Briefly in the news in Aotearoa’s political economy around housing, poverty and climate on Wednesday, October 29:

* Labour’s targeted plan for a Capital Gains Tax (CGT) to pay for three free doctor’s visits was described by political commentators yesterday as a low-target tactic that might neutralise opposition by offsetting the negative of a new tax with the positive of a new health benefit.

* However, tax lawyers, accountants and landlords wanted detail on key areas such as whether interest deductibility would be removed again as an offset to capital gains, whether live-in commercial property owners such as dairy and shop owners would be exempt, whether commercial property owners would be able to claim depreciation again, and whether build-to-rent property would be exempt.

* Also, doctors challenged the viability and cost of Labour’s plan to use AI to reduce demand for doctors elsewhere and offset the extra demand from the new ‘Medicaid’ entitlement in a way to contain costs.

* Economists also challenged Labour’s forecast for new tax revenues rising to $1.35 billion by 2030/31, saying it depended on capital gains continuing at pre-Covid rates, which would be difficult to achieve given the last 40 years of interest rate falls and household debt increases can’t be repeated.

* In news elsewhere, ACC has cut off payments to 8,000 long-term claimants in the last year, up 20% from the previous year, despite many claimants saying they can’t work and are being cast aside to save money. (RNZ)

* Also, more than 600 people applied for a part-time job helping run a mini-putt course in Wellington (NZ Herald). And, the Government has sent letters to Wellington landowners on the route for a new Mt Victoria tunnel before telling Wellington City Council, who must rejig roads, cycleways and footpaths to accommodate the $2.9-$3.8 billion plan, which is not fully-funded yet. (The Post-$)

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The Lead: A small and hazy target

MMP politics have usually forced centrist parties in opposition to present ‘low target’ policies that are difficult for a Government to attack with scare campaigns. In modern politics, new big policies that take away things from voters are much easier to attack than small policies that seem to give and take in equal measure.

That’s why National characterised its GST increase in 2010/11 as a ‘distributionally neutral’ tax switch between income and consumption. It’s why the last Labour Government considered a wealth-tax-for-income-tax switch in 2023 that would have actually generated no net new revenue (Treasury paper).

Labour’s policy for Election 2026 announced yesterday of a targeted CGT that excluded the family home, farms, shares and other forms of financial wealth has the political profile of a ferret — low, fast and gone before you can stomp on it.

This is why commentators focused on the ‘horse race’ of who is likely to win, rather than which policy is best, see a ‘low target’ policy as clever. Yesterday, they acknowledged it might help Labour neuter the sorts of attacks that killed any chance of Labour taking power in 2011 and 2014, and that forced Labour to back off a CGT in 2017 just before the election.

Here’s a selection (bolding mine):

The policy is a bit of a reverse Goldilocks, not too progressive, not too Tory. It disappoints everyone a little bit – Labour may find it, “just right”.

There are other clever spots. The policy funds three GP visits a year for all New Zealanders – a clever, if expensive, policy that gives people something to talk about rather than the tax itself. But the true genius was Labour’s decision to tie the policy to a “medicard” ostensibly to load your patient details etc (as in Australia), but mainly so that Labour has an excuse to print off physical cards and hand them out to all and sundry on the campaign trail.

It’s a fiendishly clever idea. Labour, more than most parties, knows New Zealanders love a card – pledge cards, Gold Cards (NZ First’s baby, but created in Government with Labour). It makes ephemeral promises real. These are doctor visits voters can touch. They’re also doctor visits which, though they do not yet exist, the coalition threatens to take away. Thomas Coughlan in NZ Herald-$: Labour’s CGT sets small target but has big loopholes - including family home

In order to try to cauterise the party from claims that it will just raise this money to spend on its pet leftie projects, Labour has said it will tie it to three free doctor’s visits per year, delivered via a new Medicard.The party will be hoping that gets real cut-through.

And the Medicard will be an effective political device. It can be waved around, become a symbol of a genuine household budget saving and a commitment to getting people into the GP. And despite the fact that it will benefit the wealthy, some universalism in health access does have policy merit – as does stopping people going to EDs because they can’t afford the doctor. Luke Malpass in The Post-$: Will a capital gains tax be what the doctor ordered for Labour?

Labour knows the political peril of talking tax. It’s been burned before - in 2011, 2014, and 2017. This time, the party has chosen the smallest possible target: a cautious CGT applying only to property sales, excluding the family home and farms.

In many respects, it’s little more than an expanded bright-line test - closely resembling the minority view of the 2019 Tax Working Group (paper).

The strategy is clear: keep it simple and sellable. Labour believes a modest CGT will be more palatable to the public than the more novel and ambitious wealth tax. Craig McCulloch in RNZ: Labour’s capital gains gamble: From leak to launch

Offsetting the ‘low target’ love, the Press Gallery jumped on the appearance of disunity because a leak to RNZ over the long weekend accelerated the announcement to yesterday morning. In my view, I doubt voters will care by election time in late 2026 and Chris Hipkins said he wouldn’t hunt for the leaker, but would strip them of Labour Party membership if he happened to find the source of a deliberate leak.

The Sidebar: ‘Show us the detail’

The 2011 election debate between John Key and Phil Goff became famous as the ‘Show me the money’ moment where Key flummoxed Goff with a question about how Labour’s fiscal policy, including the CGT, would be paid for. Key did it again in 2014 with a question to then-Labour Leader David Cunliffe about whether the CGT applied to family trusts. Cunliffe couldn’t answer.

Bill English capitalised on an uncertain answer from then Labour Leader Jacinda Ardern in September 2017 about whether a CGT was actually an inheritance tax in disguise, given it applied to the proceeds of estate sales.

There will still be plenty of room for attacks on the devilish detail, but Labour has tried to shut many of them down with a tightly targeted policy that excludes shares, financial assets, lifestyle blocks and farms, and rules out taxing estate sale proceeds and property title transfers to family members or partners.

“The tax will also not be payable when a commercial or residential property (excluding the family home) is transferred to a person’s spouse, civil union partner, or de facto partner. In situations where a property is transferred as a result of a marriage, civil union, de facto relationship ending or death, tax will not be paid when the property is transferred. “Labour policy document attached below.

But there are still plenty of grey areas that were not clarified yesterday in news conferences or policy documents, including:

* whether interest deductibility would be removed again as an offset to capital gains;

* whether live-in commercial property owners such as dairy and shop owners would be exempt;

* whether commercial property owners would be able to claim depreciation again; and,

* whether build-to-rent property would be exempt.

Chart: Inflation higher for beneficiaries & pensioners than top 20%

Stats NZ data published yesterday on Household Living Costs showed inflation for beneficiaries in the year to the September quarter of 3.4%, 3.8% for NZ Superannuitants and 0.8% for the highest spending quintile. The CPI inflation rate (3.0% in Q3) is used to adjust beneficiaries incomes, while wage inflation is used to index superannuitants’ benefits. Inflation was 4.0% for the lowest spending quintile.

Electricity contributed 17% of beneficiaries’ inflation, while rates increases drove 18% of NZ Superannuitants inflation. Mortgage interest costs fell 15.4% in the year, which was the main reason the highest quintile of spenders saw 0.8% inflation for the year.

Cartoons: Leaks & realism

Timeline-cleansing nature pic

Ka kite ano

Bernard

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