The horse lay still at the edge of the field, its once powerful limbs sprawled awkwardly. As the sun beat down upon its matted coat, the air was thick with the scent of decay. The only sounds were the buzz and the dull thud of a riding crop slamming against haunch.
This is the eternal fate of a capital gains tax for New Zealand. When no other horse is available, whoever the leader of the Labour Party is at the time is obliged to take out a whip with the word “conversation” inscribed on the handle. The implement is then used to administer a merciless flogging to the carcass of the expired animal.
“Get up,” the leader hisses at the lifeless creature, blinking back tears, “get up!”
Time and time again, Labour leaders have returned to the dead CGT horse. Time and time again, the failure of the horse to rise from the dead to be ridden to victory is blamed on previous beatings just not being long or hard enough. For the “tax is love” crowd, the horse is always just a few more strokes away from getting back on its feet.
Of course, we do have a pseudo-CGT in New Zealand. It applies to residential property speculation. National is resetting that tax so it only applies to properties bought and sold within two years. No doubt when Labour gets in next it will be extended out to five or ten years again.
That’s it, though. We are very unlikely to ever see a more “comprehensive” capital gains tax. And no amount of beating the dead horse is going to change that.
A finance minister to Louis XIV once said that “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hiss.”
When it comes to a more compressive CGT, the additional feathers are just not worth the additional hisses. What little money the tax would raise has to be balanced by the political blowback from powerful middle class voting blocs.
It must be admitted that there has from time to time been polling showing support for such taxes in the abstract. But this gives a misleading impression of the political reality and people relying on such polls often show that they do not know very much about politics. The overall balance of support or opposition is a consideration – but so is the placement and intensity of that support or opposition.
Let’s say that 70 pc of people supported a CGT, and 30 pc were opposed. It might seem like an electoral winner. But what if that 30 pc opposed the policy much more intensely than the 70 pc who supported it? What if that 30 pc included a greater concentration of swing voters than the 70% who were mostly already decided?
In the era of MMP, where every election is close, minority opposition to a proposal will be fatal if that opposition is concentrated in the right areas. And this, more than anything, explains why better politicians than Chris Hipkins have tried and failed to have the CGT conversation. That is the reason New Zealand does not have a comprehensive capital gains tax.
Other countries have capital gains taxes but it does not follow that the same path can be imposed on New Zealand voters. In most places, a CGT is a long-established component of the tax system. In these cases it is already the default and an accepted, if not always cherished, component of their financial landscape.
New Zealanders, on the other hand, are accustomed to not having a CGT. The absence of a capital gains tax is the norm for us and not an anomaly. We are not habituated to it and so those to be subjected can be counted on to oppose it all the more fiercely.
In his heart, Hipkins almost certainly knows this. He knows the horse won’t get up. So why is he still out there clutching the riding crop so hard his fingers are bleeding?
I suspect it is because David Parker wants him to do it. Also Kieran McAnulty perhaps. And because he didn’t try flogging capital gains taxes and prime minister, his opponents are convinced it’s one of the reasons his government failed.
It doesn’t matter that voters abandoned Labour for parties that were also opposed to a CGT. Labour isn’t in that headspace yet. They’re convinced they need a zombie horse and Hipkins probably doesn’t have the clout to tell them otherwise.
The sun will again set on the lifeless form of the CGT lying in the field. Some beasts are beyond the reach of revival. And by the time Labour is ready for power again, and a more electable horse comes along, these latest conversations on tax reform will be no more than an echo in the wind.
Because the dead horse of CGT will never rise again, no matter how fiercely the Labour Party beats it.
The trouble with Hipkins on tax is, almost no-one voted for National because of National's pretty obviously silly tax cuts. The election was just a big 'nope' to Hipkins and his government.
The mayor of Auckland might actually be a better pick of winners.
He's suggested
1. Central government to pay the local authorities rates on crown land such as schools, hospitals, prisons, military camps, airports, Brown estimated he could get 36M per year for that;
2. Return the GST on rates to the local authorities;
However, for the latter I would suggest that it could be simpler just to exempt rates from GST (unless it's a payment for specific services, such as rubbish or recycling bins) and then let the local authorities increase rates up to the previous level, according to their own needs for local infrastructure and services,
Look, the fact is that all city and district councils are in need of more funds for water pipes et c., et c.,
??