A capital gains tax could have been introduced by Sir Michael Cullen, lead author of the Tax Working Group's report, when he was finance minister from 1999 to 2008. Photo/NZME
A capital gains tax could have been introduced by Sir Michael Cullen, lead author of the Tax Working Group's report, when he was finance minister from 1999 to 2008. Photo/NZME
TOPICAL TAKES
From everything I've read on capital gains, one figure has stood out. It is economist and Newsroom Pro editor Bernard Hickey's calculation that over the past 20 years one trillion dollars of capital income on houses and land has not been taxed.
If you're a tax-paying wage and salary earner without a property portfolio, you'd be right to be little miffed at this unfairness.
Something should have been done about it years ago. A capital gains tax (CGT) could have been introduced by Sir Michael Cullen, lead author of the Tax Working Group's report, when he was Finance Minister from 1999 to 2008.
The idea was dismissed by Cullen, claiming it would be political suicide.
But that was then and this is now.
The comprehensiveness of the proposed CGT was a surprise. But it makes sense if it gives Labour some options for ruling out one or two and giving them cards to play when dealing with Winston Peters and NZ First. Photo/NZME
The arguments for a tax on capital income haven't changed, but the political possibilities, I think, have.
Introducing a CGT, at least on investment property, isn't necessary political suicide anymore.
Why I think this is true is that in politics it's the direction of the political current that matters most. And in this case, it's the views of a younger generation of voters that are key.
Labour, and the Greens also, are orientating themselves to a growing constituency: propertyless renters. Generation Rent is an important class of voters who obviously want to be listened to.
One of their main concerns is the unfairness of the housing market and the perception that an older generation has a stranglehold on wealth.
For them, a CGT holds fewer fears. They're open to the argument about making the tax system fairer.
Ongoing media coverage, along with family and workplace conversations over the next 12 months will, I believe, see a firming up of support for some form of CGT.
The question for the politicians will be at what rate will capital income be taxed: 33 cents in the dollar as recommended by the Tax Working Group or lower? And on what forms of capital income will the tax apply?
The majority recommendation of the Tax Working Group was for a capital gains tax (CGT) on investment property, the family bach, all business and farm sales, plus income made from investing in the sharemarket, including KiwiSaver.
The comprehensiveness was a surprise. But it makes sense if it gives Labour some options for ruling out one or two, allowing them to appear more moderate to wavering voters. It also gives them cards to play when dealing with Winston Peters and NZ First.
For the moment, Jacinda and Co will watch and see how the debate unfolds.
They might be hoping for more from Simon Bridges on a CGT being a threat to the "Kiwi way of life". That one comment probably did more for the pro-CGT case than anything the Prime Minister could have said.
Labour will campaign at the next election on a CGT on investment property at the very least. To back away from it now would make them look weak and would disgruntle Labour's membership base big time. As well as severely set back the party's attempts to establish an enduring bond with younger voters.
Holding their nerve, with strong backing from the Greens, is Labour's only option. The arguments for a CGT just have to be won. There's a good chance they will be.
