John Armstrong: Goff goes for broke with huge gamble

Phil Goff. Photo / Sarah Ivey

Make my day. That was the invitation from John Key to Labour yesterday as speculation intensified that Phil Goff planned to make the introduction of a capital gains tax, a land tax or a financial transactions tax a core feature of Labour's election policy.

It is an invitation that Labour - while intending to say nothing until the big day - is going to accept when it includes a capital gains tax in its economic package to be officially released next week.

In normal circumstances, the major Opposition party would hardly wish to find itself promoting a new tax during an election campaign.

But Labour has no choice. It had to find a fresh source of revenue to remain fiscally credible.

Above all, the party needed to be bold to shift the seemingly immovable polls. Being National-lite was a one-way ticket to defeat.

Labour is no longer going to die wondering "what if". Labour is going for broke. But pushing a tax which has traditionally been similarly viewed as a one-way ticket to oblivion is a gamble of massive proportions.

It may move the polls. Whether that is in the right direction is the obvious moot point.

An awful lot hangs on how Labour pitches a capital gains tax. You can guarantee there will be sufficient exemptions to ensure the great majority of taxpayers do not end up paying it.

The detail will come next week. Labour's target is top-end income-earners, however. It will argue fairness. It will argue that in tough times the well-off are not paying their fair share.

National will argue Labour is exploiting the politics of envy. National will suggest this is the thin end of a very big wedge. Take GST. Initially the rate was 10 per cent.

It has since climbed to 15 per cent. Phil Goff has a difficult task assuring people that similar "creep" will not apply to a capital gains tax over time.

National believes that Labour will successfully sell such a tax to an "academic" audience which believes New Zealand is very much the exception in not having a capital gains tax.

Out in Voterland, however, the best that Labour can hope for is that people will grudgingly accept the need for such a tax. No one will be doing cartwheels at the prospect.

But Goff had few options. A land tax would have gone down badly with the elderly who had large properties. Such a tax also depresses land values on its introduction.

A financial transactions tax - another alternative - would normally be introduced as a replacement for GST - not an addition.

Much depends on how the debate about a capital gains tax develops over the days before the official release tomorrow week.

Labour's stance yesterday was to confirm nothing and rule nothing in or out. National will fill the vacuum.

The risk to Labour is that John Key manages to dictate the terms of the debate ahead of the policy launch.