Comment

Labour’s tax triangulation

Labour’s tax policy provides further proof Jacinda Ardern and Grant Robertson are conservative triangulators, rather than the socialist boogeymen some opponents make them out to be, Sam Sachdeva writes

Journalists who face claims of bias from politicians on each side of the aisle often fall upon a time-worn defence: “If both sides hate me, I must be doing something right.”

Finance Minister Grant Robertson may have been tempted to reach for the same cliche after Labour’s big tax reveal - a new, top tax rate targeting the wealthiest two percent of New Zealanders - was panned by the party’s rivals and allies alike.

National accused the party of “going back to its old habits”, while on the other side of the political spectrum, coalition partner the Greens claimed Labour was “proposing patchwork solutions when visionary change is needed”.

Of course, it is far from a foolproof rebuttal - a reporter may simply be bad at all aspects of their job, and so too might Labour’s plans simply be poor policy.

But if nothing else, both the tax proposal and the reaction to it show that Robertson and Jacinda Ardern have become astute at charting the course least likely to turn off the swing voters who have put Labour within touching distance of a single-party majority.

There are plenty of legitimate criticisms of the Government, but the line of attack painting Labour as radical ideologues has never seemed apt given Ardern’s tendencies towards triangulation.

Labour’s tax policy for this election seems similarly calculated to appeal to the widest slice of the electorate possible while avoiding claims of radicalism.

During the 2017 campaign, the Labour leader quickly pivoted away from a commitment to introduce a capital gains tax (CGT) and towards a more nebulous “tax working group” when it became clear her party was suffering in the polls as a result.

Then, in 2019, Ardern declared a CGT dead and buried forever due to New Zealand First’s opposition within the current coalition, despite the possibility her party could return to power with Winston Peters’ handbrake released.

Labour’s tax policy for this election seems similarly calculated to appeal to the widest slice of the electorate possible while avoiding claims of radicalism.

The new 39 percent tax rate would apply only to New Zealanders earning more than $180,000, leaving income tax unchanged for 98 percent of the population.

Robertson spoke of “striking the right balance”, but exactly why a lower threshold or a higher top rate would be unbalanced was left unsaid, leaving a sense the final figure was as much about what was politically palatable as any economic rationale.

The estimated $550 million in tax the new rate was estimated to bring in each year also seems light, even before considering the likely manoeuvrings from wealthy Kiwis towards more favourably taxed assets or entities, such as trusts.

But at a purely political level, Labour’s plan makes sense.

Taking on the 'two percent'

A new top rate would represent a move towards the more progressive tax system that many of the party’s supporters desire, while not being so high as to spark a damaging backlash from the business community or other “two percenters”.

National certainly struggled to find a compelling critique, with leader Judith Collins resorting to an allegation the policy was “just the start” of further tax grabs.

That does not mesh with Robertson’s categorical commitment there would be no other new taxes or tax increases in the next term of government if Labour was re-elected.

He seemed similarly unequivocal on whether the Green Party’s wealth tax would be on the table in coalition talks, saying: “We are committing to not implementing anything other than this [Labour’s policy] if we are in government.”

Of course, if granting such a concession is the difference between retaining the baubles of office and a return to opposition, Robertson’s stance - or more importantly, Ardern’s - might yet change.

Having learnt the hard way about insufficiently prescriptive coalition agreements this term, the Greens would have sufficient motivation to play hardball should it be in the queenmaker position after October 17.

But that is far from guaranteed as the party scraps for its mere survival (although it may benefit from Labour voters moving leftward), while it lacks the leverage that would come from being able - or willing - to negotiate with National in parallel.

Speaking to Newsroom last month, Ardern defended her government against claims from left-wing critics it had been insufficiently transformative.

“For me, transformation is change that sticks. I think people forget about the second part of that equation, they just think about change, and somehow transformation needs to be dramatic and jarring,” she said.

Labour’s tax policy is a further demonstration of that worldview, for better and for worse.

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