Making up for lost time

Written By: - Date published: 8:34 am, May 22nd, 2024 - 39 comments
Categories: capitalism, david parker, Deep stuff, Economy, grant robertson, labour, tax - Tags:

Benjamin Franklin observed that “You may delay but time will not, and lost time is never found again.”

This came to mind when considering the reported outcome of last weekend’s Auckland regional conference of the Labour Party.

Members were seized by the need for change. In particular, they applauded a future Labour-led government’s commitment to tax reform, perhaps the major failing in previous periods in office. One hopes that similar sentiments will wend their way through other regional conferences and the national conference at the end of the year, and through Policy Council and on into policy for the 2026 election.

Franklin was right. Every missed opportunity to reform taxation makes subsequent reform attempts more difficult. Entrenched interests become further entrenched. The chorus of self-interest in favour of inequality will become louder. Labour’s own willingness to engage with difficult issues will become more stretched. Procrastination will make things evermore difficult.

Why Labour is in this situation is understandable. The 1930s Keynesian Accommodation has been moribund for half a century. The days of Helen Clark’s government seeking to stem the flood of neo-liberal outcomes are long gone. Even then, policy trimming under attack from the unleashed power of Capital was rife.

Look, for example, as the fate of employment relations reform after the first step of the Employment Relations Act. Fair Pay Agreements had to wait a further twenty years to see a short-lived light of day. Internationally, defeats of the democratic Left in the 1970s and 1980s have caused the international Labour tradition to turn away from what is sometimes today called “real transformation”.

Transformation was in any case always going to be difficult, for an essential feature of Keynesianism was a willingness on the part of the Labour tradition, political and industrial, to operate in committed fashion within a regulated Capitalism.

That arrangement marginalised alternatives. It bound politics into a model of quid-pro-quos, which tended to exclude alternatives. This was understandable.

In the context of the Depression and the Second World War, Keynesianism made great sense, and it worked for two generations. The problem was, as Piketty and others point out, Keynesianism did not meet Capital’s needs from the 1970s onwards. Global Capital was more interested in global integration, reduction of the price of labour, profitability and ever-increasing rewards to its leadership.

This broad context – Labour’s historical commitment to a tripartite regulated Capitalism, and Capital’s rejection of that option, helped in no uncertain fashion by the Fourth Labour Government – required Labour to rethink its strategy.

Two options emerged – the transformation approach, discussed tentatively but undeveloped and unimplemented, and a defensive option, seeking to protect the remnants of the Accommodation as inequality increased, public provision became stretched further, and, crucially, the consensus underpinning Keynesianism disappeared.

So we arrive at 2024, and the challenge facing Labour.

Choosing transformation is not easy. As noted above, Keynesianism is far behind us; practical experience of the policies and mechanisms of Keynesianism is now in its 70s; younger generations have little or no experience of Keynesianism or the debates about its political constraints; those same generations have developed their own post-Keynesian frames of reference, often more in tune with Foucault than with Marx, often at odds with traditional ideas of transformation. Some might argue that the idea of a renewed Accommodation is fanciful.

Others will disagree. This is why the past weekend’s deliberations in Auckland are important, and why we must hope to see them taken to their logical conclusion in the 2026 Labour manifesto.

Labour has the opportunity to promote an alternative based on tax reform. The reform mix is still to be determined, but one must hope that it moves beyond CGT to wealth taxes, and, also, includes tax switches. We may, within national borders, implement policies to reduce wealth differences, whilst demonstrating internationally how this might be done.

We know that in 2023 Grant Robertson and David Parker proposed tax reforms. Such proposals are easily reinstated. As important, they need to be stated clearly and quickly.

They should be explicit by the end of this year, such that Labour is able to campaign on them for nearly two years.

These proposals will be subjected to powerful attack, and Labour must have their arguments and spokespersons ordered and convincing. Above all, Labour must be brave, as the alternative offers little to working people.

Truly, time will not wait. The next six months will be crucial for Labour.  

Nigel Haworth

39 comments on “Making up for lost time ”

  • Comments are now closed

  1. mikesh 1
    22 May 2024 at 10:09 am

    I think either land taxes or wealth taxes (or both) would be preferable to CGT. The trouble with CGT, from the point of view of battling inequality, is that many of those affected by it may not be particularly wealthy – especially if they have borrowed to acquire their extra homes.

    • Bearded Git 1.1
      22 May 2024 at 11:11 am

      CGT is also complicated and brings in very little revenue to start with.

    • tracey 1.2
      23 May 2024 at 1:58 pm

      With wealth tax, what happens to asset ‘rich’ people of low/super income? If I own a home valued at $2m (not unthinkable in 5-10 years) – rates will be high but not cash to pay a wealth tax on the home value cos on Super?

      • SPC 1.2.1
        23 May 2024 at 2:06 pm

        Index the base level.

        That said my preference is for a temporary wealth tax, 5-10 years, while a broader change involving CGT (covering only multiple land/property ownership), stamp duty on property over $2m and estate tax.

        PS If the multi-miilion dollar property is rising in value, it would be easy to borrow against that to pay a wealth tax and cost of debt and still have growing equity. This is how farm business operates.

      • Nigel Haworth 1.2.2
        24 May 2024 at 3:20 pm

        If the family home were excluded, and the tax applied to aggregate wealth in excess of, say, $5 million……,

        • SPC 1.2.2.1
          24 May 2024 at 4:11 pm

          At $5M why exclude the family home – it would only encourage the MacMansions?

      • Nigel Haworth 1.2.3
        24 May 2024 at 3:41 pm

        If the family home were excluded, and the tax applied to aggregate wealth in excess of, say $5million…..,,

  2. Ad 2
    22 May 2024 at 10:25 am

    Really encouraging post thankyou Nigel.

    Hopefully they do a show in the South Island.

    • tracey 2.1
      23 May 2024 at 1:55 pm

      The Southern Regional is in Timaru in June. Sad that this isnt more widely known.

  3. Bearded Git 3
    22 May 2024 at 10:43 am

    "The reform mix is still to be determined, but one must hope that it moves beyond CGT to wealth taxes…"

    Amen to that. With Willy as leader pushing a Wealth Tax the next election is in the bag.

  4. Michael Scott 4
    22 May 2024 at 12:36 pm

    I don't like wealth taxes because they don't work. I have lived in two countries where they were tried and abandoned.

    And I think that increased tax is generally bad politically because it's so negative.

    Voters want positive policies. I voted for Labour in 2017 because of Phil Twyfords Kiwibuild. It was inspirational and, if it had been successful, would have been transformative.

    Over one trillion dollars are about to be transferred from Boomers to Millenials.

    Why not tax some of that.

    • Drowsy M. Kram 4.1
      22 May 2024 at 2:11 pm

      I don't like wealth taxes because they don't work.

      Don't mind the Green / TPM wealth taxes because I reckon I wouldn't pay them.

      Over one trillion dollars are about to be transferred from Boomers to Millenials.

      Why not tax some of that? Maybe because it's generally bad politically – it's so negative.

    • georgecom 4.2
      24 May 2024 at 11:02 am

      A CGT and a clear narrative how it will be spent. provide an alternative to "a decade of cuts" under a national government and also inoculate against the inevitable 'tax and spend' squawks that will come from National and ACT (who ironically are wasting tax payers money left right and centre atm).

  5. Patricia Bremner 5
    22 May 2024 at 2:24 pm

    Thanks Nigel. We need Policies and reasons to tip this lot out. Tax is a good starting point.

    • mikesh 6.1
      22 May 2024 at 11:17 pm

      That of course is a matter for them; that is not necessarily a reason we should do likewise.

      • tracey 6.1.1
        23 May 2024 at 2:02 pm

        It is a reason to stop saying

        ’it’s too complicated’

        ’we’re over taxed’

        ’others dont do it’

  7. Maurice 7
    22 May 2024 at 6:14 pm

    The selection of new candidates for the next election(s) is of paramount importance. Just as important as is policy.

    The Labour Party has had a huge advantage by the loss of so many from the previous parliamentary team. This requires a LOT of new blood and careful selection both of putative electorate and list members. The present ones in parliament are for ever stained with the past failures.

  8. SPC 8
    22 May 2024 at 6:18 pm

    We should have a CGT on multiple property (including land) ownership.

    And an estate tax.

    And a stamp duty on sales of property over *$M.

    A 5% windfall tax on banks – and some sort of insurance for lending to business.

    A progressive tax on corporations as once applied in the USA (larger ones a higher rate, a lower rate for qualifying companies).

    And the RBG should have the option of a 0.25 to 1.0% mortgage surcharge on residential property. This as a management tool (separate from the OCR and impact on the currency) and a source of government revenue to cope with the impact of rising property values on affordable housing supply.

    • tracey 8.1
      23 May 2024 at 2:04 pm

      imagine if we could fix mortgage rates at 10, 20, 30 years like in US, Europe etc. My boy bought in Netherlands 4 years ago, mortgage fixed at 1.2% for ten years.

      THAT would help the young into houses sooner

      • SPC 8.1.1
        23 May 2024 at 2:13 pm

        We have Keynesian concepts to manage the aggregate economy – to keep an even keel – but nothing to do the same in the financial market here.

        They say we lack the size of capital markets for it. Oz has the same issue.

        Is it enough of a reason to do nothing about it?

        I wonder what the Oz banks would say if we opened up our mortgages to offshore options …

        Lower long term mortgage cost with a mortgage surcharge applied by the RBG would provide both cheaper home finance and revenue to government. And without such a large outflow in bank profits.

      • Incognito 8.1.2
        23 May 2024 at 2:13 pm

        Your boy may want to check if he can also deduct the mortgage interest rate from his income tax.

  9. Liberal Realist 9
    22 May 2024 at 8:31 pm

    Hipkins must go, McAnulty as leader w Edmonds as deputy.

    Labour must prove they can reform by campaigning on a true socialist platform. If they don't that proves they're un-reformable and must be abandoned.

    • Michael who failed Civics 9.1
      22 May 2024 at 9:03 pm

      Social Democratic, not socialist. Socialism never appealed to most New Zealanders in the 20th century and it certainly won't in the 21st. However, our politics have moved beyond neoliberalism and the only alternative currently on offer seems to be an authoritarian capitalism that tries to manipulate populist rage and sometimes succeeds. I think social democracy offers another pathway to a (more or less) peaceful political settlement; while I acknowledge that a lot of work needs to be done before voters can be offered something that might appeal to them, I also think the foundations exist for that work to be done without delay.

      • gsays 9.1.1
        23 May 2024 at 12:36 pm

        " Socialism never appealed to most New Zealanders in the 20th century and it certainly won't in the 21st"

        I dunno so much, we were grateful little socialists during Covid with Uncle Grants lolly scramble.

      • KJT 9.1.2
        23 May 2024 at 12:48 pm

        Socialism never appealed to most New Zealanders in the 20th century

        You mean it never appealed to all three of your friends.

        In reality "socialist" policies have been favoured by New Zealanders since WW2 and even further back.

        Even Key had to say. "New Zealanders" are socialists at heart".

        The most avid socialists are Landlords and others, on a tax subsidised gravy train. They just don't like socialism they don't gain from.

    • SPC 9.2
      22 May 2024 at 9:09 pm

      What leads you to conclude that Edmonds is a person supportive of social democratic, let alone socialist, policy.

  10. Darien Fenton 10
    23 May 2024 at 4:35 am

    Great post Nigel.

  11. gsays 11
    23 May 2024 at 12:41 pm

    While not wishing to poo-poo tax reform, surely a lot more than that needs to be done to address inequality in Aotearoa.

    Banking reform, including supporting Kiwibank to be the government's banker would be a worthwhile move.

    Greater minds than mine can solve the issue of working people still needing welfare, be it WFF or Accommodation Supplement.

    And back to tax, an FTT brings a whole swag of transactions under the tax umbrella from a sector than can afford to pay it.

  12. Chris Casey 12
    25 May 2024 at 1:55 pm

    Good reasoning Nigel.

    Labour need to own the narrative about wealth and it's broader definitions.

    What is wealth ?

    Ancestral wealth.

    Wealth of knowledge, opportunity, education

    Capital, natural, social etc

    Wealth creation & redistribution.

    Labour grows more wealth with SME, ma and pa businesses, entrepreneurs, R& D…than the Right, who spin that they are the trusted custodians of Wealth (for the few).

    We don't need to fear wealth or demonise wealth, or those who are or aspire to grow their wealth.

    Sure, the system is rigged but until we change it, we'll continually exclude our people from sharing intergenerational wealth.

    For the electorate, why not start with a simple baseline " don't scare the horses" 15% sales tax/ gst on forms of wealth eg investment property, bank levies, business sales above $1-2m ?

    A zero to $18k tax free threshold ( moving to Oz anyone, or Germany ?) for the low waged especially Youth, would be possible with a tax switch or credit.

    Wealth in most cultures is defined as generosity & sharing.

    Labour can stand for WWF:

    Workers

    Wealth

    Fairness

    Kia ora.

  13. Jim Skeats 13
    26 May 2024 at 4:07 pm

    Reality check. Small like countries that dont have CGT- Belgium, Singapore (used to be an eighth of NZs per capita GDP, now double), HK, Dubai, Malaysia and Switzerland. In Australia CGT revenue is approximately equal to the export exemption (s23AH ITAA 1936). NZ is now 43rd in GDP per capita – and taxing our way to prosperity is but fools gold. A mistake Sweden made with a wealth tax (it failed as the top families migrated to Engerland so Sweden now have a 25% VAT). I, for one, do not buy brown corduroys "just because everyone else has one". CGT is an option, but relative to other revenue raising ideas, its unattractive and is high risk. Who wants a 25% GST when people relocate cash flows and wealth to Aussie ?