Francesca Rudkin: We need politicians willing to have honest conversations about taxes

This week’s political noise was all about tax. It’s perhaps the key battleground heading into the election, even if the main parties seem determined to make their tax policies as uninspiring as possible.  

And that's not an accident. 

Our politicians know something very important about New Zealand voters, we don't like paying more tax. In fact, we tend to regard a tax increase as a personal insult.  

But here's the catch. We also expect good hospitals, decent schools, functioning roads, reliable infrastructure, police, welfare, superannuation and all the other things governments provide. 

We want Scandi-level public services at bargain basement tax rates.  

And that’s the challenge the main parties face with their tax policies and managing the public debate ahead of the election. When the public won’t make a real choice between services and cost, or accept any significant trade-offs, how do you pretend you’ve got a solution?

National's answer - after a couple of weeks of torturous wordplay - has landed on ‘no new taxes’. This doesn’t mean existing taxes won’t be increased, and we’re all wondering about the planned 12c-a-litre fuel tax hike due in January.  

Labour is offering a capital gains tax on investment property, expected to raise about $700 million a year once it’s up and running, and have confirmed they too would not introduce new taxes. However, Chris Hipkins wouldn’t confirm whether Labour would restore interest deductibility restrictions for landlords, a move that would have the effect of increasing the amount of tax landlords have to pay. 

The minor parties appeal to narrower constituencies so speak more freely and are considerably more ambitious. 

ACT is about retrenchment, controlled spending and shrinking the state. 

The Greens want to tax wealth, big companies, banks and large inheritances. Te Pāti Māori wants a $30,000 tax-free threshold and wealth taxes reaching 2.5 percent at the top. New Zealand First wants the first $14,000 tax-free and tax brackets indexed to inflation. 

And the Opportunity Party wants to blow up the traditional tax model altogether, replacing much of it with a land tax to fund a universal citizen's income. 

You can argue about whether these are good ideas. But at least they're ideas. 

The real question is though, under MMP what policy survives coalition negotiations? While many of these ideas are destined for the political equivalent of the recycling bin, they do give us an idea of how a party may negotiate a coalition agreement if they get the chance. For example, the Opportunity Party may drop their land tax policy in return for Labour to broaden their CGT.  

And then there’s the question of whether any of these ideas will raise enough money.

A capital gains tax on investment property which delivers $700 million sounds like a lot, until you remember the Government is spending $155 billion a year. It’ would be a slim contributor to the gap between Labour’s plan to maintain core Crown spending around 33 percent of GDP while revenue sits near 31 percent.  

To sum up - Labour's proposal isn't remotely big enough to transform the tax base, National's promise of no new taxes isn't an economic strategy, and proposing cuts in spending should mean being prepared to tell voters exactly what you won't be doing. 

Perhaps we're being offered exactly what the parties think we want. Small tax changes. No nasty surprises.  

But is it really? This week the results of a survey of 1600 people funded by the Cancer Society and published in the New Zealand Medical Journal found 62 percent of respondents supported the idea of paying more tax for increased healthcare funding. 29 percent were opposed.  

So maybe, instead of promising what they won’t do, we need politicians willing to have honest conversations rather than engage in verbal gymnastics and word-salad.  

Because if the choice at this election is simply tax a little more, tax a little less, or don't change anything, then frankly, we’re just voting for more of the same, and we know where that gets us.  

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