Labour's CGT Policy Bold and game-changing? Sadly, no

Labour leader Phil Goff was right when he said yesterday that New Zealand needed bold tax decisions which are game changing rather than tinkering or stop-gap measures. It was time to fight he said. Too right.

But then the actual policy details revealed neither a game changer for the economy nor for Labour's electoral chances in November.

Goff asks why people who work for wages and salaries and have every dollar they earn taxed be subsidising those who make their money from buying and selling property but pay no tax? Good question. But a 15% capital gains tax will still mean property investors or speculators will be paying a lower rate of tax than anyone on wages and salaries. Under Goff's proposal wage and salary earners will still subsidise parasitic speculators. A properly applied capital gains tax would tax all income, irrespective of its source, at the appropriate personal tax rate. Labour's flat tax on capital gains is weak.

In excluding the family home Goff was aiming at the middle class, reassuring them that their place on the ladder would be safe under Labour. But what was there for low income New Zealanders? These are the New Zealanders who are already tenants in their own country - existing from pay packet to pay packet and with no assets besides an old car and a few household appliances. Goff plans to take GST off fresh fruit and vegetables and remove tax from the first $5,000 of income. There's nothing bold or game changing here for the communities which have borne the brunt of the destructive policies which Labour started in the 1980s and National continued apace in the 1990s. The changes Labour proposes now will be significant but underwhelming.

The same applies to the reintroduction of a top tax rate. Overall the income tax changes would give those earning between $25,000 and $150,000 another $525 a year - the equivalent of a cup of coffee a week. At the other end a person on $175,000 a year would pay $975 more a year, and someone on $200,000 would pay $2475 more in tax. This will be unnoticed by the poor and hardly even an irritant to the rich.

Goff didn't talk about the biggest problem the country faces which is the vast chasm between rich and poor with all its well documented social consequences. He got closest when he said New Zealanders believed in the "fundamental non negotiable principle of fairness which is basic to our values as New Zealanders". It's lucky we were spared his explanation of what it means. Goff sat at the cabinet table in the 1980s while Labour gave the fingers to fairness and then he occupied a place in Helen Clarks cabinet which after nine years of strong economic growth left almost 200,000 children living in poverty.

Goff is neither willing nor able to bring about game changing economic policies. He remains mired in neo-liberalism. Despite what he said it was tinkering stuff designed for Labour to break back into the electoral race in November but no more.

More interesting were his comments about New Zealanders becoming tenants in our own country.

This nod to nationalism is becoming a familiar theme in National and Labour rhetoric. In National's case it is to deny political space to Winston Peters and in Labour's case it is to emphasise National's sale of state assets as unpatriotic. But for both it's also because they sense a growing unease with the parlous state of our economy and the abject failure of the country to provide a halfway decent opportunities for young New Zealanders, working families or retirees. After nearly 30 years of free market fundamentalism the public knows in its heart that the country is stuffed and that politicians are to blame. And they are right. I can't see anything in Goff's speech or accompanying policies which will either change that perception or alter the reality in time to come.

Political pundits will now look for signs of movement in the polls. Will the policy bring a recovery in Labour's fortunes or will it fall flat?

I don't think there will be a significant change in the polls for Labour. There's just nothing here to get excited or annoyed about. The big bold idea is missing.

Reaction from National has been predictable but United Future's Peter Dunne is worth a comment. Dunne said Labour's package was "little more than a massive attack on personal achievement and success". In Dunne's warped world honest work takes second place to speculation and greed.

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