Has the tax wedge split the Left?

And why did National make it all about trust, not money?

Chris Hipkins was probably hoping to put a stop to speculation when he ruled out capital gains and wealth taxes last week. But he’s effectively encouraged speculation about whether Labour will do a post-election U-turn on tax to get the Greens and Te Pāti Māori on board. And so National responded by reframing it as a matter of political trust, not hard-headed economics. What was going on?

The Greens want to be in cabinet and to establish a wealth tax, so they threatened to sit it out on the cross-benches if Labour pre-emptively blocks that policy. The Green and Māori parties took the opportunity to maximise votes by giving Labour a hard time about it. And many progressives were openly unhappy about Labour’s move.

Most New Zealanders, especially on the left, basically support a CGT or a wealth tax, for the sake of fairness and redistribution.

Hipkins’s explanation that New Zealanders are more concerned about other matters at the moment overlooked the fact that New Zealanders are always concerned about fairness or equity. Furthermore, they don’t believe that the country is getting any fairer.

Why was Hipkins swimming against that tide then?

He was trying to head off at the pass the attacks from National leader Christopher Luxon about Labour being tax-hungry.

After all, you can almost hear Luxon rehearsing his line about Hipkins and Robertson hiding new taxes up their sleeves.

Now that the Greens and TPM have made their feelings known, moreover, Luxon can warn voters that Labour might flip-flop on its tax policy in order to get those parties on board in government-formation negotiations. So Hipkins hasn’t shut this debate down at all. Instead he’s copping it from both sides.

National’s response wasn’t framed in economic terms though. They made it about political trust: for the sake of retaining office, Labour’s pledges on tax could prove to be empty after the election; therefore, ‘you can’t trust Labour on tax’. They’re saying to everyone out there, not just the very wealthy, that this is a sign that they shouldn’t trust Labour in general.

National is also hinting that ‘you can’t trust Hipkins’. They’ve seen the Reid survey that showed that only 37% trusted Luxon, compared with 53% for Hipkins, and they’re trying to turn that around.

Most voters won’t bother to learn much about the parties’ tax policies, let alone compare their merits, but they’re alert to unreliability or confusion. National’s aim is to undermine middle New Zealand’s confidence in a potential Labour/Green/TPM coalition government. Those three parties fighting among themselves last week was a gift to National.

A similar strategy worked for National in 2014 (see below) even if it just discouraged some people from voting. Will they use the same kind of satire this year?

Those who’ll be happy with Hipkins’s refusal to tax wealth are naturally the most wealthy – who don’t vote for Labour anyway. The threshold of net wealth liable for tax would have been $5 million per individual, or $2 million in the Greens’ version. Few people would’ve been affected.

But disappointed progressives may lean more to the Green or Māori parties now.

Centrists who own, or aspire to own, property may never be affected by anyone’s wealth tax, given the high proposed thresholds. But such technicalities may matter less, in political terms, than their distrust. To what extent last week’s fiasco will lean people towards National remains to be seen – but this may prove to be the wedge that splits the Left.

Labour’s polling has been trending downwards since March, from mid 30s to low 30s. Last week Labour did some further damage to its own chances of retaining office. They may have underestimated the negative reactions from their potential partners.

TPM’s co-leader Debbie Ngarewa-Packer said that, after the election, prime minister Hipkins ‘will not have the luxury of deciding what they will or won’t do’. That could be because he won’t be prime minister any more. I don’t think she meant it that way, but open disrespect for the prospective coalition leader doesn’t increase her party’s chances of supporting the next government.

As a whole, then, the left gave the right an open goal.

In a week that could’ve been dominated by Hipkins on the international stage in Brussels and Vilnius, National was chalking one up at home.

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Note for readers: Advance voting starts on 2 October, and election day is 14 October. So the parties will want to have their manifestos and messages out there by the end of September. Around that time, I’ll start posting more frequently, covering the leaders’ debates, important opinion polls, the election results and the government-formation process that follows, which can take a few weeks. A hung parliament is a possibility.

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