Phil Goff's aides must be smoking a particularly powerful brand of Kronic if they think a capital gains tax will pull in $4.5 billion for a Labour Government to spend.
It was just February after all when Goff was hosing down suggestions that Labour would embrace a capital gains tax. This week his spin-meisters planted stories that a Goff Government would pull in an extra $4.5 billion a year, all through finally slaughtering the longest-living sacred cow of the Kiwi tax system.
But if Goff throws in compulsory superannuation and says he will bump up the qualifying age for national super to 67 years, he may well get Labour back into the electoral race as a party that is prepared to tackle the big issues.
Sure the Government's coffers will get a rather nifty boost if a capital gains tax is applied to farm sales, business sales, commercial building sales, beach house sales and indeed the residential investment properties sold on by so-called "speculators". Of whom the Labour leader is of course one, given that he owns a "renter" in Wellington.
But it won't have escaped notice that many New Zealand asset classes are struggling to hold value - particularly house prices, which escalated madly during the recent property bubble.
There; Fran O'Sullivan has said it; a CGT is not just about investment properties; Labour is casting its net far wider than that.
The application of a CGT to farm and business sales seems especially punitive. Success in business or farming does not happen by accident; it is the product of planning, of hard work, of learning from one's mistakes, and keeping going when all seems lost. We know that from personal experience.
We've been involved in the ownership of a couple of businesses. We have invested our own money into them, both in the start-up and growth phases. Unlike some business owners we haven't taken dividends, drawings or directors' fees; our sole income has been a salary, taxed at source. It may not be a way to maximise income, but its transparent, and that's important to us. We've also invested our time and our emotional energy; that can't be quantified. As the businesses became profitable, we paid company tax.
That the businesses become successful was not, as we said above, an accident. And yet a prospective Labour government wants to penalise people who have become successful. Is it any wonder that Labour is seen as unsympathetic towards small business?
Let's not be mistaken; this is not Phil Goff's initiative; Fran O'Sullivan explains:
This never seemed to trouble Goff all that much during his time as a senior Cabinet minister in Helen Clark's Government. But it's a fair bet that his newfound resolve to milk the capital gains tax cow is at the behest of ambitious colleagues like the "two Davids" - Messrs Parker and Cunliffe. These are the men who have been in the backrooms developing a new agenda for Labour. Not Goff. Though he will be the beneficiary of their boldness.
What the slow leak of Labour's new tax policy has done is bounce Goff back into the limelight when his lengthy absences from the fray were inviting speculation he was overseas preparing for a post-politics career.
We've heard the "two Davids" theory expounded by a number of people, and there are a couple of variants. One sees Labour coming up with a coherent policy going forward. The other sees the continued instability in Labour's caucus spilling over into election policies which are so waffly that Labour is defeated in November, and the two Davids unseat Phil Goff in the post-election wrangling. The latter scenario is not at all improbable, and the photo below which we spied on a CGT story on interest.co.nz has a prophetic ring to it.
The devil is, as they say, in the detail which will be released towards the end of next week. Labour has already faced much criticism, and the revelation yesterday that borrowing will increase "in the short term" is worrying; what happens if revenues do not meet Labour's expectations?
An interesting week awaits us. But kudos to Fran O'Sullivan for not swallowing the Labour Party line, and bringing some objectivity to the Capital Gains Tax debate; it's been sorely needed. We'll let her have the final word:
One of the delicious ironies in watching Goff grasp for his bold new policy agenda is pondering why he and his colleagues did nothing in Government to avert the property bubble.
Capital gains taxes do not stop bubbles. Nor do they make it easier for struggle street to afford their own homes. Australia and Britain have capital gains taxes - but that did not stop their property bubbles.
The reality is that for much of the past decade the world was "awash with cash". Too much cash chasing too few assets. This is what put the hydrogen into the property bubble, not a bunch of middle-income Kiwis sheltering income from the IRD through setting up loss attributing qualifying companies - LAQCs - to avoid the 39c top personal tax rate that Labour introduced.
The previous Government could have put a dampener on this by wiping the use of LAQCs. Or talking seriously to the Reserve Bank on the need to introduce loan-to-value ratios to stop the "low doc" deals that far too many New Zealanders signed up for to buy houses that they couldn't really afford.
But the Labour Government turned a blind eye - preferring to be the political beneficiary of a so-called economic boom.