It’s clever, moderate, and voter-friendly. By and large, that’s the verdict of most political journalists and commentators about Labour’s new capital gains tax policy.
Perhaps, just as importantly for Labour, the policy also doesn’t upset business and the wealthy too much. That’s been Labour’s key concern during its 14-year debate about reforming the tax system: not to scare any wealthy vested interests too much. If business and Establishment voices become too spooked by wealth taxes and comprehensive tax reform, they campaign against, and even fund with big donations, any forces to defeat Labour at elections.
The leading voices in political reporting and commentary are relatively positive about the new Labour policy. It’s worth looking at what these influential voices say – especially the political editors of the biggest media.
The Herald: Labour’s policy isn’t too radical
Herald political editor Thomas Coughlan has praised the strategic design of the policy in being able to “please businesses, households, party faithful [and] party factions”. He says that the policy has been carefully tailored to appeal to all and not really offend many at all. Referring to the Goldilocks principle, Coughlan says the tax is “not too progressive, not too Tory”, and in fact, because the policy is so mild, it’s “progressive in name only”.
Here’s the key quote from Coughlan today: “Hipkins’ centrist instincts appear to have prevailed – and while agreeing to some form of progressive tax policy was clearly a sop to those to his left, Hipkins is still clearly mindful of the business and household audiences to his right.”
The Post: Labour has a winning policy
The Post political editor Luke Malpass concludes that the moderate nature of the tax policy makes it a winner for Labour, and the more it is criticised for being moderate, the more that Hipkins will be happy: “The Greens and a bunch of left-wing tax types have already denounced the policy for being too weak, and that will suit Chris Hipkins just fine.”
Malpass suggests that Labour may have finally got their tax reform timing and policy right: “this is precisely the time to give it a go… Somewhere deep down, a lot of people sense that there is something a bit unsustainable about investment properties earning a big, untaxed return while salary and wage earners are coughing up more and more of the national tax take… increasing numbers of parents and grandparents are worried about their children not being able to afford a home”.
As with other leading commentators, Malpass praises the strategy of earmarking the tax to free doctor visits: “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. As a generalisation, emergency medicine is the most expensive to provide while primary care is the cheapest. It’s also worth noting that the Medicare card was a very effective device for Anthony Albanese in the Australian election.”
RNZ: Labour’s policy is pragmatic and clever
RNZ political editor Craig McCulloch also stresses how moderate the new tax policy is: “it’s little more than an expanded bright-line test – closely resembling the minority view of the 2019 Tax Working Group.”
He too emphasises the cleverness of the link to free doctor visits: “By tying its CGT to the health system, Labour hopes to frame it not so much as punishment for property owners, but more as a pragmatic way to fund something people actually want. It’s no mistake that the policy touches the two issues named most important by voters in polling: the cost-of-living and healthcare. Labour has also intentionally made the entitlement universal to ensure the widest possible appeal”.
BusinessDesk: Labour’s policy will be approved by Business
Even business audiences are being told the policy is moderate. The political editor of BusinessDesk, Pattrick Smellie, concludes today in his summary that Labour seems to have found a winner: “This time around, in different political times and with a better story to tell and a much less ambitious tax in mind, Labour may have found a CGT policy that voters can, if not love, then at least live with.”
Smellie also praises the role of Labour’s Barbara Edmonds in the policy: “Edmonds impressed with her solid grasp of the detail of capital gains tax” and “projected a refreshing authority and candour”. He credits her with taking the radical edges off Labour’s tax policy: “Her hand can also be seen in how limited the tax proposal is. Labour has now ring-fenced CGT to a discrete and increasingly unloved part of the economy: property investment. By leaving out almost every other kind of asset, the target is too small for its opponents to make hay with.”
Perhaps the most important part of Smellie’s commentary is his identification that in picking their very moderate version of a CGT, they have almost entirely just adopted the “minority report” recommendation that came out of the 2019 commissioned Tax Working Group exercise. This minority report was rejected and ignored by the left in 2019, as it was the most business-friendly option, essentially endorsed by Business New Zealand.
Here’s what Smellie says about this today: “The minority report had the backing of both the then head of Business NZ, Kirk Hope, and one of the country’s most respected tax thinkers, Robin Oliver. In other words, Labour has business lobby agreement for the argument that discouraging property investment over creating businesses and enterprise is good economic policy. No entrepreneur looking to exit a business will pay CGT on the proceeds of their business selling – unless it involves a lot of residential or commercial property.”
The Standard: An Unhappy political left
Make no mistake – Labour’s new policy is a defeat for the political left. The left in Labour (and beyond) were pushing for something much more progressive. For them, it wasn’t a question of whether the Labour leadership could be forced to adopt a more progressive tax policy, but whether it would be a mild version or truly something transformational. In this respect, it was mostly a choice between a capital gains tax and a more radical wealth tax.
The response to Hipkin’s announcement came straight away on Labour-aligned blogsite, The Standard, with party activist Greg Presland asking: “Is that it?” In this post, Presland captured the mood of those wanting significant change: “The tax itself is somewhat minimalist and not too different from what we had previously with an extended bright line test. I don’t understand why farms should be exempt... Public shares should be subject to a capital gains tax... And there is no sign of a wealth tax. The effect on the redistribution of wealth will be very modest.”
This is not the assessment of a hostile critic but of a loyal supporter confronting the reality that Labour has produced a policy designed primarily to avoid scaring business and big property owners rather than fundamentally addressing inequality. In the view of these more leftwing activists, the new Labour policy is a policy designed for the swing voters of suburban Auckland, not for the renters in South Auckland or the working poor in provincial towns. It moderates not to the median voter but to the anxieties of the upper-middle class.
Former party president Nigel Haworth also certainly thinks so. His response, published on The Standard, was scathing: “The later Robertson and long-term Parker views are lost. Second, this position is at odds with much of the thinking in the Party. And it is too important an issue to be subsumed under a discipline message as it speaks to the fundamental purpose of a party for working people.”
Haworth’s point cuts to something deeper than tax policy. This is about what Labour believes it stands for, and whether it has the courage to stand for anything at all when the polls look dicey. The party spent decades building an intellectual case for comprehensive tax reform — David Parker’s research showed 311 of the wealthiest Kiwis paid an effective tax rate of just 8.9 percent while middle-income earners paid double that. But when push came to shove, Labour chose not to fight.
The Spinoff: Labour is betraying us with blandness
The progressive Spinoff news site was also clearly underwhelmed by Labour’s decision to go with a moderate tax option. Joel MacManus penned a piece to compare Hipkins with British counterparts such as Tony Blair and Keir Starmer, using the popular metaphor on the British left that Labour politicians obsess with operating a “Ming Vase Strategy” which involves politicians “playing it safe, taking no chances, as if they were carrying a priceless Ming vase across a marble floor.”
MacManus laments that Labour isn’t taking a more radical tax reform that would bring in enough funding to reduce the taxes of workers: “The simplest way to implement a capital gains tax would be as a pure tax switch, using the new revenue to reduce income tax for working people. But that exposes the dirty little secret of Labour’s policy: it wouldn’t bring in anywhere near enough revenue to make a noticeable dent in income taxes, because it will only apply to gains made after 2027.”
Labour has smartly triangulated
The chances of Labour forming the next government have probably gone up after yesterday’s announcement. Certainly, in the lead up to the next election the party will be better be able to cultivate ties with business leaders now that they have shown the Labour is still “safe for capitalism”. Wealthy and Establishment forces will appreciate that the new tax policy is something that they can live with.
Business will be particularly happy with all the exemptions that Labour has granted in the capital gains tax. This tells the real story of why Labour has moderated so much. Farms are excluded because Labour cannot afford to alienate rural communities. Shares are excluded because Labour does not want to be painted as hostile to KiwiSaver and “mum and dad investors”. Business assets are excluded because Labour is desperate to rebuild its relationships with the business community.
Each exemption represents a constituency that Labour believes it cannot afford to offend. The result is a policy shaped entirely by what Labour is afraid to do, rather than what it believes should be done.
Can Labour tell us what the new CGT is for?
The central question Labour has failed to grapple with is why tax reform is necessary in the first place. Is it to raise revenue for public services? Is it to reduce income tax on workers? Is it to address inequality and rebalance a system that privileges wealth over work? Or is it simply to demonstrate policy credibility and neutralise an electoral vulnerability?
The narrow, property-only CGT tied to three GP visits suggests the answer is the latter. This is a policy designed primarily to solve Labour’s electoral problems — its reputation for avoiding tough decisions, its lack of economic vision, its vulnerability to accusations of being weak on inequality — rather than New Zealand’s economic ones.
If the goal were serious revenue raising, the policy would include shares, business assets, and other forms of capital. If the goal were redistribution, it would be paired with income tax cuts for low earners or increased benefits for those in poverty. If the goal were economic efficiency, it would close the distortions that make property speculation more lucrative than productive investment.
Instead, the policy does none of these things comprehensively. It raises modest revenue, has minimal redistributive impact, and leaves most distortions in place.
Labour has chosen safety over transformation
Chris Hipkins and his colleagues would probably not be worried by the critique above. They say that they would rather be in power, making some small changes, than out of power, dreaming of transformation.
There will always be those who say Labour has to reflect reality, which is that businesses and the wealthy will campaign against more radical tax reform, and Labour needs to accept that rather than fight back. It is certainly true that the political left and the Labour Party aren’t exactly in a very healthy shape at the moment. Fighting for a truly radical tax reform would require mass movement and participation in politics. It would involve a long and serious campaign of intellectual debate with the public.
Unfortunately for those who want this, New Zealand political parties don’t have the capacity to foment change anymore, and win over the public to big changes. Instead, our political parties revolve around focus groups, opinion polls, and PR-led political operations.
Therefore it can be concluded that Labour has come up with a winning capital gains tax. Yet, Labour might still suffer from not even trying to push the dial much on tax reform. By choosing not to fight for comprehensive reform, the party risks giving up the one thing that might actually justify its existence as a progressive party.
What this policy will do is rob Labour of any claim to being transformational, to being brave, to being willing to take on entrenched wealth and power. It confirms what many suspected: Labour is National-lite, just with better PR and more empathy.
Dr Bryce Edwards
Director of The Integrity Institute
Further Reading:
Thomas Coughlan (Herald): Labour’s mini-CGT sets a small target but has big loopholes, including for the ‘family home’ (paywalled)
Luke Malpass (Post): Will a capital gains tax be what the doctor ordered for Labour? (paywalled)
Craig McCulloch (RNZ): Labour’s capital gains gamble: From leak to launch
Pattrick Smellie (BusinessDesk): Labour’s CGT: ‘the moderates have won’ (paywalled)
Pattrick Smellie (BusinessDesk): Labour’s capital gains tax, health plan by the numbers (paywalled)
Nigel Haworth (The Standard): Tax: the debate must continue
Greg Presland (The Standard): Is that it?
Joel MacManus (Spinoff): How much is the capital gains tax on this priceless Ming vase?
Marc Daalder (Newsroom): Long live the Tax Working Group
Maybe Hipkins-the-aspirational should talk to the 200 people leaving New Zealand everyday in search of a better life. This is New Zealand do-nothing 101 and in my view offers a glimpse of a future embedded in gradual decline. The rich will get richer, the poor will get poorer, and politicians will swing the pendulum from left to right promising to fix New Zealand’s endemic problems. My god, it’s boring to watch and hard to live. My decision about the future is getting easier with every announcement.
"Malpass praises the strategy of earmarking the tax to free doctor visits.."
Probably is politically smart, but that fact itself points to a lot of what's wrong with this country. With people valuing inward looking, immediate gratification kinds of things, spending on eating a fish rather than on the capability to catch fishes.
In any case, ironically perhaps, the less tax such a CBT raises, the more likely it is to have shifted investment away from non-productive housing into sectors that could actually generate export income. It is this rather than doctors visits, and even lower house prices (although with less incentive to build that may not be the case), that are the real potential worth of such a policy.