Never has such a failure over a flagship policy been portrayed as such a principled acceptance of the public will as Jacinda Ardern's announcement that a capital gains tax is as dead as a dodo.

She is a very clever communicator.

The fact that even a diluted capital gains tax on rental residential property was off the table was surprising enough, when Ardern took the podium in the Beehive Theatrette at 2pm.


There was an audible gasp at that news.

But nobody had predicted she would rule out implementing or even campaigning on a capital gains tax under her leadership.

It was only 18 months ago that it was so important to her that she was willing to have the Tax Working Group findings implemented this term, rather than the more cautious approach of her predecessor, Andrew Little.

It was her first captain's call that she was later forced to reverse when it became too damaging during the election campaign.

Today, she explained her third position on capital gains by saying while she supported it in principle, she was a pragmatic idealist.

Another way to explain it is to imagine the counter-factual.

Focus Live: Our analysis of the capital gains tax rejection

Pragmatically speaking, if Ardern had not ruled it out, three things would have happened which she has now stopped by refusing to campaign on it again.

National would have hounded Labour about it week in and week out.


Even a diluted capital gains tax would have presented opportunities for National to portray it as a Trojan Horse for further expansion.

New Zealand First leader Winston Peters would have continued to campaign to voters as the ultimate insurance policy against any further expansion of capital gains tax to farms and other businesses.

The only way he could do that now would be to suggest that Labour and Jacinda Ardern might not keep her word on a capital gains tax – and that is not something a Deputy Prime Minister would say about a Prime Minister.

The third reason, and not least, for Ardern's decision to rule out a future capital gains tax is that the Labour Party base would have expended a lot of energy about whether it should go into its fourth consecutive campaign in 2020 supporting such a contentious tax.

It would have been a distracting and possibly divisive debate.

Ardern has decided it is not worth it. She has built up political capital in her 18 months as Prime Minister and she has decided to cash it in.

This may be her second captain's call on capital gains tax but this time it is a sensible one, based on pragmatism and her party's interests rather than idealism.