Missteps over the Capital Gains tax apart, Jacinda Ardern ran an energetic and near flawless campaign and yet Labour still lost heavily.
It is as certain as death, that tax will be front and centre of the next election and voters will be easily scaremongered again, if Labour fails to address tax.
How a major party can spend nine years in opposition and still not have detailed its tax policy, bewilders me. It raises serious questions about the competence of Finance Spokesman Grant Robertson and other senior members of the leadership team.
I understand it was Grant’s bright idea to campaign on seeking a blank cheque for tax policy and Jacinda just went along with it.
National was easily able to scare various sectors of the electorate by raising the prospect of a capital gains tax, inheritance tax, land tax, gift duties, or new higher income tax brackets.
Each of these taxes is perfectly worthy of consideration. But, assuming NZ First supports National to form a government, if Labour wants to stop an action-replay of this election, it must set up its own tax working group early next year and have its position nailed down by the end of 2018. (You can place your bet now that any government dependent on Winston Peter is not going to last until 2020).
Most importantly, whatever, the tax working group decides, Labour must put a categoric cap on how much tax, as a percentage of GDP, it intends to raise, to pre-empt tax-and-spend attacks.
If the working group recommends a CGT, as it most likely will and should, then Labour must give assurance it will maintain the cap irrespective of how much the CGT raises. So if CGT pulls in $500m of revenue by 2025, then income taxes, or the rate of GST, will be commensurately reduced.
This is an excellent idea, and in fact what the Taxpayers’ Union asked Jacinda to commit to. Grant has said this is “quite likely”.
I support broadening the tax base, but not if it increases the total amount of tax being collected by households and businesses. Make it fiscally neutral and you’d have far far far less opposition.
And Labour has already committed to keeping spending to under 30% of GDP. So just commit to keeping taxation to say 32% of GDP and you leave room for debt repayment and contributing to the NZ Super Fund.
Using the commitment not to go beyond the set ratio will allow Labour to allay attacks that it will tax anything that moves.
Far more important, however, is the need for Labour to win the ideological debate – that taxes help to build societies. This debate has to be tackled front-on and from the day parliament reconvenes. It cannot be left to an election campaign, where there are inevitable distractions.
Until Labour wins hearts and minds that taxes are the mechanism for creating a fairer, caring and better working society, it will always be on the back foot.
Few people object to paying some tax. We all see the benefits of it. But that is not the same as wanting to pay more and more tax over time. We prefer extra tax revenue to be generated due to a growing economy – not by increasing taxes on those growing it.