Tax has been a source of division in Labour’s caucus, with senior MP David Parker last year quitting the revenue portfolio after Hipkins ruled out introducing a capital gains or wealth tax if re-elected.
Inequality expert Max Rashbrooke said the party has done a lot of work on developing a fairer tax system and will be feeling the pressure to deliver on it.
“I don’t think Hipkins would raise his head above the parapet if there was no intention to do anything, because why would you get everybody’s hopes up again and dash them for a second time?
“This call for a debate about the taxation of wealth and income from wealth has to lead to something, otherwise it’s going to do extraordinary damage to the Labour Party and its support.”
Hipkins said “all options” were back on the table when it came to tax reform.
He wouldn’t narrow down what these were, but did point to the latest report on the country’s economy out of the International Monetary Fund (IMF), which suggested a comprehensive capital gains tax.
Rashbrooke said a capital gains tax would be the easiest idea to take to the public, adding he thought people were ready for it.
“We are virtually the only country that doesn’t tax capital gains in some meaningful way. There’s a very easy rationale for them; income is income, and we should treat the income that people make from selling assets the same as we treat the income from my freelancing career or someone else’s salary.
“I think the public is ready to be convinced about a capital gains tax.”
Wellingtonians RNZ spoke to were in favour of a capital gains tax.
“Yeah, absolutely. And not only that, I own a rental property and I’m very happy to pay tax when I sell it. For me, it’s income. If I sell my apartment, I make money out of it.. I should pay it back,” one woman said.
“The public is probably ready for a debate on a capital gains tax. Especially with the cost of living crisis, people are feeling it a bit rougher, and they perhaps think there are other people who aren’t feeling it as badly,” a man said.
“I definitely think New Zealand needs to accept the fact that we have an inequality crisis and that there’s millionaires that aren’t paying any tax on the millions of dollars that they’re earning from property, and that’s not fair,” a young woman said.
“My friend and I both have quite low-paying jobs, and the owner of our store, we see him around and we know he’s earning mega-bucks and probably owns loads of houses. It’s just really unfair,” another young woman said.
Rashbrooke said it was one thing for Labour to call for a debate on tax reform and another to mount a successful campaign for change.
“Labour can have the debate until the cows come home and Hipkins can listen to any number of opinions, but what Labour has never been able to do is mount a sustained, coherent pitch in favour of any major change of the tax system.
“Until they figure out how to do that, the debate isn’t going to take us particularly far.”
Labour will formulate new tax policy over the next two years, through an internal discussion document, before taking it to the public ahead of the 2026 election.
