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.