John Armstrong: Goff tax has caught National napping

Phil Goff. Photo / Dean Purcell

Chalk this one up as something of a triumph for Phil Goff. So far, at least.

You can question the merits of a capital gains tax. You can question whether Labour's promotion of such a tax will turn out to be the game-changer the party is so desperately praying it will be.

What is indisputable is that in the 10 days or so since it became apparent that a capital gains tax would be an important component of Labour's election manifesto,

Goff has for the first time - and at the right time - tactically outmanoeuvred John Key and National.

It is hard to envisage how Goff could have handled the very difficult politics that inevitably flow from promoting such a complex and contentious tax any better than he has done.

National thought Labour had effectively committed political suicide when it first got wind of the Opposition party's intentions.

National thought a capital gains tax would see off Labour for good as far as November's election was concerned. National saw its task as hastening Labour's demise. The public's antipathy to new taxes - especially this sort - would do the rest.

Things have not worked out in quite that fashion. National has found it extremely difficult to land a substantial hit on Labour. It has found it difficult because Labour has anticipated where National's attacks would be directed and moved to smother them in advance.

Take Thursday's official launch of the new tax at Wellington's Westpac Trust stadium. For starters, the afternoon scheduling of the launch left National with little time to analyse the detail of Labour's package before the television news bulletins went to air.

While Goff was heading for Auckland to push Labour's cause on Campbell Live, National was frantically scrutinising a table of numbers Labour had compiled to show how its package would allow New Zealanders to keep state enterprises in public ownership while still paying down public debt.

What the table actually showed was how a capital gains tax would allow Labour to introduce a tax-free zone on the first $5000 of income, remove GST on fresh fruit and vegetables and lift New Zealand's abysmally low spending on research and development.

The table did not address how Labour would fill what National calls the "$12 billion hole" in Labour's version of the Government accounts caused by Labour's spending plans and its intention not to sell shares in state assets.

In May's Budget, National cunningly "booked" the money from its planned post-election sell-off of such shares even though the money has yet to be realised.

Some of that "money" has been set aside for $900 million in capital spending.

Labour has exacted revenge for this trickery by simply ignoring it.

Labour can still credibly argue it will get Government books back into surplus at the same time as National as the measure of that is the Budget's operating balance, which does not include the proceeds from asset sales.

Labour has also deliberately avoided outlining its spending plans until closer to the election.

There were no figures covering that bar the already announced lift in the budget for research and development.

Labour's strategy is to provide just enough data to persuade people it is fiscally credible, and avoid revealing anything that might be less than robust and therefore open to attack from National.

However, introducing a new tax leaves Labour vulnerable to Bill English's charge that it is still the "tax and spend" party.

Labour's answer to this will be to show that when it comes to spending it is now a tightwad. Labour knows that is the mood of the electorate. It is not going to buck it.

For its part, National is handicapped in attacking a capital gains tax because the real reason for its opposition is not particularly edifying.

Its members and supporters would simply skin Key and English alive if they introduced one.

National has had to fall back on weaker arguments, such as saying such a tax will raise little revenue in the short term, that it would be bad for the economic recovery and discourage investment; and that measures are already in place to penalise those indulging in property speculation.

In contrast, Goff has claimed the high ground by arguing a capital gains tax is justified economically and on the grounds of fairness.

National concedes that Labour's promotion of the tax was always going to get the tick of approval from some economists, think tanks and academics.

National did not count on that endorsement being so strong. The endorsement has come from across the political spectrum, thereby making Goff's push for the tax look less political and motivated more by what might be in the national interest.

National has meanwhile comforted itself that any Goff-driven consensus on the introduction of a capital gains tax does not extend beyond the Beltway and ordinary voters are pathologically averse to any new tax.

That may be so. But the Beltway backing Labour has got for such a measure must make it slightly easier to sell to suspicious voters.

Labour has also done its best to make its version as palatable as possible by not touching personal assets other than land or buildings, or "collectibles" such as antiques and jewellery.

A lot depends on voters' willingness to work out whether they will ever have to pay such a tax. Likewise, Labour has to hammer home the fact that most will be better off under its plan.

Labour's own polling shows disapproval of a capital gains tax running at around 43 per cent against 31 per cent approval, however.

At best, Labour may get grudging acceptance of the need for such a tax. That does not automatically lead to a vote-switch to Labour.

What the policy has definitely done is revitalise Goff. He is suddenly making the running.

Labour might not yet win the war over a capital gains tax. Goff sure as heck has won the early battles. The question is whether he can keep doing so.