As often as they say "let me be clear", politicians from both major parties this election are being anything but clear with voters. In a lolly scramble election, we deserve better

The campaign is getting down to the business end. Of all the previous general elections I recall, 2017 will go down as the biggest lolly scramble election. Every day brings a new multi-million dollar promise from one side or another.

It's hard for Bill English - he has been there for three terms. The accumulation of niggles and annoyances over that nine year period are a death by a thousand cuts to a governing party. People are tired of it and bored with it.

While Bill English’s claim that he has run the economy well is accepted – even Jacinda Ardern does not dispute that – running the economy well is not of itself a vote winner. Indeed, the public will expect any government to run the economy well. To win on this argument, Bill English has to demonstrate that a Labour-led government would let the quality of economic management slip.

Stephen Joyce’s “$11.7 billion hole” attempt to make that point turned out to be so over-egged that its credibility was undermined. It ended up haunting rather than helping. On a campaign one has to make their points so their credibility is unquestioned.

Why will bad economic management frighten people? One example is in the housing market. There are a lot of people who have purchased very high priced houses over the boom and paid for them with equally high mortgages. They will not want to see policies that drive the Reserve Bank to raise interest rates or cause house prices to fall.

Unclear commitments too should be a turn-off voters. While frequently Jacinda Ardern and Grant Robertson say “let me be clear ……..”, so often they are putting a critical policy issue to a working party/expert group for a post-election decision. The answer to the “are you going to introduce a capital gains tax” is “let me be clear – it depends on whether or not it is recommended by the working party”. “But” the statement goes on “it will not apply to the family home”.

I should add this disclaimer. My politics are well known – I was a National Minister (including being a Revenue Minister) – but unlike my party, I personally have long supported a capital gains tax. So I don’t say this because I am opposed to the policy. I do not think it the optimum tax policy for this class of income – the assets tax as proposed by Gareth Morgan and the Opportunities Party is much fairer and have much more profound redistributive benefits. Certainly it will not solve the housing price problem.

Our very indefinite Income Tax Act already has sections that apply income tax rules to capital gains, but they apply to capital profits where the taxpayer intended to make a capital profit. It is all to easy for the taxpayer to avoid the tax by claiming that they did not intend to make the profit so that income is therefore non-taxable. The Act gets even more complicated – land developer capital profits are covered by specific sections and there is of recent times the ‘bright line’ test that says if you sell it within a defined period its taxable end of story (National – two years/Labour – five years).

Their past experience has made Labour very gun-shy on capital gains tax – I am far from convinced that it should. Many with tax expertise support the idea. Andrew Little, arguing that a promised CGT had helped lose Labour the past two elections, had taken this potential attack card against Labour off the table by promising too set up the working party as Jacinda Ardern has done, but apply the new policies only after seeking a mandate next election.

Ardern has already limited the tax’s reach. Not applying a capital gains tax to the family home blatantly favours the rich. Example: Joe Bloggs from some low income suburb bought a second house for his daughter five years ago which he no longer needs as she has shifted away. Under the ‘family home is exempt’ policy, that second home will be subject to tax. The very expensive family home in Remuera is sold and makes a much larger capital gain but that is exempt.

It would be better to know the details before the election. Better for the tax policy to make sense intellectually and better for democracy.

Comments (3)

by barry on September 12, 2017
barry

The problem with the CGT is not the tax, it is the detail.  Last time Labour gave a lot of detail so there was a lot for National to criticise.  In reality the actual tax would be devised with a lot of resources that are not available to the opposition.

In this case the Labour party has not had time to prepare a detailed plan and if they said they were going to introduce a CGT then people would (rightly) want to know what it entailed.

So the only way to win is to keep it off the table for 3 years (or lie like National did about GST 9 years ago).

by Rich on September 13, 2017
Rich

In the UK, CGT applies to a main home where the section is over 0.5 hectares (https://www.gov.uk/tax-sell-home). A million dollar tax free price limit would be an alternative.

 

by Katharine Moody on September 14, 2017
Katharine Moody

Agree with all the sentiment, except this:

The accumulation of niggles and annoyances over that nine year period

The problems we face that have not been adequately addressed (climate change, housing affordability, poverty and homelessness, high suicide rates/under-funded mental heath, under-funded classrooms, burgeoning student debt, dismal productivity, over-crowded houses/over-crowded roads, degraded waterways, social housing waiting lists and so on) are much more than "niggles and annoyances'.  

The very fabric of our once egalitarian society has changed beyond recognition. New Zealand is better than this. But we first have to admit how bad it really is. 

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