Copyright thespinoff
Labour’s capital gains tax is pitched as simple and sellable – but its limited scope is catching flack from critics, writes Catherine McGregor in today’s extract from The Bulletin. To receive The Bulletin in full each weekday, sign up here. Divided reaction to Labour’s cautious capital gains tax Labour’s long-awaited capital gains tax (CGT) announcement on Tuesday morning, accelerated after a leak to RNZ over the long weekend, drew a predictably wide range of reactions. Finance minister Nicola Willis called it a “terrible idea”, warning that it would load costs onto businesses and act as a “handbrake” on the economy. The Greens were equally unimpressed from the opposite direction, dismissing the plan as a “watered-down” response to inequality. Co-leader Chlöe Swarbrick said it failed to fix a system where “the wealthiest pay half the effective tax rate of our nurses, teachers and firefighters”, calling instead for a comprehensive wealth tax and higher corporate levies. Between these poles, chartered accountant John Cuthbertson described Labour’s CGT as a “fairly pragmatic starting base”, while warning that it could take up to a decade to bring in meaningful revenue. University of Otago tax expert Craig Elliffe called it the “cleanest, simplest” version of a CGT – narrow, targeted and easy to implement – but one that “covers less than similar tax regimes overseas”. The Ming vase strategy and the Dua Lipa doctrine For two Spinoff commentators, the policy’s modest scope is emblematic of Labour’s broader approach under Chris Hipkins. Writing this morning, Joel MacManus likens Hipkins’ strategy to “carrying a priceless Ming vase across a marble floor” – an axiom in British politics that refers to politicians playing it safe to avoid giving their opponents opportunity to attack. “It’s telling,” he writes, “that the version of capital gains tax Labour settled on was more about reducing the downside risk than increasing its potential upside.” Lyric Waiwiri-Smith sees the same pattern through a pop-culture lens, invoking the viral “go girl, give us nothing” meme born from an infamously low-energy 2018 live performance by Dua Lipa. After two years of policy timidity, she writes, Labour’s tax announcement felt like more of the same: “You gotta love their lack of energy for landing on a specific side of the political spectrum.” Yet she also strikes a hopeful note: “If ‘go girl, give us nothing’ has taught us anything, it’s that things can only go up from here – if there is hope for Lipa, there could be hope for Chris Hipkins and co, too.” Leak drama overshadows launch Labour’s planned rollout was thrown into chaos after the policy was leaked to RNZ, prompting a hasty early-morning media release confirming the details. Stuff’s Tova O’Brien reports the party president will be asked to quietly question those who voted against the tax – about seven people in total – at a joint October 19 meeting of Labour’s caucus and NZ Council. However, “the leaker seems unlikely to be a member of Labour’s caucus”, given that just two of its MPs were opposed to the CGT option when it came to a vote. Writes O’Brien: “The consensus within Labour is that the culprit wasn’t content with just a CGT on property, they wanted the party to go further to the left and take something broader to the election – something the party political apparatchiks knew wouldn’t be sellable and would lose them the election.” While Chris Hipkins “has ruled out a witch hunt”, he’s made clear that any leaker identified would be expelled. Uncertain effect on housing affordability The policy’s impact on housing is surprisingly murky. In One Roof, economist Tony Alexander says the tax would, in theory, be “positive for housing affordability” as it discourages speculative investment. But in practice, “the price impact will be very hard to spot”, given all the factors that are already pushing prices down. The Post’s Tom Pullar-Strecker (paywalled) cites modelling suggesting the effect could even be modestly inflationary despite more ex-rentals entering the housing market. That’s because rentals are often shared by groups of young people, “each of whom tend to want a home of their own when they buy, increasing pressure on the available housing stock”. The broad consensus is that rents are more likely to rise than fall, while the influence on house prices will be marginal at best.
