for a Capital Gains Tax. Indeed, had it not been for the application of Winston Peters’ “handbrake”, he would likely have made history by introducing New Zealand’s first comprehensive CGT in this Labour government’s first term.

David Parker, beneath whose grey exterior beats a surprisingly red heart, was keen to top Robertson’s CGT with a Wealth Tax. Inspired by the radical French economist, Thomas Piketty, Parker commissioned an IRD study into the distribution of wealth in New Zealand. To the surprise of very few, it showed the wealthiest New Zealanders paying a proportionately smaller amount to the taxman than the average wage and salary earner.

Before they could take their tax package public, however, Robertson and Parker needed draft legislation. At Treasury and Inland Revenue, the wheels were set in motion. Alarmed at the speed of the policy’s development, Hipkins grabbed for the handbrake himself, bringing the work at Treasury and Inland Revenue to a sudden, screeching halt. A few weeks later, the Prime Minister issued his infamous “Captain’s Call” from Vilnius, killing the Robertson/Parker Tax Package stone-dead.

This is what he killed. A tax package that would have made the first $10,000 of personal income tax-free. Worth roughly $1,000 per year, this change would have made every taxpayer around $20.00 per week better-off. It was to have been paid for by a Wealth Tax levied on the richest families in New Zealand. These wealthy few would not have been impoverished by the tax, but within ten years they would have been contributing billions to the state’s revenues. Whether Labour’s package would have addressed the problem of “fiscal drag” (a move that would have neatly undercut National’s tax policy) paid for by a CGT and a new top tax rate for those earning in excess of $250,000 per annum, we shall never know. The whole thing lies dead at Chippy’s feet.

Word was spread that the Robertson/Parker package had been very badly received by Labour’s focus-groups. Like Jacinda Ardern before him, Hipkins appeared spooked by the prospect of having to win the country over against the fierce opposition of big business and the right-wing news media. He remained unmoved by the argument that the election could be transformed into a referendum on a fairer tax system and all the pro-social things it could buy. “We have no mandate”, chorused Hipkins’ defenders. The idea of seeking and winning one, was rejected.

One can only speculate on Hipkins’ response to the suggestion that the announcement of the Robertson/Parker package would have refocused the public’s attention dramatically. Kiri’s crash forgotten, voters might now be arguing about something of real importance to their own, their families’, and their country’s future.

Ironically, the idea of using a dramatic event to distract the public’s attention from something politically embarrassing was picked up by Hipkins’ principal victim. David Parker, unwilling to front Labour’s “revised” tax policy, quietly relinquished the Revenue Portfolio. Presumably, Grant Robertson is waiting for October.

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 28 July 2023.


Guerilla Surgeon said...

The right-wing machine swings into action whenever there is any mention of an increase in taxation or a shift in taxation from the poor to the wealthy. Lawyers and economists comment, their articles in the media, and they all basically push the same idea – that it's too hard – that nobody else does it – that it's too complex – the rich will move overseas "and blah blah".
I remember "We won – you lost" and the almost immediate collapse and abject withdrawal from left-wing politics under business pressure. It's one reason I haven't voted Labour more than once since Roger Douglas. They are – to be blunt – and gutless. Really the only thing that keeps me voting at the moment is fear of ACT and their ridiculous libertarian bullshit.

new view said...

I have to agree Chris. I'm believing that not only did Hipkins not read the room (Caucus room) but most likely failed to read the labour electorate, and then some. I'm from the right but can see a fairly thought through CGT would be OK. I believe Chippy is more right wing than left.

Guerilla Surgeon said...

I just had a look at the Maori Party's tax policy. Looks pretty damn good to me. They'll never get it through of course, what with all the neoliberalism washing around the country. But I particularly like the crackdown on tax evasion/avoidance. Someone commented something like "If you are poor and owe them a few thousand they will chase you to the ends of the earth, but if you're wealthy and owe millions they'll settle for 10%."
Now I don't know if this is true, my relations with the IRD have been pretty good even when I was self-employed – I did make a mistake once on my taxes and they were very helpful. But if it is true, it's about time something was damn well done about it.
And yes, I know that the wealthy pay most of the taxes – but they make most of the money and they pay a hell of a lot less as a proportion than I do.

Tribal+Scot said...

The problem with taxing unrealized assets is that it kills new companies
If you consider Rod Drury and Xero, as the companies value increased the value of his shares increased.
The company was burning cash but his individual weath grew. The only way he could have paid a wealth tax was by SELLING 2.5% (labour) to 8% TPM. With TPM he would have lost control very quickly
The other option was moving to Australia and paying no wealth tax
Pretty easy decision really
How many million per year would you pay to stay in NZ?

larry said...

The absence of CGT in our tax regime makes no sense.

We could just as illogically exempt rental income .
... or conversely deduct at source a portion of thoroughbred horse racing ... though not standard bred's wager winnings.


Exempting CG' s merely reflects the political power of the anti lobby.

Exempt though àny logic.

sumsuch said...

Who the frick knew Parker was Labour's most Left-wing minister? Till he revealed it in his resignation.

Not how it works, or used to work. Nor should work in a people's movement.

About the people's movement, climate change, our soon end. Reich and Sanders and Chomsky know it's the everything, in their plutocracy. Martyn admits it but gets no responses on his posts and you have been terrible about it as our chief idea-monger.

You think nothing can be done about our main challenge, so carry on with minor immediate things. Everyone has bank accounts like Sean and the bright-toothed fellow; yep, I'm suggesting you're in their foul company

You really need to explain fully about your non-confrontation of the main thing for the people.

I think it's mostly about you, whatever that is.

Chris Trotter said...

To: Sumsuch @ 22:25

Re: "the main thing" - by which I presume you mean Climate Change.

When we discover that most of the wildfires sweeping through Greece were deliberately lit, Sumsuch, it should tell us something important about the capacity of our species to inflict harm upon itself and the planet.

Humanity has hit its limits, but it does not know how to stop. If it did, then it would have tackled anthropogenic global warming five decades ago, and the world would be a very different place.

But humanity didn't, and the world is burning.

I can describe what is happening, Sumsuch, but I can't stop it.

Assume the crash position.

sumsuch said...

Fair, Chris. But the global authorities say we can still do things. And I certainly expect it should be the main thing for the social-democratic movement. Unlike you. You make yourself look silly not addressing the main matter. And you never did seriously address it, the last 3, rather than 5, decades.

We are about the main reality or nothing. The Yank Leftists can do it, why not you? You've become a pessimist talking for reality. Yeah, it's probably over, but we must do our best for my old age, your kids, and your grandkids.

Anonymous said...

Sumsuch, CT is not God. Keep saying your prayers as it may be your only salvation.
Personally, CC is the least of my concerns but I will cry for days if this so-and-so government gets back in.

Anonymous said...

When Pandora opened the box, all evil escaped. But Hope remained.
No matter the state of the planet and humanity you have to hold onto hope.

Anonymous said...

True, but the capital gains was only one element of their income, the other being rents, dividends and interest. These gains are revised on a regular basis. Interesting we only discuss CGT