When It Comes to Capital Gains, Anything Goes

Labour Leader Exposes Her Flank

We are rapidly coming to the view that New Zealand's Labour leader, Jacinda Ardern is a sandwich-short-of-picnic.  She has exposed herself and her Party to the risk of a merciless and overwhelming attack that will destroy Labour's election chances.  It remains to be seen whether the attack will be mounted and successfully executed.  We suspect it's something the Establishment does not want to see happen.  The media would be devastated by their poster-girl falling exhausted from death by a thousand self-inflicted cuts.  But it is her own fault.  She--and by all accounts, she alone--has placed Labour in this acutely vulnerable position.

The issue is tax.  We all know that the Labour Party is the tax-and-spend party.  It is part of its genetic makeup, evident for decades.  Ardern, political neophyte, wants to walk in that tradition.  She wants to tax, and she wants to spend. It's the only way to achieve the grand Millennial vision of the Left. Since Labour party politicians are not demi-gods and cannot work miracles, the only way they can make progress is by spending the people's money which must first be stripped off them via tax.  For some explicable reason the average voting joe isn't enthusiastic.

To avoid making voters mad, she has been oh-so-clever.  She has introduced the "possibility" of a capital gains tax after the election.  But she knows that actually to put a percentage rate on the tax risks electoral suicide.  As soon as the capital gains tax rate is specified, voters are going to calculate the cost to them--and that's when they turn very quickly into anti-tax voters.  So, she has endeavoured to speak grandly and presidentially of setting up a working group to make recommendations as to what will be taxed and how much; only then (on the presumed basis of reasoned and researched wisdom) will she reveal to the voters how much they are going to get stripped away from them.  In the meantime she is "not ruling anything out".

This exposes Ardern to enormous electoral damage, if the Establishment has the professionalism to follow it through.  Think of Ardern having lifted her arms, turned side on, and inviting anyone who wishes to take up the dagger and deliver the coup d'grace.

Why is this such a major tactical blunder?
 Why does it risk the end of Ardern and the Labour campaign?  It is because Ardern has justified her "we will not tell you how much we will take" gambit on her integrity.  She is asking the electoral to "trust me" when it comes to taxing you more.  She is both kind and reasonable--and so can be trusted in this matter. At least that's the unstated, silent message she projects.

Her political opponents merely need to puncture the self-righteous, unctuous bubble she has blown.  It is waiting to be done.  None have yet dared to call her bluff.  If her political opponents had been sufficiently bold raise such an "argument" for their own party's positions they would have been gone by lunchtime.  But Ardern--well, she's special.  She is the people's princess, non?

Here is what needs to happen: political opponents merely need to put out a strongly-worded press release that asserts: "Labour may take 100 percent of all capital gains in its new tax".  As extreme as it may seem, that statement, on the face of all the evidence, is true.  Remember, the only thing Labour has ruled out so far is taxing the family home.  Everything else remains on the table.  Ardern has been emphatic about this.  And this has been her stupid gambit: since nothing is yet set in concrete, she refuses to say anything about the actual tax and how it will work, until the post-election working party comes out and tells us.  It is what we will now call the "Ardern gambit": trust me, anything is possible.

As soon as Ardern is confronted with a headline such as this, she would have to respond  along the lines of, "I have been perfectly transparent.  I am going to wait until the working party on tax comes back with its recommendations.  I am not going to make any commitments beyond that."  But she would not be able to deny the claim.  Under Ardern's watch, no-one can rule out a capital gains tax of 100%.  Ardern herself has not ruled it out.  If Ardern has not ruled it out, no-one else can.

Now, we expect that Ardern would crumble pretty quickly.  Faced with the pressure she would concede, "I can confirm that the capital gains tax rate would not be 100%."    

Then comes the next press release: "Ardern confirms Labour may take up to just short of 100% of capital gains in its new tax."  And so forth.  Ardern will fold.  She has to.  She will have to climb down off the mountain of sanctimonious deflection she has been living upon.  But, it would not end there.  There are dozens of permutations, combinations, and possibilities that may end up being part of Ardern's capital gains tax.  Since none can be ruled out, we have to rule them in.  Ardern must be made either to confirm them or deny them.

She has placed her party in the most vulnerable position we have seen in the past thirty years.  And it appears to be all her idea.  Maybe her deputy should take her into a side room and school her more perfectly about what happens when politicians make things up on the fly.  He knows a thing or two about that.