The total capitulation of the Government on a Capital Gains Tax has numerous aspects to it that are of interest. Let’s look at them in turn:
Total Victory for opponents
While it was unlikely that the Government was going to pass the TWG’s CGT in its entirety, it was even more unlikely that they would capitulate entirely and do nothing. When I discussed this with Taxpayers’ Union staff a few days ago, we didn’t even consider the possibility of total victory. At the very very minimum we expected an extension of the bright line test on investment properties.
Very feasible also was a CGT with a lower rate, current assets grandfathered in and not applying to businesses. That would have met many of the objections.
The fact they couldn’t even get agreement on extending the bright line test for investment properties is embarrassing.
Andrew Little ditched Labour’s 2011 and 2014 policy for a CGT. Jacinda Ardern’s first act as Labour Leader was a Captain’s Call to put it back on the table. Doing so pushed them down in the polls and robbed them of any chance of a clear left Government of them and the Greens. If she had not made her Captain’s Call they may well have ended up ahead of National at the election. As the backlash grew, she devised a compromise of no CGT in the first term and have it considered by a Tax Working Group.
It was Labour’s decision, not Winston’s.
The assertion that the announcement this week is all due to NZ First is overly simplistic. The reality is Labour choose not to proceed. How do we know this? Simple. Ardern’s announcement that Labour won’t implement a CGT ever ever ever while she is leader.
If this was simply about NZ First, then Ardern would have said we don’t have the numbers in this Parliament for it, but we believe this is important and we’ll try again when we do get the numbers. This is what National said when they didn’t get the numbers for RMA reform. They didn’t say they’ll promise to never ever try again.
A deal could have been done with Winston
If Labour really wanted to get the numbers to pass it this Parliament, then of course a deal could be struck for some form of a CGT. This is what politics is about.
Look at the oil and gas ban decision. That went against NZ First’s interests just as much as a CGT would. NZ First backed it because they did a deal in exchange for their waka jumping law. Labour could have offered NZ First some other wins if they had wanted to.
The other reason why NZ First were open to a deal, is they didn’t rule out a CGT in the coalition agreement. They choose not to, which indicates that they could be persuaded in return for some policy gains elsewhere.
A great outcome for opponents of a CGT. It is basically dead for decades to come. Thank you Jacinda.