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.
The two faces of National’s hitherto successful PR strategy
UPDATE (19 Aug, evening): Literally in the last few hours, National have unveiled some policy on their website. This renders the first two graphs and table out-of-date. But the second half is still relevant, and I reckon it’s worth leaving the first half online as a time capsule of what National’s campaign looked like until WhaleGate. Coincidence? What do you think?
Original blog (19 Aug, afternoon):
“the left have given up on the policy argument. They don’t think they can beat the National Government on the issues … so what they’ve decided is they’ll play the man, not the ball … but we’re going to keep talking about the ball.”
This is similar to his quip when Laila Harré announced she was running against Key in his local seat:
“we won’t be having much of a debate about policy – the only policy the Internet Party has is to make sure Dotcom isn’t extradited.”
In fact, I’ve been following and compiling the various parties’ policies, and the Internet Party have far more policy on their website than National do – even though the IP have only had a few months to formulate theirs. In fact, National have less policy on their (single) policy page than any other party – significantly less than most of them. On word count, they only provide literally 2.4% as much as Labour or 1.1% as much as NZ First:
It is true that some parties (notably Labour, the Greens and the Internet Party) provide fuller versions of their policies or additional documents, linked from their main policy pages. This is the main difference between National’s and the IP’s policy websites.
If we’re generous, we can include a couple of documents from January about their 2014 priorities in this category… the speech is largely not policy, but they do link to these documents at the bottom of their policy page. This time National manage to claw their way up to 2nd-to-last, because ACT only expand upon two of their policies – but they’re still left in the dust by the left-of-NZ-First parties he accuses of giving up on policy:
It’s also worth noting that Labour and the IP both state that even more policy is forthcoming, and the Greens are frequently updating theirs. I wonder if National’s are on the way, too? [update: I guess so! National also now say there’s more on the way]
Here’s the full data, if you’re interested:
While I spent an embarrassingly long time on this [update: now-obsolete! grrr…] number-crunching, we actually didn’t need these numbers to know that National try to run policy-free campaigns and policy-free politics wherever possible. They don’t engage with public questions like this, this or this. They don’t engage (openly) with blogs; certainly not opposition ones, and certainly not on policy questions.They don’t really put policy on their billboards – some people had to do it for them last election. Their flagship policies are generally pretty unpopular. They [update: still] have [basically] no policy about some of the biggest issues facing NZ (climate change, child poverty, inequality and the housing crisis) – in fact, they often deny that they’re issues.
Nicky Hager’s Dirty Politics has provided some alarming insight into what kind of politics they do instead of policy politics. I haven’t read it, but Danyl McLaughlin helpfully summarises the basic thesis thus:
John Key’s National government uses a ‘two tier’ communications strategy; positive communications, which are focused around John Key, who is presented as ‘relaxed’ and decent, and negative/attack communications, which are conducted covertly by senior staffers in Key’s office and fed to the media mostly – but not exclusively – through Cameron Slater’s WhaleOil blog.
Obviously, the emphasis of the book is on the negative ‘tier’; the positive ‘tier’ was already quite obvious… but in fact both strategies involve “playing the man, not the ball” … positively, they focus on “the man” of John Key, his smiling face [update: which emblazons 12/18 of these and 4/4 of these plus a bonus] and perhaps some content-free feel-good generalities coming out of it. Negatively – well, you can read the book or the excerpts or the leaks or the blogs yourself.
Playing the man in these two ways has been a winning strategy so far, and has kept National riding high since Key took over (they’re currently polling well over double their 2002 election result). Will Dirty Politics and Whaledump change that? I hope so, but I can’t say with confidence.
What I can say with confidence, though, is that Key’s latest accusation is the most brazen hypocrisy I’ve witnessed since I’ve been following NZ politics.
Post-script (21 August):
Here’s the updated first graph now that National finally have some policy (5965 words of it, to be precise):
They’ve also deleted the two documents they previously linked to, but they’ve added a whole lot of links on each of their policy pages (mostly past news stories about what they’ve done while in government, which is kind of cheating… but also some fuller policy statements). I can’t be bothered counting that up at this stage. My guess is it’s still much less than Labour and probably less than the Greens and Internet Party too (definitely if we only include policy announcements proper).
And yesterday, Mickysavage from The Standard responded to the latest idiot millionaire (good at making money, not so good at fact-checking National spin) to whom the corporate media has given uncritical voice to trumpet this propaganda. He says it better than I can:
Rod Drury: “What I’d like to see is the Government have another term because they’ve had two terms where they got the debt sorted …”
Mickysavage: “Such economic illiteracy coming from such a senior businessman is a worry. It obviously needs to be repeated that in June 2008 Labour had paid off
allcrown debt and the crowns accounts showed a slight surplus. By September 2013 net Crown debt had reached $60 billion and increases in debt are predicted for years to come.
Of course many will then trot out Key’s mantra that Labour had left the country with a decade of deficits but this statement is essentially a lie. The Global Financial Crisis was the cause of the sudden change in the country’s finances but instead of Helen Clark and Michael Cullen being blamed I can suggest many other names of those who should take responsibility. Names such as Wall Street, Morgan Stanley, Bear Stern and my personal favourite Merryl Lynch. Because it was a bunch of robber merchant bankers that brought the world’s economy to its knees.”
Here’s a couple more graphs and a couple more quotes, to help illustrate the various impacts of the GFC (for which Key was partly responsible), the 2010 tax changes (which made tax regressive for the majority of incomes), and the Canterbury earthquakes.
However, please note that the main point of this blog was never to say National have been irresponsible with their deficits and debt (I tend to think they have been, but it’s a complicated question). The main point was to show that the right-wing suggestion that Labour are irresponsible with deficits and debt is completely unfounded.
“The estimated cost of the Canterbury rebuild has been increased … Mr Key said the budget would also show the estimated net cost of the earthquakes to the Crown would rise from about $13 billion to about $15 billion.”
“Tax as a proportion of GDP is slightly below OECD averages and has declined markedly over the last few years … New Zealand has, like other countries, faced a cyclical decline in tax revenue as a result of the global financial crisis but there were also important policy steps which reduced tax revenue between 2004–05 and 2009–10.”
I’ve written a sequel blog on the equally pernicious lie that National are better for employment than Labour, because (it’s assumed) beating up beneficiaries and keeping wages low are good for unemployment.
Finance Minister Bill English conceded that the Government would like to have had more New Zealand investors than the 62,000 and a higher share price than $1.50.
But he blamed in no small part Labour and Greens’ energy policy, accusing them of scaring off mum and dad investors from Mighty River Power and Meridian because of their policy to control wholesale power prices.
“They set out to sabotage lower income New Zealanders doing it. Unfortunately they’ve had some effect.”
So Bill English (yes, that’s the deputy prime minister, not your ignorant workmate) thinks poor NZers can afford to buy shares, and the only reason they aren’t buying shares in what we used to own together is that Labour and the Greens “sabotaged” their investment plans by “scaring them off.”
The most obvious explanation is that he’s trying to contort the embarrassing failure of the asset sales into being somehow the opposition’s fault.
A more worrying possibility is that he actually believes what he’s saying. This is, after all, the man who wrote off child poverty as merely “relative.”
70% of National supporters don’t know anyone who’s unemployed, so what are the odds the National deputy leader knows any “low income New Zealanders”?
As Robert McAfee Brown put it: “who we listen to determines what we hear; where we stand determines what we see.”
(Re. the title: I’m happy to be corrected)
NZ’s political parties
at the 2011 election now updated for the 2014 election, according to PoliticalCompass.org
“It’s actually a very clear decision for New Zealanders. It’s sort of centre-right versus the far left.” – John Key today
Coming from the most right-wing prime minister in NZ’s history, this is the height of dishonesty and hypocrisy.
More likely, the next Labour government will be centrist or centre-left… still considerably to the right of traditional Labour values yet hopefully a genuine alternative to the neo-liberal inequality consensus of the last four Labour/National governments. Cunliffe has gone on record acknowledging that this neo-liberal inequality experiment has failed our economies and our people.
Meanwhile, Key, a long-time architect of this failure, is still drinking the neo-liberal Kool-Aid… dogmatically pushing National’s far-right, anti-democratic, economically idiotic, ultra-capitalist inequality ideology as far as we let him get away with.
Key, with his loyal servants in the corporate media, will attempt to claim the ‘centrist high ground’ and whip up McCarthy-esque hysteria about Cunliffe. For the second time in Cut Your Hair history, I’m advising: set your bullshit detectors to maximum.