MMP in action: ​Jenée Tibshraeny on the politics of the Government putting a Capital Gains Tax to bed

MMP in action: ​Jenée Tibshraeny on the politics of the Government putting a Capital Gains Tax to bed

New Zealand First is the only political party to emerge from the Capital Gains Tax (CGT) debacle a winner.

Labour lost a battle it never fought and National lost its 2020 election campaign ammunition.

Labour and the Greens now need to actually "do this". The question is whether NZ First's win is big enough for it to let them. 

Here's Jenée Tibshraeny's take on the politics of the day. 

Peters’ power

Prime Minister Jacinda Ardern on Wednesday afternoon said the Coalition Government’s inability to form a consensus on the Tax Working Group’s (TWG) recommendation to implement a broad base CGT meant the policy would be canned.

“Ultimately this is MMP. We are not the only party in government here,” she said.

NZ First Leader Winston Peters – the clear spanner in the works – tried to downplay assertions from media his party was the most powerful in government or that the tail was wagging the dog.

“This is not about your macho game of politics,” he said at a press conference.

“It’s about a very serious issue on which we discerned at the beginning. But we were happy to see the public’s response; that there wasn’t sufficient agreement in the country [to a CGT]…

“Politics and coalitions are difficult to operate. This has been a most successful coalition in an unexpected way and it’s not a matter of being happy, or who won or who lost. What really matters is, have we got the right policy?”

Peters said the complexity of the CGT and lack of international evidence that it solved the problems it set out to address, were behind his opposition to it.

He acknowledged New Zealand’s tax system wasn’t as fair as it could be and voiced his support for tax changes to crack down on multinationals and land bankers.

Shaw: ‘We are a bold government’

While Peters refrained from exuding too much smugness, Green Party Co-Leader James Shaw emerged the neglected younger brother putting on a brave face.

He said he was “disappointed” the Greens had missed its first real shot at implementing a policy it had campaigned on for two decades.

He tried to emphasise the positives: “I completely believe and continue to believe that we need to tax income the same way that we tax income from capital.

“When I said that I was making a call for bold action, and when you look at what this government is doing on climate change, on cleaning up our rivers, on ending homeless – we are a bold government and a transformational government…

“You win some, you lose some…

“It is harder to make something happen than not happen, but the whole point of MMP is that you’ve got coalition governments and they’re a moderating force on each other.”

Labour lost a battle it never fought  

Shaw wouldn’t be drawn on whether the Government’s political management of its tax review contributed to it being a flop on the CGT front.

He avoided criticising his Labour colleagues for doing nothing to sell a CGT and accompanying income tax cuts, or his NZ First colleagues voicing concerns around the impacts on farmers and small businesses.

He also avoided saying whether the vacuum left open by the Government deciding to announce its decision on tax two months after the TWG released its recommendations, was in part to blame for the outcome.

Since in government, Labour Party ministers have avoided voicing their support for a CGT. Instead they’ve passively said they’d consider the TWG’s recommendations, with Ardern repeatedly saying her job was to build “consensus” among the parties in government.

On Wednesday – when it was too late – she was explicit: “I genuinely believe there are inequities in our tax system that a capital gains tax in some form could have helped to resolve. That’s an argument Labour has made as a party since 2011…

“While I have believed in a CGT, it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future.”

It appears Labour’s strategy has been to test the waters and gauge public opinion.

But pawning off responsibility to TWG chair Michael Cullen to come in to bat for a policy that was always going to be a hard sell, was never going to be good enough.

National stripped of ammo

At the start of this piece I said NZ First was the only winner. National is no exception to this statement.

The Government canning a CGT has stripped it of nearly all its ammunition going in to the 2020 election.

Bridges on Wednesday continued down the scaremongering path, saying a vacant land tax, an agricultural tax and a waste tax were still on the table.  

“Prime Minister Jacinda Ardern says she personally still wants a CGT and that our tax system is unfair. New Zealanders simply can’t trust Labour when it comes to tax,” he said.

However the tax-related press releases National sends out on an almost daily basis will carry even less weight with a CGT off the table.  

Bridges also attacked the Government for in its “so called year of delivery” dropping its “flagship tax policy”.

“It’s a humiliating backdown,” he said.

Sure – but a backdown is what he wanted. This rhetoric will only get him so far.   

National now needs to get its own house in order and show it has some other strings to its bow, as it fires shots at the Government.

It can no longer bet on a CGT seeing Labour lose the election.

Let’s actually do this

Ardern said she was a “pragmatic idealist” and there was “disappointment but acceptance” among her colleagues in caucus over the CGT being off the table.

Her challenge now is to prove she has enough pragmatism to get stuff done.

The Government desperately needs to get runs on the scoreboard.

It needs to up the ante reforming the Building Act to streamline the consenting process for prefabs, kick the Housing and Urban Development Authority into gear, prove the Provincial Growth Fund is more than a slush fund, clarify its population policy, more clearly illustrate how the “wellbeing budget” will truly be transformative, detail how it's reducing child poverty and the list goes on.

Ardern has the leadership skills. She now needs to convince the public she has the authority.

As for the Greens, it’s been gazumped by NZ First on tax. And while the Provincial Growth Fund was allocated $3 billion, its Green Investment Fund was given a measly $100 million.

It will keep claiming the ban of new offshore oil and exploration as a win, but the sheen will wear off if MBIE’s advice is correct and a gas shortage sees us burn more coal and pay more for electricity.

Shaw, now more than ever, needs to get NZ First on board its Zero Carbon Bill, which aims to create an independent agency to manage climate change.

The question will be whether NZ First considers its CGT victory big enough for it to sit back and let Labour and the Greens claim a few wins.  

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

44 Comments

Comment Filter

Highlight new comments in the last hr(s).

Shaw, Ardern and co were probably also beaten by the lack of gains in auckland property. Made it easy for Winston to justify holding out. Walloping a market which is already under pressure would not be bright. The renting class would be howling and baying for blood come 2023 election

I asked the PM about the extent to which she believed slowing house price growth affected public opinion on a CGT. You can hear her response at 16.30min in the video in this story: https://www.interest.co.nz/news/99198/prime-minister-says-govt-unable-find-consensus-and-ruling-out-capital-gains-tax-under-her

Great question Jenee. Do you also think by ruling out campaigning on CGT next election, the PM has lost some of the strength of confidence she displayed in the last 2017 election campaign

I agree with Jacinda, a CGT is about fairness. Unfortunately too many New Zealanders’ - including Winston Peters - values aren’t about about morality but rather self interest above all else. A sad comment but unfortunately true.

Very true. All people's selfish desire to pay no tax on their windfall income and have others bear the tax burden instead.

Why did jacinda do a complete about turn and declare Labour will not even campaign on the tax?? That must be a huge blow to other Labours MPs. She put the blame on nzers for her change when in reality it's because she is not sure she can win back power. That is her self interest...

Printer8, Jacidna has decided that it is more important to stay in power than to be committed to fairness. Is it not exactly what Winston has done (i.e. to maintain his power, he decided to torpedo the CGT)? Jacinda does what buys her votes. She will say whatever buys her votes. She will put on whatever mask that will buy her votes. All the talk about fairness, transparency etc, is just to buy votes. No principles, no core values, only one thing: what will buy you votes? Just the same as Nats, Greens and all other professional politicians.

the elephant in the room that nobody is taking about is the property bubble has burst
and if you follow what is happening in Australia right now banks property investors are panicking the younger generation don't realize there sitting in the box seat ,over leverage property investors have nowhere to go they need to cash up but there going to get caught in an negative equity trap so be patient don't rush housing is heading for a hard landing. i hope the government will guarantee no bailouts for landlords and indebted home owner who have used there homes as atms .it is criminal to try to suck in first home buyers at bubble prices to bail out the speculators who willingly got themselves in trouble and ruined there own retirements

13
up

Well now, what happens next? Next year, next election that is. Where the heck would we be if NZF had not scraped in over the threshold last time. Seriously, with all the committees & U turns and general naive dithering and reliance, it would seem quite obviously, on old Labour old hats, that this government is more or less rudderless. They are popular at the moment. So too was Thatcher after the Falklands. So too was Bush junior after 911. And our PM has done wonderfully well, and we should all be proud of her for it, during our own crisis. I had never voted for WP & NZF before but I am so glad that I did last time. But this Labour lot are still in short pants if you ask me, and I foresee the election next year, if WP is not a force, as a choice between a wacky idealistic Labour/Green lot and a pallid and limp National lot. God defend New Zealand!

Typical Winnie. Didn't expect too much from him.

It's more like, Typical Peters; he made the right call, again!

11
up

The straw grasping exercise to portray this shambolic failure as somehow beneficial to the coalition in its contest with the nats because it will starve the blue team of oxygen, requires suspension of a number of beliefs; that the electorate is indifferent to the government's struggles to operate cohesively, that yet another failure of a flagship policy will not create voter doubt about their delivery capability and that amateurish management by Ardern of the CGT process is not a red flag about her personal competence. Erosion of voter confidence is a slow process, Ardern has significant capital but has now blown an unknown amount of it and cannot keep doing so indefinitely. Freeboard on the coalition ship is reducing and will continue to slowly do so, even if the nats keep their policy cards close to the chest for a while yet. There is no hurry for them to show their hand, especially with the likes of Shane Jones capable of delivering more wild cards at any time.

Regardless of the merits (or otherwise) of this decision, what is really fascinating is how the nats will position themselves to have ANY chance of winning the next election. A CGT would have given them plenty of stuff to work with.
Maybe now they will need to be more productive and positive on what THEY can do.
So what do people think? Beyond having a go at Labour, what sort of policies could distinguish National?
For me, a good start would be to chuck out the RMA altogether and start again. A radical rethink. No more tinkering. Revert to a system whereby planning only controls nuisance and noxious environmental effects.

I thought National were just going to rebrand themselves as Labour-Lite before the election to make their positions clear?

Fritz. With environmental issues near the top of most people's list (including this tory), it'd politically high risk to advocate dismantling the RMA, for all its obvious flaws and handbrake effect on the economy. And I'm intrigued at the sudden clamour from the left for the Nats to show their policy hand. Why would you do so when your opposition is peaking and possibly on the way down? Especially if a leadership change was a likelihood. If I were running the party I'd be doing exactly the same - run an attrition campaign, keep my policy powder dry and observe the coalition circus struggling to keep it together for a bit longer yet.

I think it's as much a victory for Labour as NZF.
They get to
- Claim pragmatism
- Take the wind out of Nat's sails
- Not lose votes
- Continue to espouse how great strange MMP marriage are
- Drive a bunch of other things through, while claiming the moderate path

In fact, it might be enough to put L+G > 50% next time around, which surely would be the end of Winfield Peters :)

16
up

That's rubbish, when you campaign on a policy for 3 elections and the PM admits she would still like to see the policy implemented but she concedes she "has not been successful" in implementing said policy, and worse she will not ever implement it under her watch, it is NOT a victory, actually it's what you call a CRUSHING DEFEAT

Yvil, cant agree. It shows intelligence and vote catching.
The decision today has sucked the wind out of the sails of the National Party. I am a blue supporter and us Nats have lost a huge policy advantage with a potential debate on capital tax virtually put to bed.
Now it is time Simon and Paulette were dealt with in similar fashion before more damage is done to the Nats.
Crusher maybe? Or what about Nicki Kaye?
I like Crushers style but will the swinging voters?
The next election I don't think will be close who ever wins it.

Simon did have something to bark at with CGT. What's he going to bark at now?

Kiwibuild is still dying, oil and gas was closed without so much as a working group, the fiscal "hole" seems to be appearing, and getting bigger.

The "Nuclear free" moment of our generation seems to be making giant flights around the world for 1 day visits.

Child poverty and homelessness (All big talking points during the leaders debates) seem to have been quietly swept under the carpet.

Who knows what the May budget will bring, but I doubt middle NZ will benefit.

National have lots to bark at, it's more a question of if they are capable enough to do it.

In his speech above, Peters says expensive housing "is not a result of the (lack of) CGT, it's a matter of supply and demand, which the government is addressing now" Does he mean like building 100'000 affordable homes and curbing immigration??? What a joke

oh so negative kiwi saver is rocking we are debt free plenty of jobs happy days why look to the government make your own success.take personal responsibility for your own future

if there is a greens labour government i dont see why cgt could be brought back since it green party policy

In the case of an epic property crash, this will be a trifling matter than is soon forgotten. In the meantime, we can listen to The Hosk and Ashley Church.

I'm opposed to CGT as proposed but for different reasons than probably 90% of all articles and comments. The devil lies in the detail and no where in the working groups report did they specifically mention leveling the investment playing field. Specifically shares and bonds vs residential investment. In fact they have made investment in shares a bigger mess than is the current situation by exempting some shares but not others. I'm sitting on the fence regarding CGT on the house you live and own. My perception that the mansion effect of CGT is grossly overstated if there is no CGT on the house you own and live in. If no CGT on the home you live in and own and there is the so called mansion effect, it may even force down in the long term the price of mansions!

Got an email from NZF in my inbox on it. Which I thought made perfect sense in terms of what the coalition government had agreed would be done in terms of the tax system:

Current tax policy, rigorously enforced by an Inland Revenue Department properly resourced will by itself
1. Improve the administration of existing tax policy, and
2. Target those multi-nationals not paying their fair share of tax

We also welcome the announcement that the coalition government will be urgently exploring options with the Inland Revenue Commissioner, in concert with central and local government, for taxing vacant land held by land bankers and reviewing the current rules for taxing land speculators.

Tightening these rules was a priority for New Zealand First.

Well done NZF - I always preferred a land tax - one aimed directly at speculation on land is great.

Makes a lot of sense to me plus changes needed to the RMA .

Please not changes to the RMA. Tear it up and start again

Becuase, I expect, she is not going to run for another year. She was very careful with her words - not whilst she is PM.

She's missing the formative years of her daughter's life - time she'll never get back. I expect she's going to step back and let someone else contest the next election.

So Ardern may not campaign on a CGT - but a potential future Labour/Greens coalition may well do. This move was about providing clean water for someone to step up and do just that.

If you're right who would step up to take the PM role?

Could be the worst election yet if you are right.. Both major parties with no competent leadership. National have been floundering, And Ardern has no strong sucessor that I can see, so we'd be left trying to pick which of the two major parties is the least rubbish.. No clearcut winner in that race.

Would be a good time to launch a new party and actually have a chance of breaking the 5% threshold if there is anyone out there that has the charisma and can assemble some decent policies.

Nash?

Andrew Little MkII

polygonalvector .Your observation on Ardern's precise wording is astute. But I think any successor would still see the poison chalice that CGT is and come to the same conclusion. Especially if NZF survives the next election.

Thankfully no CGT .......... THIS HAS NOTHING TO DO WITH FAIRNESS AND ALSO EVERYTHING TO DO WITH FAIRNESS

Why would you want to weaken any sector of our population ?

CGT IS an insidious form of resentment tax that is designed to lower us all to the level of the lowest common denominator , handicap and weaken us financially , and a massive disincentive to savings and investment .

You would not do anything to weaken or handicap the All Blacks or any successful Kiwi sporting team , so why do it to successful farmers and entrepreneurs and people who have taken risks to provide housing rental stock?

Boatman. Ideology, pure and simple, is why. Throw in a delusion that our economy is comparable to other powerful countries that have a CGT and the motivation is complete. One merciful benefit of this exercise is that we will no longer have to put up with the abrasive Cullen hectoring us daily, like some resurrected socialist relic from the last century.

As much as income tax is an insidious form of resentment tax from speculators who aren't skilled enough to earn a high salary, sure it is.

As John Key himself put it, if a person earns $100k of income from a salary they pay tax on it, and it's fair that a person earning $100k of income from selling a house pays tax on it just the same.

To pretend it's about something else is just being a silly-billy. John Key with his $50+ million doesn't envy your portfolio.

"Why would you want to weaken any sector of our population ?"

That's a question better posed to the people ideologically opposed to social welfare, or any kind of redistribution of wealth for that matter. The CGT love or hate it, would have improved social outcomes by increasing liquidity available to entrepreneurs. There's far too much money locked up in housing that would be better spent on startups. If saving a few pennies through housing is more important to you than society, then you'll probably support the National party who represent such pathetic values with zealous fervour.

Why further weaken the already impoverished? Why increase the disparity of wealth, and therefore increase crime? Why blame poverty on the poor with inane nonsense about personal responsibility?

Surely during the Coalition talks after the election the cornerstone policy of a CGT was discussed with Peters.
What would have been his reply back then?
Has he gone back on an agreement?

You highlight the shambolic management of the whole process by Ardern. In the real world a board would censure or fire a CEO who failed to get her ducks lined up before launching a high risk venture such as this.

It was clear, even to me, that any CGT we might have gone with would be very difficult to manage and understand. I think we all instinctively know that the best taxes are all encompassing, easy to apply and cover a wide base at the lowest rate possible. Ta da - financial transactions tax

Ah yes, the oft-mooted, definitely-inflationary transaction tax.

I always thought that Labour putting their neck on the line over a CGT was a mistake and never going to work for them. It would have made more sense to break down CGT into a series of options in a referendum held before the election and then set out their proposed changes with the support of a resonably large concensus.

Jacinda is just a nice smiling face , probably like Sir John Key.
I think Jacinda has won the election due to Mosk attack , don't get wrong it shouldn't of happen but that's all people can see as there are no policies that seem to be going past the post lately and that's being missed
The only thing that it will de rail the govt is a global crisis .

x