Claire Trevett: Will housing be PM Jacinda Ardern’s political capital gains tax risk?


Finance Minister Grant Robertson’s “I was too definitive” is a noble addition to the collection of contortions a politicians goes through to try to escape being accused of a back-flip.

Robertson came out with this phrase after Labour announced it was extending the bright-line test for taxes on property sales from five years to 10 years – something Robertson had categorically ruled out in a Newstalk ZB interview last year.

“I was too definitive,” Robertson said of that interview this week, as Prime Minister Jacinda Ardern nodded her agreement at his reckless over-definitiveness next to him.

Ardern may well nod.

It has long been Labour’s belief that a capital gains tax was one of the best tools to quash property speculation.

The trouble is Ardern ruled it out for political reasons in 2019. After failing to get NZ First over the line on even a watered-down version of Labour’s hopes, she simply decided it was not worth the potential political cost.

Ardern stated then, very definitively, that Labour would not pursue a capital gains tax on her watch.

So this week, it was either Robertson or Ardern who would have to cop to being “too definitive”.

It was always going to be Robertson who swallowed that particular fly.

As pressure mounted on the Government to try to stabilise the property market, its options were to introduce a comprehensive capital gains tax – or do pretty much the same job by extending the capital gains tax by another name (the bright-line test).

Ardern was determined to prove she had not broken her own promise. She went to great lengths to try to prove that a tax on capital gains was not the same thing as a capital gains tax – by using previous statements by National MPs, when that test was set at two years.

Labour also pushed through the pot-calling-the-kettle-black defence – pointing to former PM Sir John Key’s promise not to raise GST in 2008, only to raise GST from 12.5 per cent to 15 per cent in 2010.

There are inevitable accusations of “broken promises” when MPs u-turn on previous positions.

But promises are given and taken in the context of the times they are made in – quite why prime ministers insist on making promises that will last unto eternity is a mystery.

The promises do not take account of things like, oh, a global pandemic.

People accept broken promises if they are justifiable, and the politicians can convince them of that. Key’s approach was to ease people into them, by raising them as a possibility before they became a reality. Labour’s approach was to simply announce it.

Perhaps ironically, back in 2011 it was Grant Robertson himself who compiled a list of National’s “broken promises” (as he called them back then) and beat National over the head with it – ranging from the brain drain to cycle ways and GST.

National won two more elections after that and came very close to winning a third.

When Key broke the GST promise, it was in the context of the global financial crisis.

He faced a dilemma of which promise to break: would he fail to deliver promised tax cuts, or would he break his GST promise.

He went for the latter – selling it as the “tax switch” under which the revenue from the GST would pay for the income tax cuts.

People accepted it, because of the global financial crisis.

Ardern too faced a dilemma: to break her promise to do something about the housing “crisis”, or break her promise about some of the measures she believed were needed to do that.

She too will be hoping people will also accept that the volatility of Covid-19 justifies the need for the housing measures.

Ardern is often accused of being too careful with her own political capital, and unwilling to risk it to push ahead with potentially unpopular moves.

The fear of that increased after the last election, when Ardern acknowledged her majority was due to people who would normally vote for the National Party giving their ticks to Labour instead.

Ardern’s biggest mistake would be in not recognising why that was: it was to ensure there was stability and certainty as the country grappled with Covid-19 and its effects in the term ahead, rather than an endorsement of Labour’s other policies.

But Ardern can hardly simply abandon those policies for the sake of holding onto those votes. She stands accused of timidity on housing and poverty in particular.

The cries of disbelief from property investors and landlords in response to this week’s announcement will have been music to the ears of some Labour supporters – proof Ardern is willing to risk a tax on her political capital.

The actual rate of that tax is now in the balance.

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