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Connell: Capital gains tax - should we care?

Even if you’re a normal person and have wisely headed for the trenches to escape the machine gunning of opinions on Twitter, you’ll know it’s been all about Capital Gains Tax over the last few days.

Despite reading more than is healthy on it, I am left feeling indifferent about the old CGT. It’s odd because the debate has blown up into polemic warfare, emblematic of something much bigger than a tax. It’s become a prism - splitting people like light, into different personal, political, socio-economic and generational polarisations. You could reverse engineer people’s opinions on it into a Myers Briggs test for values and affiliations. That’s usually a rich vein for me to tap into.

I’ve spent the weekend examining my apathy about it. It’s been fun, team. Any points I may have racked up in the ‘normal person goes about life, remaining largely apathetic about stuff and is therefore quite happy’ category have been cancelled out by this rigorous internal investigation into why I don’t really care about the CGT.

I am Generation X. Born in 1979, I just squeak in. I live in Auckland, rent a small three-bedroom house with my husband and dog. Between us (but excluding the dog) we earn well above the average wage.

Last year our rent accounted for 24 percent of our after-tax earnings. We could service a home loan on that, but like many people, we are struggling to save a deposit for an averagely priced Auckland home.

The CGT isn’t going to be a silver bullet for the housing crisis. There are now too many other factors at play – supply, high migration and low house building rates among them. The Tax Working Group itself doesn't believe a CGT would have a huge effect on housing affordability, suggesting we’d see "small upward pressure on rents and downward pressure on house prices".

Ten years ago, I thought it might have been the answer, but it now feels like something we coulda/shoulda done back then. Now I’m 75 percent of the way through a grief cycle – mourning the loss of the Kiwi dream and learning to feel less like a failure because I rent. An exempt family home already seems like a pipe dream for many so the CGT isn’t going to be a balm for our grief.

The Kiwi way of life, for many of my generation, is to have already been punished for that by way of crippling student loan debt, low wage growth, under investment in infrastructure, globalisation and the increased privatisation of basic services.

At this point the only impact of a CGT for me would be if it acts as a tax on savings or as an inheritance tax. It’ll take a bite out of the inheritance I might gain from the sale of any assets my parents have beyond the ‘family home’ when they die.

This feels like an inevitable burden I am resigned to shouldering alongside the many others my generation already carry. It doesn’t feel like an assault on the Kiwi way of life or a punishment for hard work. The Kiwi way of life, for many of my generation, is to have already been punished for that by way of crippling student loan debt, low wage growth, under investment in infrastructure, globalisation and the increased privatisation of basic services.

Philosophically, I accept taxes as part of the social contract. I agree they should be fair, and that income should be taxable no matter how it’s earned. But when you live in a world where the odds seem increasingly stacked in favour of the overtly wealthy, where tech companies pay little or no tax and the gap between rich and poor seems beyond closing, I don’t necessarily view a CGT as any kind of real leveller. I just can’t get that het up about it - as a blow for fairness or an assault on the individual’s right to reward for hard work.

I reserve most of my apathy for the politics of it all. Because I think it’s past its use-by date as a political lightning rod, I am exhausted by the rhetoric being rolled out by the Opposition and the punditry that continues to suggest it's possible political suicide for Labour.

The National Party has launched at the idea of a CGT like William Wallace at the English. They’ve trowelled on the blue face paint that comes free with the ‘Muddle Nu Ziland’ playbook and rolled out an all-out assault that’s disproportionately greater than any assault on the Kiwi way of life. It’s histrionic, will play well with a base but is disingenuous and steeped in a dangerous nostalgia for a way of life that doesn’t really exist anymore. If it does it’s definitely not a life lived by Middle New Zealand who won’t bear the brunt of a CGT because they’re not wealthy enough to have a lot of assets that will meet the criteria for taxation.

National are playing a short-term game, creating momentum around the idea that a CGT strikes at the very core of our identities in the run up to the 2020 election where it may be one of the big issues. There’s nothing that surprising about it but it’s as depressingly inevitable as well, death and taxes.

There seems to be some fiddling with tax brackets being recommended which may see us all pay less tax but honestly, it kind of just smells like a bowl of politically palatable election time soup.

Perhaps the original portent of my apathy came for the TWG report itself and the Government, who welcomed it with a weak handshake.

The TWG was charged with looking at the integrity, fairness and efficacy of the tax system with consideration of the economic environment over the next five to 10 years. As election cycles go, it’s an eternity but given it's 2019 and we’re still largely operating under the radical tax change regime of 1987, it seems short-sighted.

As Thomas Coughlan points out in his analysis of the report, the first issue of integrity has received scant attention. We are staring down the barrel of an ageing population who will stop working and therefore stop contributing to income tax revenue generation while requiring superannuation and increased health care.

The family home is exempt, handing National a free hit, allowing them to ask about the fairness of someone sitting in an $8 million Parnell family mansion (bit close to the bone), paying no GGT on the sale of it while others pay it on Kiwisaver savings.

There seems to be some fiddling with tax brackets being recommended which may see us all pay less tax but honestly, it kind of just smells like a bowl of politically palatable election time soup.

The recommendations just don’t seem that radical or go far enough to address some of the enormous challenges we have looming on the horizon. There’s a limit to what tax policy can achieve but when it’s the main source of revenue for the entity in charge of which direction we travel and where we spend our money, it’s pretty high up the list of things I’d like to see properly future-proofed. Ten years ago, the recommendations might have been revolutionary and worth getting hot and bothered about but now they seem politically cautious.

And that’s the problem isn’t it? A CGT has become so loaded with political mythology that it has become political suicide to enact despite not being a particularly progressive or radical bit of policy. The Government’s tentative response to the TWG’s report is politically cautious. They can take the recommendations, par them back a bit and create something easier to digest. Many predict the CGT won’t make the cut.

I hope the CGT stays if only to signal that Labour isn’t crippled by short-termism and that working groups can effect change. Because we have a lot of them and while I applaud rigorous thinking in decision-making, at some point we’re going to need to see some transformation from this Government. They have already spooned out a lot of transformative rhetoric and backed working groups to do a lot of the heavy lifting for them. It does, for want of less crude phrase, feel like a ‘crap or get off the pot’ issue for the Government.

Finally, if it goes, may we resolve never to speak of it again and move onto talking other ways to tackle the large challenges we face. I don’t want us to still be talking about a CGT when I’m carried from my rental property in a box, having carked it because I couldn’t afford to access healthcare after we did nothing to address the challenges of an ageing population, a lower income tax take, rising costs and the increased strain on the government purse.

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