Rodney Hide: Key fiddles while market burns

The land tax on foreigners is the perfect policy for John Key. Photo / Dean Purcell

The land tax on foreigners is the perfect policy for John Key: it won't work, won't upset voters, shows he's "doing something" and, just to be sure, he's floated the policy to gauge reaction and to poll.

Not upsetting voters is crucial. No one likes paying tax. But making others pay - especially "the rich" and, even better, rich foreigners - is a plus. The policy won't lose votes and will win some. Making foreigners pay for our government is smart politics.

That the policy fails is important. There are more homeowners than home buyers. The expectation is not just that house prices stay high but that they ever increase. No government will survive the bursting of the housing bubble.

I am confident the policy won't work. The Government's number one policy agency, the Productivity Commission, spent more than a year studying housing affordability and produced a 300-page report concluding against fiddling the tax system as any sort of cure.

The commission spent another year coming up with a 350-page report of policies that would work. Such is politics that policies that won't work are favoured over those that would.

Key learned his politics from the master, Helen Clark. She developed the floating of policy ideas ahead of any announcement. Key has perfected it. Any ideas provoking kickback are binned.

The land tax policy is not just fruitless, it's dangerous. Key says the tax would be annual and could be adjusted for conditions.

The power to tax is the power to destroy. A tax applying to land to be "adjusted for conditions" is a frightening prospect.

It may be "only for foreigners" but income tax was originally only for the very rich and GST was only ever to be 10 per cent.

I shudder to think what happens to a tax that is introduced with the promise that it will be "adjusted for conditions".

A land tax is a dangerous tax because it's easy to ramp up.

Hike income tax too high and workers head to Australia. But land can't be shifted.

And if you don't pay land tax the government will take it.

At 3 per cent the tax would be $510 a week on an average Auckland home.

At that rate, homeowners would be renting their own home from the government. And Key is floating the policy saying it will be less than 10 per cent. That's three times the market rent.

The important thing in politics is to appear to be doing something.

Taxing foreigners ticks that box - and it also pinches Labour's policy. That takes the wind out of their sails.

Such is Key's luck that he will successfully complete his third term with the country thinking he did something about housing affordability. Such is Little's luck that he might be Prime Minister when the bubble finally bursts.

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