Labour unveils its plans for a capital gains tax today and has much riding on the framework of it.
On the one hand, heavy-hitters including the IMF, the OECD, our own Treasury and numerous business commentators, have argued that New Zealand is out of step internationally without a comprehensive tax on capitalgains; that our current selective tax distorts investment decisions by New Zealanders and has encouraged us to pump billions of dollars into unproductive property investments, turning our economy into a glorious tax haven.
On the other hand, middle-class Kiwi voters who Labour must win over to have any hope in the coming election are unlikely to be impressed by a tax on their investments.
Commentator Gareth Morgan, arguing in favour of a capital gains tax, has gone as far as to write that the family home should not be exempt. Your home, he contends, is "the biggest tax shelter presently available".
The all-important swing voters, those currently with National who might be attracted to Labour if its policy platform appealed, would be as likely to vote for a capital gains tax on the family home as a turkey would vote for Christmas.
Labour's tax plan will not storm the sanctity of the family home. Not unless Phil Goff has decided his best chance to win votes is to make an overt appeal to the low-waged and unwaged at the expense of the middle class. It is not.
In fact, there is every chance that Labour will feel pressure to write in so many exemptions to ensure the majority of taxpayers are not hit hard by its proposed regime, that the proponents of a pure capital gains tax may accuse it of falling well short of the mark.
A capital gains tax, say its supporters, must be broad-based to encourage more investment in productive sectors of the economy. While that may be true, will the majority of mum-and-dad voters care?
Through all of this, one suspects John Key will be recalling the advice of Labour's own David Lange with a certain quiet smugness. A capital gains tax, quipped Lange, was something you introduced if you wanted to lose the next election and one or two after that.
