Labour\u2019s work currently consists of adumbrating what\u2019s in and what\u2019s out. Tax speculators on the profit from a mouldy rental? Absolutely. But what about a pedigree dog in a trust \u2013 complete with deductible vet bills? The line between policy and parody is perilously thin.<\/p>\n
The pressure to save this version of the tax from the fate that swamped Labour\u2019s last two attempts has narrowed minds on a narrow tax \u2013 again, it must be stressed, this is one option of several.<\/p>\n
It has drawn on a group of politically aligned tax experts to help design the tax.<\/p>\n
It\u2019s less formal than a new Cullen Tax Working Group (which is what National MPs describe it as \u2013 they\u2019ve got wind of the group but not its members). In fact, it\u2019s better described as a collection of Labour-aligned experts lending their expertise to the party.<\/p>\n
A non-exhaustive list of members includes Andrea Black, who advised Grant Robertson and the Cullen Tax Working Group, and was a former principal adviser on tax at Treasury and Inland Revenue (IRD), Toby Moore, also an adviser to Robertson and member of Labour\u2019s Policy Council<\/a>, and Terry Baucher, a tax consultant<\/a> and author of a book Tax and Fairness co-authored with Labour\u2019s revenue spokeswoman, Deborah Russell.<\/p>\n Beyond them, Labour tapped at least two outsiders for discreet counsel.<\/p>\n Enter Geof Nightingale and Robin Oliver, both Cullen working group alumni, who were asked to give some advice to the party on a couple of options.<\/p>\n Oliver, though he is close with finance spokeswoman Barbara Edmonds, is perhaps the most curious recruit. The ex-IRD deputy commissioner of policy scorned some of Labour\u2019s tax ideas last term (including the interest deductibility policy Labour has spent so much time defending this term<\/a>).<\/p>\n Oliver dissented from the majority on the Cullen Tax Working Group, and his minority report is said to be where we should look for clues on what Labour is proposing \u2013 although again, it must be stressed, nothing has yet been decided.<\/p>\n That minority report agreed there was a \u201cstrong case\u201d for taxing capital gains on residential property, but \u201conly to the extent that benefits clearly exceed costs\u201d.<\/p>\n The rest of the opinion was sceptical of extending this approach to capital gains wider to include things like companies and other assets.<\/p>\n Cullen himself, while voting with the majority on the group, later confessed to coming around to Oliver\u2019s view, his Damascene conversion recorded in his memoir and very recently republished in a presentation on a CGT co-authored by none other than Nightingale and Joanne Hodge<\/a>, who herself co-authored the tax working group minority report with Oliver.<\/p>\n \u201cI voted with the majority,\u201d Cullen wrote, \u201cbut came to view the essential change as a CGT on land.\u201d<\/p>\n So if Labour takes the trust of Oliver\u2019s critique as the germ of the tax, what would it mean in practice?<\/p>\n It would probably look like a maximalist bright-line test: family homes exempt, farms also likely spared, but residential investment property and the family bach are all in.<\/p>\n Tax would be levied at realisation, not the once-favoured \u201cdeemed return\u201d method, which is a wee bit too much like a wealth tax on people who aren\u2019t always that wealthy.<\/p>\n Such a narrow, property-focused CGT will dismay Labour\u2019s left. But the arithmetic of MMP is ruthless: keeping the defectors from National matters more than indulging purists.<\/p>\n Expect the announcement to be pretty clear on any loose ends: no wealth tax, no more GST tinkering, and likely no return to the ban on interest deductions for landlords. One can have a CGT or the ban, but not both \u2013 not without breaking the basic grammar of taxation.<\/p>\n Expect Labour to bury the tax inside a suite of announcements setting out the party\u2019s vision for a more productive economy. That works for the party, which knows that the public\u2019s enthusiasm for taxation isn\u2019t well aligned with that of party members.<\/p>\n Those members cannot be ignored \u2013 and nor can Labour\u2019s progressive partners, the Greens and Te P\u0101ti M\u0101ori, who have to find some accommodation with this new tax.<\/p>\n There\u2019s a battle brewing over how progressive it\u2019s possible to be. The darkest-before-the-dawn theory looks at the way the progressive Savage Government emerged from the ashes of the Depression \u2013 perhaps now is a time for similar change.<\/p>\n The Labour right is sceptical, wondering whether some in the party have simply swallowed too much opposition PR. Things are bad, but not Depression bad, and they\u2019ll probably improve by the election.<\/p>\n Hipkins\u2019 circle remember well Bill Shorten\u2019s \u201cunlosable\u201d 2019 election in Australia \u2013 an election lost to hubris after party progressives saddled Labor\u2019s slate with a wish-list of progressive policy.<\/p>\n Hipkins faces the same trap. Momentum has swung from the coalition. But nothing drains momentum faster than tax detail, and nothing could bring the coalition together (quite the feat) like the opportunity to shoot down a new tax.<\/p>\n The wealth tax v CGT debate has been well litigated. CGTs are globally orthodox; wealth taxes are not. Wealth taxes do raise a lot of revenue by taxing hardly anyone, CGTs<\/a> raise less revenue but tax rather more people. <\/p>\n If Labour embraces the minimalist model sketched out in the minority report, it can argue \u2013 plausibly \u2013that tax will shift away from housing speculation towards productive business. But that case is harder to make while fending off questions about dogs and artwork.<\/p>\n Trade-offs abound. Political saleability comes at a fiscal cost. Oliver\u2019s paper reckoned his limited CGT would raise barely 39% of the broad CGT\u2019s take \u2013 around $2.4 billion after 10 years. Not trivial, but still less in 10 years than Labour\u2019s 2023 wealth tax would have netted in one.<\/a> At worst, it could make Labour look unserious about tackling the alleged austerity it\u2019s spent the parliamentary term prosecuting.<\/p>\n Some CGT advocates don\u2019t actually mind the revenue shortfall. The argument they want to have is about productivity and the economy, not fleecing people for cash. A debate about revenue gives National the opportunity to argue Labour only needs the tax to fund its own profligacy \u2013 an argument it could furnish with examples of some undependable spending from the last Government.<\/p>\n Those hoping the tax will fund Labour\u2019s promises, particularly the pricey pay-equity reversal<\/a>, will be disappointed. The answer to that question will probably need to wait until the fiscal plan, published after Treasury\u2019s prefu (pre-election economic and fiscal update) just weeks before the election. A clue here: Labour may repeat the trick it used in 2017, axing or tweaking expensive National policies (like the $6b Investment Boost) to free up cash.<\/p>\n It\u2019s a mistake to think the lion\u2019s share of Labour\u2019s spending commitments will be paid for by new taxes \u2013 they probably won\u2019t be.<\/p>\n Can they do it? Well, National loves to kill a tax \u2013 and it\u2019s very, very good at that. Labour needs to be on top of the detail in a way this team often isn\u2019t.<\/p>\n Hipkins bungled a question on the tax take in 2023, thinking it went down under Labour rather than up<\/a>, Edmonds in 2024 circulated a chart that claimed debt had plunged when it had soared<\/a>, and this week cracked open the door to raising the Reserve Bank\u2019s inflation target<\/a> \u2013 until Hipkins slammed it shut.<\/a><\/p>\n Yet this week, Edmonds finally managed to score some wins in the House. Dropping the scripted Question Time routine that has failed her for more than a year, Edmonds turned prosecutor in the chamber and for two days grilled Nicola Willis over the Reserve Bank scandal.<\/p>\n A lawyer by trade, Edmonds handled herself well and bested Willis both days.<\/p>\n They weren\u2019t the only moments Edmonds showed her worth this week.<\/p>\n A staffer in the Ardern Government, Edmonds worked in the office of the Revenue Minister with senior Labour hand Kathryn Street.<\/p>\n The joke around the Beehive was that Edmonds\u2019 and Street\u2019s job was half policy and half keeping the minister out of trouble.<\/p>\n The minister was Stuart Nash, and this week the entire country saw the value of Edmonds\u2019 efforts. <\/p>\n Pity you can\u2019t tax it.<\/p>\n","protected":false},"excerpt":{"rendered":"But Labour\u2019s microscopic target is about to get ever so slightly bigger. \u201cSomething must change\u201d is about to…\n","protected":false},"author":2,"featured_media":20440,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[9344,806,1288,21438,3278,13988,78,6721,12814,21437,111,43,139,69,90,4762,7254,7496,113],"class_list":["post-20439","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-zealand","tag-announcement","tag-as","tag-capital","tag-coughlan","tag-facts","tag-gains","tag-in","tag-labour","tag-looms","tag-narrows","tag-new-zealand","tag-news","tag-newzealand","tag-nz","tag-on","tag-party","tag-policy","tag-tax","tag-thomas"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/20439","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=20439"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/20439\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/20440"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=20439"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=20439"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=20439"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Sir Michael Cullen discussing the findings of the tax working group. Photo \/ Mark Mitchell<\/p>\n
After a slow start, Barbara Edmonds came into her own this week. Photo \/ Marty Melville<\/p>\n