Vance on Labour’s CGT obsession

Andrea Vance writes:

The polls might show support for the broad idea of taxing excess profits and capital gains, but when you dig into detail on asset classes, like shares and property, that diminishes.

It’s an aspiration paradox: people vote for the wealth they want rather than the lifestyle they have.

Or put simply: voters resent new taxes. Presented with a choice only a year ago, the electorate plumped for tax cuts.

This is correct. A CGT always falls down on the details as people realise it will affect their lifestyle block, their bach, their shares etc.

In theory a comprehensive CGT (no exemptions) which was offset by significant income tax cuts would be economically desirable. But politically a comprehensive CGT will never fly, and one with exemptions just leads to rorting.

And so, Labour has been sucked back into the capital gains tax doom loop. It’s an issue it has failed to resolve over four successive elections.

Next time around, whatever form it takes, the policy will be even harder to sell.

First, Hipkins will have to find the political courage that deserted him last year — and the two leaders before him.

He will have to explain why he changed his mind, without stating the bald, cynical truth that a new tax was undesirable.

Labour will also have to dissolve the prevailing narrative that in government the party wasted and mismanaged vast amounts of public money.

Exactly. They increased spending by $1 billion a week and made almost indicator go in the wrong direction as so much of it was wasted.