The ultra-rich can breathe easy and progressive voters can scream into the void, because Prime Minister Chris Hipkins has ruled out any meaningful reform to our broken and unfair tax system. The Labour leader says it won’t happen on his watch.
Official documents were released yesterday showing the Government asked officials to draw up ideas for how a wealth tax might work. They focused-grouped the idea and this exercise showed it wouldn’t be an easy win for Labour so, regardless of its merits, it was thrown on the bonfire.
Hipkins was then asked yesterday whether Labour might implement wealth taxes during its next term in government, and he categorically ruled out any such progressive reforms under his leadership.
The Progressive tax reforms that Labour rejected
We now know that Treasury put together a number of different models for how a major taxation reset could be progressed by the Government. The main model Labour considered involved two central planks, and was designed to be fiscally neutral, much like Bill English’s “tax switch” in which some taxes went up and some down.
Under Treasury’s proposal, a tax of 1.5 per cent would be levied on the assets of those owning more than $5m. About 25,000 ultra-rich would be affected, and it was forecast to bring in about $3.8bn a year.
The flip side of the tax increase would have been a new tax-free $10,000 threshold for every individual, which would amount to a tax cut for most of about $20 per week.
The Herald’s Thomas Coughlan reports today: “The documents show from the perspective of Treasury and the IRD how rather large tax cuts for millions of people could be paid for by slapping a tax on a tiny minority of New Zealanders.” And Treasury calculated that those paying more tax as a result had gained their wealth mainly in sectors of the economy involving finance, professional services and real estate.
Hipkins has dismissed this wealth tax idea as being an unwanted “experiment” at a time when his brand is about being focused on the basics. Furthermore, reports say Hipkins was “spooked” by the tax switch idea, taking fright at the potential for his government to be criticised by farmers and the rich for negatively impacting them.
In demoralising progressives Hipkins might be shooting himself in the foot
In ruling out progressive tax reform such as a wealth tax, Hipkins is keeping alive the possibility of winning over wealthier voters who might be considering voting for National. He’s made an electoral calculation based on the potential votes that could be lost, and whether he and his party have the capacity to successfully sell the concept of a wealth tax to the electorate. There are reports today that Labour’s focus groups made it clear that the wealth tax was a risk for the Government’s re-election. In that sense it’s an understandable decision.
But it’s a terrible move for Labour’s progressive reputation and standing. Voters who want to see progress made on inequality, poverty, and a genuinely transformational leftwing government after 14 October will be severely disillusioned. The question of significant tax reform has become a symbol amongst progressive voters of the need for radical change.
When Jacinda Ardern ruled out a capital gains tax in 2018 it was a major turning point for her reputation with leftwing activists and opinion leaders. There had been hope that Hipkins wouldn’t go down the same route. So there will be anger with Labour amongst some on the left, and it’s hard to rally the troops for the election campaign when the troops have lost faith in the leadership, or ponder what the point of a re-elected Labour Government is.
So the unintended impact of Hipkins’ captain’s call could actually be to reduce Labour’s chances of re-election. The demoralisation factor could hit the political left at a crucial time, when there are already concerns about whether the Labour-led government of the last six years has really achieved much at all.
Even on the question of Hipkins’ electoral calculation, progressives might well doubt whether ruling out a wealth tax was necessary. Is Labour really that reliant on the votes of those concerned about the fiscal wellbeing of the ultra-rich? After all, Treasury’s wealth tax proposal would’ve only impacted negatively on about 25,000 voters (something like 0.5 per cent of the population), while improving the lot of four million.
Labour is angering progressive voters
Political journalist Richard Harman writes today that Labour’s decision “infuriates its left-wing base”. Similarly, BusinessDesk’s Pattrick Smellie says “it’s likely that a goodly chunk of Labour supporters will be wild, seeing what Hipkins ditched.” He points out that those wanting substantial and progressive tax reform have essentially just been told that they will have to wait until 2026 at the earliest.
Leftwing blogger No Right Turn typified the angry leftwing response yesterday, writing: “Labour, ‘the party of the workers’, has sided with the ultra-rich to f*** over normal people, as usual. But then, should we really expect anything different from a man paid $471,049 a year, who owns three houses? Bluntly, he’s not one of us – he’s one of them. Of course he stands for their interests rather than ours”, and now it’s clear that Hipkins is “not going to offer us anything – just the awful, unequal, rusting status quo.”
And others will now wonder if Labour really believes in anything. Labour already admits that the current tax system is broken and highly regressive. And the public recognise this – two months ago a Newshub poll showed that 53 per cent of voters want a wealth tax implemented. Yet Labour has effectively shut down the debate.
Newshub political editor Jenna Lynch put this best yesterday: “It begs the question what is the point of Labour if even with this massive mandate it would not risk electoral punishment and stick to its morals of fairness”. And she asks: “What is the point of Labour? What do they stand for? Power is pointless if you do nothing with it.”
Business journalist Bernard Hickey has written a scathing analysis today. He sees Hipkins’ decision as a complete capitulation to vested interests over the common good: “That’s it. It will now be almost impossible for a wealth or capital gains tax to be implemented within the next decade or two. The future of Aotearoa’s political economy will now remain frozen in its stagnant, unequal, unjust, unproductive and unhealthy state for the foreseeable future. That’s what our leaders, and ultimately the only voters that matter, have decided.… The announcement yesterday of the freeze on the full wealth tax debate probably added another 10-20% overnight to land values, thanks to the removal of any uncertainty about a threat to the existing model of our ‘churn and burn’ economy of a housing market with bits tacked on.”
What happens next?
Labour is about to unveil its tax policy for the election campaign, and the signs are it will be very unambitious. Hipkins has already signalled that people should expect “restraint”.
Labour might still propose some sort of tax-free threshold on the first component of everyone’s income. But if this is announced it will be very limited because Labour don’t seem to have any way to raise the money to pay for it.
Likewise, they could imitate some of National’s tax threshold changes, effectively providing a tax cut. But this too would be minimal, because Labour hasn’t found a way to pay for such changes.
A wildcard would be the revival of Labour’s 2011 policy of removing GST from fresh fruit and vegetables. Pattrick Smellie raises this possibility today, saying “This policy has had political appeal for decades. And while it would make a mess of one of the world’s most effective indirect tax regimes, tax purity never won anyone an election. Making food cheaper during a cost of living crisis might.”
If Labour doesn’t find a way to reassure leftwing voters that they still have a progressive plan, then the risk is these voters will turn to other progressive options. Commentators are saying that Labour’s conservatism on tax will be good for the Greens. For example, today’s Herald editorial says: “The decision seems set to send Labour supporters keen on tax reform into the arms of the Green Party.”
But are the Greens really that well-positioned to mop up these votes? The party is also looking tired and ineffectual. Even on this issue, 1News’ Felix Desmarais says party co-leader James Shaw has been pretty pathetic in his “feeble stab at Hipkins’ political principles”. Shaw suggested that Hipkins’ ruling out of a wealth tax won’t stop the Greens campaigning to implement one and trying to negotiate for one after the election. But Desmarais asks: “if James Shaw can’t tear shreds off Chris Hipkins in a press conference, how strong can he argue around a coalition negotiation table?”
There’s another party that is perfectly placed to be the receptacle for voters who want to see more significant tax reform and progress on transforming New Zealand – Te Pāti Māori. The party is on a roll at the moment. Its last three poll results have put it on 7, 4 and 5 per cent. They are nipping at the Greens’ heels, threatening to push that party into fifth place in the election.
Right now, Te Pāti Māori are overshadowing both the Greens and Labour in terms of radicalism, freshness and being bold. The wealth tax debate, together with three big polls, may well have handed Te Pāti Māori the mantle of being the Real Party of Progressives in 2023.
TOP is the only option for tax reform, especially if you’re a white male and don’t want to be lynched.
Again, for those hard of hearing, Labour will not increase taxes on themselves. No more then National, ACT, or even the Queer Party will.
They could, but other then meaningless lipservice and a new commission of highly paid do nothing’ers they will do nothing. But they for sure will try to bait you again, next time around. After all, you are just to vote for them.
And people still think Labour is for them. Time to wake up.
Not woke up.
Hold on a minute. You cannot be seriously saying that our PM owns 3 houses and has made a captains call on not introducing a wealth tax or a CGT. If the ownership of a few thousand dollars of shares is enough to get a Minister demoted for conflict of interest then surely Hipkins is guilty of corruption.
Yes very well put Peter.
Yes Peter, and what of Luxon of Nazareth? He’s even worse. Interest deductibility back in and removal of the brightline test. It’s shameless self serving policy from our, about to be, PM. This country is made up of absolute f’ing idiots. It’s only fitting we end up with an evangelical whore to real estate and dairy.
Peter “Guilty of corruption “ is precisely how I would describe the gender ID ideology being forced through primary schools, and not just confusing kids, and sexualising them, but sometimes leading to debilitating outcomes which can cripple the rest of their lives, should they continue to live them.
“An unwanted “experiment” at a time when his brand is about being focused on the basics.”
“Basics” like Critical Race Theory and radical gender ideology.
Pope it’s Don Brash on the phone. He was wondering if you live near Orewa.
“…criticised by farmers and the rich for negatively impacting them….”
You don’t get out much do you Dr B.E. What, exactly, do you mean by “…farmers and the rich…” ? Are farmers a different species to the rest of us in your mind?
Farmers earn the money for the rest of you once third parties sequester then export the goods they can, and do, regard as theirs. The urban rich then wade knee deep through all that money calling it their own while creating logical-fallacy leafy suburb Empires with it. Multi-million dollar houses, both here and abroad, six figure cars, annual vacations to beautiful places… etc , etc.
Could the real problem with AO/NZ be that influential people like yourself have no idea what the fuck you’re talking about? Serious question.
Clearly, not even the self proclaimed intellectuals of AO/NZ know what the fuck’s going on in front of their own erudite noses, so farmers…Strike. Go on, strike. You can do it. Ring around, make a date with your neighbours, stop work. Farming’s a seasonal pastime and clearly the suburban-ites don’t need to eat or enjoy the all but free money supplied via the corrupt foreign banking criminals so they’ll not miss you at all. So strike for one seasonal year. Say, summer to summer. I believe the destitute, anorexic look is sexy on the Mediterranean beaches right now.
Here’s what you can do for poor old Countryboy. Do nothing. Keep the rams in, keep the vets from the cows, keep the grain in the silos and leave the vegetable seeds in the sacks, now sit back and watch the grass grow. And what ever you do… do not. I repeat DO NOT drive your tractors slowly through the towns and cities. That, achieves nothing unless you think fucking good, normal people off is something. City people are not the enemy.
The biggest problem Hipkins has is how to hide the wealth we have, but perhaps more importantly, the wealth we HAD.
Our AO/NZ didn’t get a First World lifestyle complete with rich, urbane, first-world cities including 14 multi-billionaires, 3118 multi-millionaires and four now foreign owned banks arrogantly and confidently stealing $180.00 a second 24/7/365 in net profits right out from under our noses by declaring all monies, all profits, all distant, off-shore money laundering advantages by studiously declaring all incomes now, did it. That’s why, for example, all good drug dealers drive old shitter cars.
If Hipkins started to [out] the criminal elite by offering generous tax breaks to the already victims of phil goffs GST, a selective and precise tax against the poor, then he’d be a bit fucked from all angles wouldn’t he.
Farmers. Strike. Then ring King Charles for a wee royal commission of inquiry to find out where all that farmer money’s been going for the last 140 years.
“If Labour doesn’t find a way to reassure leftwing voters that they still have a progressive plan, then the risk is these voters will turn to other progressive options.” BRYCE EDWARDS
Another risk is that disillusioned leftwing, particularly Labour voters, may just not bother going to the polls at all.
In the past when this happened, the Left particularly Labour party left have a tendency to blame their base for letting them down. (when it should be the other way down).
Anyone who believes that removing GST on fresh fruit & veges means price reductions & not increased retailers profit margins – I have a bridge to sell
I keep saying this but it keeps coming up it shows how little some people know about business .
A demonstration of the fantasy world the Labour government inhabits.
People are doing without essential health treatment because the health system cannot function without adequate resources. Families have no home. No houses are built to solve the problem – the poor are coralled into motels and guarded by police – originally to prop up the motel industry during covid tourism. The poor are just pawns in that game too.
Just two massive problems amongst a plethora.
The Labour Government is blissfully unaffected. They and all of their friends are over-housed and are financially advantaged by the housing shortage. All are privately insured for gold standard health treatment – why upset their own sense of well-being and security by even looking at the catastrophic result of underfunding the health system. Maybe some friend could join a working party and make a fortune out of thinking about such problems. No need to find, let alone implement any actual solutions.
They are great. Everything is fine. Open another bottle of champagne.
This is edging NZ towards rioting like we haven’t seen since those that forced the ‘new deal’ that has now been completely decimated.
Being a career politician the Chipster is a reed in the wind.His hypocrisy has no bounds,what am I today?
Being a career troll, and pedophile, what are you today.
“Dr Bryce Edwards Political Roundup: Labour keeps the status quo on tax, but has it shot itself in the foot?”
It’s probably done more than shot itself in the foot as shot itself in its fundamentals. When the Chipster gets back which must be imminent (with all aboard the flight hoping for a soft landing), he’ll be looking for ways to roll His proclamation back a little (in this space, going forward)
OWT You have sized up the sidduashun! Labour has shot itself in the fundamentals. The summation that supercedes all. They have also become supercilious, no longer super!
Of course he will.
He has form.
Grant Robertson’s demeanour when asked to comment on the captains call tells me that he was caught with his trousers down. I will not be totally surprised if this kerfuffle is a misunderstanding between the Dear Leader and the policy geeks working in the background. A matter of timing.
Either way, this kerfuffle does not show strength in the labour caucus. What is new?
Typically such a thing is released when the PM is overseas. It’s time to wake up Labour, the electorate wants a new approach and instead more of the same. Better to be an agent of change-than be a victim of it. Time for TOP to get in.
what do you really expect from a weak kneed neo-lib?
That’s the issue. Instead of a restructuring of the tax system, what we get from labour is more of the same. Wages go higher, prices go higher, properties go up in value. Any underlying factors in the economy, such as inflation, are avoided, simply left to the Reserve Bank to lift the Official Cash Rate.
“Labour, the party of the workers”
Hasnt been since the 80s when it became the tool for neo-liberal “economic restructuring”. Its now pandering to Middle Class Marxists high on Pure Trans Joy.
“should we really expect anything different from a man paid $471,049 a year, who owns three houses? Bluntly, he’s not one of us – he’s one of them.”
Like Jacinda, who lived in snobby Point Chevalier with her B list kiwi celeb partner, got a big pay rise as PM and moved on up to swanky Mt Eden. She’s a celeb now too of course.
“And others will now wonder if Labour really believes in anything.”
True believers in Globalism and Identity Politics since 1984 – just look at the demographic breakdown of Labour MPs. All NZ political parties worship at the Temple of Globalism. Like the menu at Maccers (“If you gave people a choice there woud be chaos”) there is no real choice for voters.
“The future of Aotearoa’s political economy will now remain frozen in its stagnant, unequal, unjust, unproductive and unhealthy state for the foreseeable future.”
Nah bro, a brain eating virus repeatedly hitting our population and Climate Apocalypse are going to break us real soon.
“handed Te Pāti Māori the mantle of being the Real Party of Progressives in 2023.”
It will be infiltrated by Rainbow Parakeet grifters and wrecked.
Pope P 100%
FBT not even mentioned. It us the only tax that would not hurt wrong people and is the most difficult to evade.
But it would hit finanvial speculators and we do not want that.
Labour shoots itself in the foot? How will we know; will they bleed as normal or are they bloodless (early models of AI), or will we see green fluid flowing from the foot?
The Labour leader says it won’t happen on his watch.
What’s his problem – didn’t someone like the idea who is more important than the people of NZ/AO who want a well-run, modern social economy in the 21st century?
Rip-posts:
Groucho Marx like – There wouldn’t be room on his watch.
? His watch is broken.
? He hasn’t wound up his watch as he expects some app to do it for him.
? He doesn’t know his watch has been broken for months as he can’t look away from his internet device.
This government is taking an additional billion dollars per week in tax off hard working New Zealanders, much of which has been wasted in ridiculous vanity projects such as Skypath, Light Rail to the airport, the Hamilton/Auckland train and restructuring health & the tertiary training sectors. Most recently we have half a billion wasted on expired RAT tests and then there was Hipkins Kapa Haka trip to China.
So, nobody in their right mind would trust this lot with the Treasury Benches again.
I don’t think your examples of vanity projects with rail etc being named is a reasoned comment. Think again, you are too to the right, I think you will overbalance Andrew. Please take steps to avoid accidents says health and safety looking out for you!
What a load of shit, you silly person.
Andrew your numbers don’t seem right. Just like Dr Evils numbers, when he claimed to still be a child at 26 years of age, but maybe he’s a late bloomer, who got resurrected. If a new strain of covid emerges ten times worse than currently, you’ll be glad there are rat tests, or maybe you’ll be complaining that the govt should have got more rat tests.
The RAT tests have expired, you silly person.
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