If there was any doubt left, we can surely call it now. Time and date. End of. Finito. Perhaps you thought you saw a flickering eyelid or a finger move? You were wrong. Labour has given up on tax reform for the foreseeable future. One of the key remaining left/right battleground issues has been conceded. National has won.
It truth, with hindsight, National won the argument years ago. Labour’s ‘barely there’, ‘nearly nude’ tax policy announced yesterday is really just a continuation of that victory. After much waiting, Grant Robertson laid out a revenue plan that really did nothing to increase government revenue. He promised Labour would create a new top tax rate at 39 cents, for the two percent of New Zealanders earning over $180,000.
To which most New Zealanders said, “how much? I’ll never get close to that!”. Which, of course, was exactly what Robertson wanted them to say. Because it means tax won’t be a stick National can beat them with. Oh no, this lot won’t be lured into a battle on National’s political high ground. They’ll retreat, thank you very much, just as Jacinda Ardern did over capital gains tax last year.
I know, it’s easy to mock. It must be painful for them, because they got into politics to win precisely these arguments. They have more political capital than any Labour leadership before them. The government will have a desperate need to recoup revenue over the coming years and the public is crying out for action on the inequality gap. For a party that bases its credo on fairness and equality, to walk away from the tax reform they and their predecessors fought so hard for, well, it’s hard to fathom.
Presumably they believe the promise of greater tax reform would put a second term at risk or that by a cruel twist of history, the fates have offered Labour its best chance to act at precisely the time when it’s the wrong thing to do. But more than else is looks like Ardern and Robertson are tax trauma victims.
Having seen John Key and Bill English wipe out Helen Clark and Michael Cullen’s 39 percent rate in a single blow and watched Phil Goff, David Shearer, David Cunliffe and Andrew Little all eviscerated by various versions of “show me the money!”, they are now cowered.
Clark and Cullen’s 39 percent rate cut in at $60,000; around $90,000 in today’s money. Labour this time has brought it in at twice that amount. Sure, they hope to say they succeeded where Goff, Shearer, Cunliffe and Little all failed, but it’s the most pyrrhic of victories.
It’s estimated to bring in a measly $550m a year. Robertson said that would go into health, education and covid debt. That’s nonsense. That amount will buy you today a sum total of one week’s worth of wage subsidy. Yep, one week. The government budgeted $50 billion to save the economy this year; half a billion achieves next to nothing in that context.
The good news for Labour is that a look at National’s policies in the past week, suggests that while National has won the tax argument, Labour is winning the wellbeing argument. Labour promised a Matariki holiday without even the hint of a Don Brash-like “race-based” sneer from the Judith Collins’ outfit. What’s more, her policy releases have included $3000 for new babies (albeit taking away universal cash and replacing it with means-tested vouchers), treating meth as a health rather than law and order issue (she even said “we can’t arrest our way out of this”) and more government debt via an Infrastructure Bank. Chris Bishop likes to point out National’s new-found commitment to mass transit in our big cities and this week even called National the “party of electric vehicles”.
The centrists seem to have the upper hand in National at the moment, as they lean into the ‘kindness’ moment, where Labour and its leader has won the public mood to her way of thinking.
All of this creates opportunities for the much-neglected minor parties to differentiate themselves from the increasingly like-minded majors. The Greens, in particular.
Robertson made some remarkable comments after announcing the tax policy. Desperate to not allow Collins to say what she said anyway and was always going to say, he insisted that if Labour wins the election this will be their tax policy. This isn’t a Trojan horse full of bigger and lefter tax policies, which the Greens jump out of as soon as it is wheeled into the city on election day.
“This is the policy that Labour is campaigning on and we will only implement the changes Labour is campaigning on,” he said. Which is odd messaging. On one hand he seems to be stating the MMP reality - we campaign on this and this alone, but we might have to govern a different way. But then he says these are the only tax changes Labour is willing to make.
At face value the latter comments are incredibly brash. Even arrogant. Is he saying the regardless of the election result Labour won’t negotiate on tax? Does he really think that by saying that the Greens will simply walk away from their own firm commitments, should they make it back in, and not even bring tax to the negotiating table? Of course tax will be on the table.
Going by his own words, does this mean Robertson is willing to walk away from government if the Greens or New Zealand First want to negotiate tax after the election, should they get the chance? It’s a dangerous line he’s taking.
This position as a lamb in tax policy but a lion in negotiations over tax policy, may suggest that Labour is genuinely trying to win a majority. It may be reaching for the big, historic ring of being the first party to govern alone under MMP. In truth, however, I suspect this position does the Greens some favours. This tax timidity gives space the Greens can exploit to Labour’s left, arguing they are the only voice for change that has a chance of being in government after this election.
While Ardern gets the leadership kudos and carefully hoovers up the centre ground, the Greens can talk more directly to centre-left voters, saying that if they want progressive policies, Labour won’t deliver. The Greens will surely be hammering this message home at every opportunity for the next five weeks: Labour needs to be reliant on the Greens, if voters want real progressive change; action on inequality, for example.
Because Labour seems determined to take tools out of its toolbox when it comes to tackling poverty. The party has repeatedly made it one of its top priorities, yet if it won’t use taxes to address it, what other methods have they got up their sleeves?
Assuming Ardern as Child Poverty Reduction Minister feels obliged to actually act on the issue - and she has always been genuinely concerned about it - then what tools will she employ?
When she gave up on capital gains tax last year, she said, “We can find, and will find greater ways to achieve fairness in our system… There's a range of options but I need to go and develop that plan for 2020”.
Just what those options will be is one of the great policy questions left in this campaign.