So the Greens co-leader James Shaw recently made a mistake. In his role as Associate Finance Minister approving funding for “shovel-ready” projects, he fought hard for a private “Green school” to get funding to expand their buildings and, therefore, their student capacity. There are many problems with what he did: forgetting to oppose private schools as per Green policy; supporting an approach to environmentalism based on individual education of wealthy elites’ children, rather than systemic change; finally showing some spine around the cabinet table and for this; being so out of touch with his party’s kaupapa and membership that he actually thought his actions would be seen as a “win” for the Greens. It was a big mistake and it doesn’t say anything good about Shaw’s political judgment.
But here’s what happened next: the Greens’ membership, supporters, and former MPs flipped out. They rightly criticised what Shaw did, instead of sycophantically defending his actions because he’s the party leader. And Shaw called an emergency meeting with members, admitted it was a mistake, apologised unreservedly, and tried to do whatever he could do to reverse his actions.
Meanwhile, Grant Robertson, Shaw’s fellow Wellington Central-based MP and carpool buddy*, was working on an announcement of his own. Robertson is also effectively the second most important leader of his party, and he’s also a Finance Minister… and not just an associate one, but the proper one.
Robertson’s announcement was that his party, Labour, are finally going to increase tax on the rich. First, they’ve brought in a new top income tax rate of 39% on income above $180,000. And second… there is no second. That’s it. In this country of notoriously low taxes on the rich, in the greatest economic crisis since the Great Depression, their revenue policy is: Bringing back the Helen Clark/Michael Cullen top income tax rate of 39c, but to qualify for that top tax rate you have to earn as much as someone working 183 hours and 10 minutes per week on the minimum wage. No wealth taxes, just a small income tax change that even right-wingers think is too low. Australia, the UK, and other OECD countries have higher income tax on the rich, lower taxes on the poor, and of course capital gains taxes, even before the COVID recession… but Labour’s pathetic approach is literally lower taxes on the rich than what Don Brash proposed as National leader in 2005.
So what happened next after Robertson’s announcement? Well, there was dismay and anger from the left and from the centre (this example from No Right Turn is characteristically concise and well-reasoned: If not now, when?). But did Labour’s membership and supporters revolt? Did Robertson, like Shaw, call an emergency members’ meeting, apologise profusely for his massive misjudgment, and do everything in his power to rectify his mistake? Nope. None of that. The leader of the country’s biggest union, the PSA, even welcomed the announcement. The policy stands, and will probably become government policy after the election, unless polls change and the Greens get some leverage. Yet another opportunity for Ardern’s and Robertson’s promised “transformational change” has been wasted.
And therein lies the difference between the Green and Labour parties.
* “carpool buddy”: My partner saw Robertson giving someone a ride in his Labour car during the 2017 election campaign, and she’s like 76% sure it was Shaw.
“National and the Greens should work together” sentiment seems to have reached an all-time high. This is not because the two parties have moved closer together in policy or philosophy. It’s because after the election, this is the only way—short of a Nat-Lab grand coalition—to lock Winston Peters out of any role in government.1
I can’t be bothered to list examples because I’m sure you’ve all seen or heard people calling for a blue-green government arrangement (or “teal deal” if you will). Perhaps you’ve even suggested it yourself.2
What I want to talk about is the suggestion that usually comes after “National and the Greens should work together”. This is how former National PM Jim Bolger puts it:
“the Greens might be quietly reflecting on whether they, unique in the world of Green parties, should only link themselves to left-wing politics, whereas the environment is neither left wing or right wing, frankly. The environment is the environment; it’s Mother Earth we’re talking about.”
The idea is that the Greens would be more effective in pushing environmental policy if they stuck to that, and got rid of their insistence on left-wing socio-economic policy. This way, it is suggested, they would have a better chance of being able to find room for compromise and cooperation with National. Other Green parties in countries like Germany have been willing to form coalition governments with right-wing parties.
The Greens’ usual response is to give reasons why environmental justice and socio-economic justice (or environmental sustainability and socio-economic sustainability) are inextricably linked. Ever since they were the Values Party they’ve pushed both, and they don’t intend to stop now.
Another response could be to say that New Zealand is not Germany. Germany has a democratic socialist party called The Left which pushes left-wing policy even if the centre-left parties (the Greens and the SDP) don’t—even if they form grand coalitions with the centre-right. In New Zealand, the Alliance and Mana have disappeared as left voices in Parliament. Moreover, Labour kickstarted neo-liberalism and haven’t really repented from it. Until Labour make a significant change from Clark/Blair-esque compromise to Corbyn-esque social democracy, the Greens are the only party significantly trying to push New Zealand in a leftward direction.
However, both of these responses to the challenge accept the terms of the challenge (like Labour accepted the terms of National’s “dead cat” “fiscal hole” challenge). These responses accept the assumption that it’s the Greens’ left-wing socio-economic stance that blocks them from working with National, and that they’d be able to find common ground on the environment.
However, I don’t think this is correct. Certainly the Greens’ socio-economic stances—making welfare more of a livable UBI and less of a punitive control mechanism; raising tax on the rich and introducing it for property investors; returning the minimum wage to 2/3 of the average wage; reducing imprisonment—are all basically the opposite of what the Key-English government have done. However, I think Bill English is actually more likely to accept these policies than to accept Greens’ environmental policies. If Bill could be convinced these socio-economic policies are good “social investment”, he could get behind them. Of course, he won’t. (This is largely because National’s vision of “social investment” is so limited by a pathologically individualist mindset, and so tantamount to Minority Report in its instinct to control the risk factors rather than healing the determinants.) But it’s not outside the realms of possibility.
The Greens’ environmental policies, on the other hand, would require National to actually seriously challenge farm owners, drilling/mining companies, and other capitalists. Currently the costs of these capitalists’ activities are largely falling on the environment, and therefore on the present and future public. The Greens want to stop these business activities destroying our shared home by preventing and internalising these external costs. They’ll ban some unjustifiably polluting business activities, such as drilling or mining or exploring for more fossil fuels at a time when even burning the fossil fuels already dug up will make the Paris target impossible. They’ll tax other business activities for their pollution—making those who produce the costs pay the costs, instead of externalising them. And they’ll use the tax revenue to clean up the damage and to subsidise farmers and other businesses moving to more sustainable ways of doing business.
Do you really see National doing that? The party whose base is farm owners and other capitalists? The party that think climate change is only an issue for “elites”, and that it’s not a “pressing concern”, and that we should adapt to climate change rather than mitigating it? The party who scaremongered on a small water tax for some big farms that are currently destroying the quality of Aotearoa’s awa and wai?3
So how should the Greens respond to this “helpful suggestion” to the Greens—and this implicit congratulation of National for their supposed hypothetical willingness to “green up”?
Well, I wonder if they should make an offer to National this election: If you let us have our way with the environment, we’ll give you confidence and supply to do everything else you want to do as the Government for the next three years. We’d pass a zero carbon act and introduce the Greens’ policies for actually getting to zero carbon. We’d follow the Greens’ ideas to clean up our rivers instead of pretending National and the “hard-working farmers“4 already have the issue under control. We’d build sustainable transport instead of roads, roads, and more roads.
National would refuse this offer. And then maybe people would stop trying to make the teal deal happen. Or at least realise it’s not Green stubbornness stopping it happening. It’s National’s near-total lack of concern for the environment.
- Special votes are extremely unlikely to change the basic possibilities. ↑
- Someone who can always be bothered finding, listing and summarising examples is my hero Bryce Edwards who has subsequently done one of his legendary political round-ups on the teal deal. ↑
- These points I’m making are not new—here‘s basically the same point made three years ago on the No Right Turn blog. ↑
- It was shrewd of National to portray criticism of National’s record on rivers as criticism of farmers who are working hard to clean up rivers, because it’s deeply ingrained in the NZ psyche to pretend we’re really farmers at heart. We all lie about being the rural type. ↑
John Key is being a Spurious George again. In explaining why he’d love to cut taxes for (mostly) the rich, but just can’t afford to yet…
Key pointedly said that when National took office the average wage was $47,000 a year but had risen to around $55,000 today, and was expected to climb to $62,000 by 2017. This was creeping towards the top tax bracket, where salary earners pay 33c in the dollar for earnings over $70,000.
“I don’t think it was anyone’s intention that someone on the average wage would be paying the highest marginal tax rate in New Zealand,” he said, echoing arguments National has been making in private for months.
Well, Mr. Key, it also wasn’t anyone’s intention for the incomes of the rich to rise so much faster than those of the poor, pushing up the average (mean) income to a level less than 30% of people reach. (Actually it was some people’s intention: right-wingers who think inequality is a good thing)
Key is trying to give the impression that the average (mean) income is the income earned by the person in the middle. But mean doesn’t measure the middle of the people, but the middle of the money; and of course the money is weighted towards wealthy outliers at Mr. Key’s end of the spectrum, who push the average up with their exponentially higher incomes.
A far more useful statistic is the median income: the amount that half the people earn more than, and the other half earn less than. This truly represents the average Kiwi. The median individual income is almost exactly $30,000 p.a. – just under the middle of the third-to-top tax rate band.
It’s actually getting more and more misleading to portray average income as a reflection of middle-income earners: As inequality worsens, the “middle of the money” (average income) is moving further and further from the “middle of the people” (median income). My eye makes it less than 10% difference in 1980, up to about 25% now:
It’s also worth noting that the increased average income Key mentions has accrued almost entirely to above-median earners:
Another problem with mean income figures is they hide inequalities like these and portray a boon for the rich as a boon for everyone.
I do agree in principle with indexing tax-rate thresholds (in fact, all thresholds… *cough*student loan repayments*cough*) for inflation, but Key’s trying to use that principle as a smokescreen for more tax cuts to the rich, spinning this as a release for the average NZer from crippling over-taxation, which is not true on any level whatsoever. Taxpayers between the median and mean incomes actually pay the lowest proportional tax:
And in the context of a supposedly progressive tax system it’s the rich who are really best off:
“At very low incomes, New Zealand’s taxes are a little above the OECD average … But for high incomes, our overall “tax wedge” … is the lowest in the developed world.
Our tax system asks too much of those with little, and too little of those with much.”
This would only get worse under National’s proposed 2017 tax cuts.
In any case, if Key is really worried about too many NZers in the top tax bracket, there’s an obvious solution: Implement a new top tax rate(s) for the super-rich, like most similar countries have:
Soooooooooo: whatever people’s intention about who should be on the top tax rate, it’s clear John Key’s intention in referring to the mean income, rather than the median, is to mislead (or perhaps he simplify misunderstood statistics in a conveniently misleading way, as with child poverty at the last debate). Sadly he’ll probably largely achieve that intention.
John Key on raising incomes for low-income families, 3 News, 9 Sept 2014:
Prime Minister John Key says there’s no evidence that giving people money makes any difference.
“What really makes a difference is employment and employment opportunities,” he told reporters.
John Key on tax cuts, 3 News, 10 Sept 2014:
“Whatever the number was for an individual or a household, whether it’s $500, $1000, $1500 – you can pick your poison – I don’t accept the argument that doesn’t matter to a low- to middle-income family. I think it does matter.”
The unholy trinity of National, right-wing blogs and the mainstream media are scaremongering about Labour et al’s proposed capital gains tax again. Because it’s new and because it’s a tax, it seems scary and there’s easy political points available in opposing it. But in fact most countries have capital gains taxes. New Zealand’s tax system is one of the most generous to the rich, and part of that is our anomalous lack of CGT.
The current scaremongery relates to inherited family homes of deceased family members. The impression John Key et al are putting across is that a grieving, struggling family will have to scramble to sell their deceased parents’ family home to avoid being stung with a hefty capital gains tax they can’t afford. IF that were the case, a one-month “grace period” certainly doesn’t sound like long enough to grieve, get organised & sell the house to avoid financial ruin.
But it’s NOT the case. Even without a grace period, only profit since inheritance – I repeat, profit since inheritance – would be taxable (and at a modest 15%). If a family inherited a house worth $400,000, and sold it a year later for $430,000, they’d incur tax of $4,500, but they’d get to keep the other $25,500. They’d still be $25,500 better off than if they’d sold the house straight away, and $425,500 better off than if they hadn’t inherited the house.
This is no different from inheriting any other profitable asset. Currently, if you inherit a company, and it makes $30,000 profit over the next year, you’ll be liable for 28% ($8,400) company tax on that profit. There’s no “grace period” there. And more importantly, there’s no “grace period” on the profits – 72% of which you’ll keep and no doubt enjoy.
So it’s extremely dishonest of Key to portray families inheriting profitable assets as somehow hard-done-by, simply because they’ll incur tax on those profits. Truly hard-done-by families are the families of (increasingly numerous) people who’ve never managed to buy a house (largely because of tax-free property investment). Those families will receive no inheritance (let alone profitable inheritance), and many struggle to pay for (increasingly exorbitant) funeral and burial costs.
Years from now, if my siblings and I inherit my parents’ house and it makes capital gains by the time we get around to selling it, we’re not hard-done-by if we incur tax on those gains. We’re lucky my parents own their home in the first place, and have something to leave us (in fact, something that continues gaining value until we sell it).
That said, I do tend to agree there should probably be a grace period of maybe six months, because the tax is supposed to target people who buy extra houses for profit, not people who gain an extra house by accident because a relative died. Besides, it may take some months to decide whether they’ll sell it, keep it as a rental, or have other family move in (in which case it remains a family home, thus exempt from CGT). But a grace period would be an act of compassion to people who don’t really need it; certainly not a demand of justice or need.
Of course, Cunliffe didn’t help his own cause by remembering the policy wrong and declaring unequivocally that the grace period will be one month. In truth, the length of the grace period is a detail that they’ll leave to an expert advisory group to work out. It was incompetent of Cunliffe not to know this.
Anyway, despite those two caveats: don’t believe the hype. Look into it, listen to David Parker’s explanation, think about it, etc. After doing so, no right-thinking person would think there’s anything to worry about.