Dunne: Nats need more than a “no new taxes” message

A one-legged stool can never stand, says Peter Dunne. National's "no new taxes" promise is a cynical ploy to capture the public interest, but the party will also need to define its values and brand them in a positive way.

National leader Simon Bridges’ pledge that National will not raise any taxes, excise duties or levies in its first term of office, should it win the next election, is really the first shot of the next election campaign.

It is also a cynical, short-term ploy to capture the public interest after the debilitating and bitter Jami-Lee Ross affair, and to give people something to mull over during those rare moments over the coming summer barbecues when the conversation turns to politics.

At this stage, whether anyone takes it seriously is irrelevant, but it is at least one sort of stake in the ground for National about where it stands, even if it does suggest that its approach to the next election will be pretty much status quo, with little allowance for additional spending.

While this announcement will not be causing any great panic within the Government ranks at this stage, it is clear that tax is shaping up to be a major issue in the next election. And the battle lines are being drawn sharply.

Voters faced with the choice of the money or the bag, have usually taken the money

Labour’s tax working party under Sir Michael Cullen is due to report early next year. The working party was Labour’s 2017 way of getting off the tax hook, with the commitment to introduce no new taxes before they had been put to the electorate in 2020.

So, potentially, at the next election, Labour will be proposing a range of tax changes, presumably including its (and Cullen’s in particular) long-treasured wish for a comprehensive capital gains tax, under the guise of making the system “fairer”, versus National promising to not only to dump any capital gains tax proposal but also not to increase any other tax rates before 2023.

Historically, elections fought on tax issues go badly for the party proposing tax increases. Helen Clark understood this all too well which, coupled with support party intransigence, was why a mooted capital gains tax never got off the ground in 2005-2008.

Voters faced with the choice of the money or the bag, have usually taken the money. National will be hoping there will be a similar voter response in 2020. They may well be right, but there are signs that the traditional response may not still be as relevant as it once was.

Over the last year or so, before its own economic policies have been able to have any impact, the Government has been able, on the back of the sound state of the books it inherited, to invest heavily in infrastructure (principally through the still dubiously administered Provincial Growth Fund) and increase social spending, and the early signs are that voters are liking what they see.

This is despite the untested or badly directed nature of some of the spending (the First Year Free tertiary study policy which is little than a taxpayer funded gap year for the better off being the latest example), or the open-ended nature of some of the commitments. But it is difficult to escape the conclusion that, these concerns notwithstanding, there is a sense that long standing investment deficits are being addressed at last.

While it is too soon to say for sure how this will pan out in the longer term, last weekend’s state election result in Victoria provides food for thought. Of course, there were local and national issues that influenced the outcome, but there are some parallels worth considering.

In Victoria, a big-spending, infrastructure investing Labor Government won re-election in a landslide, with the biggest swings to it apparently occurring in the better-off electorates. The centre-right's traditional fiscal prudence and personal responsibility message was swamped by a Premier stating simply “We live our values, do what we say, and get on with job”. It is not too difficult to imagine the New Zealand Prime Minister parroting similar lines to potentially similar effect.

To look different from the more of the same label, National’s no more tax message needs not only to be honoured, but accompanied by a clear statement of National’s values.

Simon Bridges is none too specific on this latter point as yet, although, interestingly, Judith Collins in recent speeches is starting to weave a still somewhat vague narrative about the values those on the right of the party hold dear.

The question will be to what extent the wider Party is willing and able to coalesce around these emerging values and adopt them as its own, or whether the Collins' initiative provokes a sharper redefinition of its more moderate traditional values.

In any case, National will need to brand these in a positive way to persuade voters it is not about to take away the good things they think they are currently enjoying.

But to come back to tax, generations of politicians have sought to imbue tax policy with a sense of mystery it does not deserve.

Put simply, the primary focus of tax policy should be to produce as efficiently and easily as possible the revenue the government needs to do its job. As the seventeenth century French politician Colbert famously wrote, “The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing”. Nothing more, nothing less.

Tax is primarily about gathering revenue. From an efficiency and effectiveness perspective, income redistribution and wider social equity matters are secondary considerations, but too many governments over too many years have sought to use the tax system to drive social change, which, perversely, is why it has ended up so complicated, and so unfair for so many.

While there are warnings for both major parties in this, the greater challenge is for National. For its no more tax message to achieve cut-through, it will have to be able to persuade people that the goose still has enough feathers to be plucked, or that they can grow a bigger goose, to give everyone what they have come to expect, without increasing unfairness. After all, a one-legged stool can never stand.

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