I'm not too proud to eat my words. In September 2017, I wrote a column in which I advocated for a capital gains tax.
"The real question is one of fairness. Untaxed capital gains benefit only a few at the expense of many," I wrote. "I've even heard the situation described as welfare for the wealthy."
I don't disagree with those sentiments. I still, in theory, support a capital gains tax. But I also believe that the Government's call to scrap plans for a comprehensive capital gains tax was the right one – as difficult a dead rat as it must've been to swallow, particularly for Labour and the Greens.
Capital gains tax is one of those phrases that many New Zealanders hate, alongside "The Wallabies" and "that was the last slice of the Vogel's".
Business and landlords are particularly vocal in their opposition (surprise, surprise) and the concept is so foreign to us as a nation that even the many everyday Kiwis who would benefit from a capital gains tax are wary of it.
So, you could surmise that imposing a capital gains tax would be political suicide, and you'd likely be right. If not because the majority of the population is against it – which isn't necessarily true, given some of the poll results that have come out recently showing that a significant number of New Zealanders actually support the idea of a capital gains tax – then because pushing forward with the policy would've likely resulted in a humiliating defeat in the house at the hands of New Zealand First, a fracturing of the coalition, and much gleeful jeering from the opposition.
The announcement on Wednesday wasn't exactly surprising. Both the Prime Minister and the Finance Minister appeared to distance themselves from the idea of imposing a capital gains tax when the working group's report was released.
Such a lukewarm response was hardly accidental. I wonder whether the decision to throw the policy to a working group was actually an effective strategy to allow Labour to kick the issue to the kerb once and for all; something they couldn't do before now, given they campaigned on the issue in 2017.
Either way, it's a shame (though an entirely foreseeable one) that it's come to this. There is no doubt that New Zealand has an inequality problem. Child poverty is on the rise again, and there are many Kiwi families – particularly the so-called working poor – who are doing it tough. These are real issues that need to be addressed, and that will likely require solutions that will impact on the tax responsibilities of higher earners. They're problems that are not only moral but also economic. Poverty is expensive. It costs us billions every year in health, justice and social development spending.
Call me naive, but I like to think that most New Zealanders do want their fellow citizens to get a fair go. I like to think that most of us despair at the idea of Kiwi kids growing up living in cars, without clean clothes to wear to school, and decent food to fill their tummies. The capital gains tax, in the form that it was proposed, wouldn't have solved those problems all by itself, but it would've gone some way towards addressing unfairness in the tax system.
Personally, there were recommendations the working group made that I didn't like. While I could get behind a capital gains tax of 15 per cent on property sales, I didn't like the idea of property profits being taxed at the highest personal tax rate. Don't ask me why, because I couldn't tell you. It's irrational. But the simple truth is that, despite what neoclassical economics may suggest, many of us are irrational when it comes to money.
That irrationality is something that's going to plague any government that tries to tackle the financial class system we've developed since the 80s. A capital gains tax, though standard in most developed countries around the globe, is not going to fly in New Zealand because many New Zealanders are opposed to the idea. It also won't work because of our low wages and low productivity. When owning property is one of the safest ways for people to build wealth, in a country in which wealth-building is exceptionally difficult, people are understandably going to resist a capital gains tax.
The people who lose, of course, are those who are already struggling. Nothing new there. What we have to grapple with now is what we as a nation are willing to do to help those people. We have to take a moment to check in on our national moral compass. Because something must be done, or we risk not only further economic strain as a result of increasing levels of poverty, but also a loss of our compassion and humanity.
The question we must now ask the Government is simple: if not a capital gains tax, what does it plan to do instead? The problems a capital gains tax aimed to solve won't go away without serious and long-lasting action. What is the Government going to do now?