Chris Trotter doubts Jacinda Ardern and Grant Robertson will be losing much sleep over their left-wing critics' anger that no Capital Gains Tax will be implemented

By Chris Trotter*

Has there been an “explosion of rage” in response to the Coalition Government’s decision to abandon the proposed Capital Gains Tax (CGT)? It depends on how you define “explosion”, I suppose. And “rage” for that matter.

Certainly, there have been a lot of angry tweets. On the left-wing blogs you will find a great many disappointed, even cynical, postings. Young Labour are not happy. But, “explosion of rage”? Nah. Not really.

Explosive rage is what the world has been watching unfold on the streets of Paris and other French cities since the end of 2018. “Yellow Vests” smashing up the face of “Marianne” on the Arc De Triomphe. Running battles with the riot police. Setting fire to the high-end stores along the Champs-Elysee. That, I think, qualifies as an “explosion of rage”. Tweeting and blogging – not so much.

Historically-speaking, mass protests are much more commonly associated with the imposition of a new tax, than with a government’s decision to spare its citizens from additional fiscal burdens. Margaret Thatcher’s “Poll Tax” drove the British working-class onto the streets in much the same way as Richard II’s Poll Tax had driven the English peasantry into open revolt in 1381. If Richard’s privy councillors had advised the common folk that after much thought they had decided against implementing the new taxes recommended by the nobles’ working-group, then I suspect the Peasants Revolt would never have happened!

The response of New Zealanders to new taxes offers even less hope to those with revolutionary aspirations. As a young trade unionist and Labour Party activist, I fought the good fight within the labour movement against the introduction of Roger Douglas’s Goods & Services Tax in 1985. To no avail. The Fourth Labour Government’s advertising campaign for GST – featuring, as I recall, bouncing babies and vacuum-cleaners – had the voters convinced that this new tax would be a very good thing indeed. Even in the Labour Party (a considerably more left-wing beast in the 1980s than it is today) only a third of the delegates to the 1985 annual conference were prepared to raise their voting cards in opposition.

It is possible that the Prime Minister, Jacinda Ardern, and her Finance Minister, Grant Robertson, could have generated a similar degree of enthusiasm for the CGT in 2019, had the decision about whether it should – or should not – be introduced rested with Labour, and Labour alone. Any half-way competent ad agency would have had a field day with the brief. Imagine what the creatives could have done with the idea of making the fat cats pay their fair share. The campaign would, almost certainly, have been an award-winner.

Except, of course, the decision on CGT was not Labour’s, and Labour’s alone, to make. Ardern leads a coalition government in which a party representing small business owners and farmers holds the casting vote.

Indeed, as an aside, it is interesting to reflect upon the near impossibility of anything like Roger Douglas’s revolution ever happening again in New Zealand. Turning this country’s fiscal regime on its head was possible only because the old First Past the Post voting system generally provided the winning party with sufficient parliamentary numbers to implement its policies without serious impediment. As no less a commentator than the former National Party finance minister, Ruth Richardson, warned the electorate in the run-up to the MMP referendum in 1992: the radical reforms of the 1980s and early-1990s would have been impossible under a system of proportional representation.

The absence of any commitment to implementing a CGT from the Labour-NZ First coalition agreement should have warned New Zealanders that the chances of such a tax making its way onto the statute books were negligible. Winston Peters had clearly warned Ardern and Robertson that his electoral base would not stand for such a radical restructuring of the way New Zealanders built their businesses – nor with the way they reaped their reward after years of unstinting effort.

That neither the PM, nor her finance minister, had the wit to straightforwardly acknowledge this impediment and remove the CGT from the table during the coalition negotiations –  thereby disappointing Labour and Green supporters at the earliest opportunity and in the least disruptive way – says much about their political inexperience and overall feel for the realities of government. Certainly, more accomplished politicians would not have pressed on with the CGT exercise in hopes that a right-wing populist party like NZ First could somehow be persuaded to commit electoral suicide.

It is, similarly, disconcerting to review the successive failures of Labour’s political leadership to quit when they were behind. The Tax Working Group Chair, Michael Cullen, warned his protege that the prospects for unanimity on the CGT were dim to non-existent: Robertson asked him to press on. The final (majority) report presented a CGT of such breadth and bite that it could not possibly survive politically without the most aggressive and creative campaign being waged in its favour. And yet, from the Labour and Green leadership there came hardly a word. Week after week went by during which the opponent’s of the CGT waged a vicious, unrelenting, and ultimately successful, war against its introduction.

Voters who might have been willing to accept a CGT that targeted property speculators and land-bankers were astonished to discover that their KiwiSaver nest-egg might fall within the Taxman’s reach. People working from home faced the prospect of accounting for CGT on the bedroom they had converted into an office. I would not be the first to speculate that Cullen may have deliberately concocted a tax of such punishing scope in order to save Ardern and Robertson from themselves. If so, then he succeeded admirably!

The contrast between the Labour leadership’s handling of the CGT and their handling of the TPPA could hardly be sharper. In the “explosion of rage” stakes, the 30,000-strong Auckland demonstration against the Trans-Pacific Partnership Agreement in February 2016 ranks highly. So angry was that protest that Labour contrived to position itself proudly alongside the agreement’s opponents. Within weeks of becoming the government, however, Labour and NZ First had deftly executed a u-turn on the free-trade deal. Did the angry opponent’s of the TPPA explode in rage? Did they heck-as-like! The Left generally acquiesced in the new government’s 180-degree policy shift like lambs. Why Ardern and Robertson did not do the same re: the CGT remains a mystery.

Still, if the “explosion of rage” against the Governments decision to be guided by the bleeding-bloody-obvious fact that the proposed CGT was never going to make it out of the House of Representatives, is confined to the ethereal realms of Twitter and the blogosphere, then I doubt if the PM and her finance minister will be losing too much sleep over their left-wing critics’ immaterial detonations.

*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. His work may be found at http://bowalleyroad.blogspot.com. He writes a fortnightly column for interest.co.nz.