Chris Trotter: David Parker’s Tax Ammunition: Use It, Or Lose It.

Nicola Willis, somehow managing to keep a straight face, claims to be the defender of working people. That the deputy-leader of the National Party, by no means a stupid woman, is prepared to offer up such a ludicrous proposition indicates just how deranged our politics have become. That there are working-class voters out there who will take Willis’s claim seriously should not, however, be received as proof that National has quietly embraced socialism. Rather, it should be taken as a measure of just how emphatically so many of Labour leaders have rejected it.

Not all of Labour’s leaders, however. Not while David Parker remains a member of Chris Hipkins’ Cabinet. Parker is a stern critic of economic inequality, most particularly of the way New Zealand’s tax system allows the über-rich to avoid paying their fair share of tax. For nearly two decades he has championed the introduction of a Capital Gains Tax (CGT) finding sufficient support among his own caucus colleagues and Labour’s rank-and-file to embed the policy in a succession of Labour election manifestos.

Not that this broad-based support within Labour was sufficient to propel a CGT across the line. At the summit of the party there has long been a junta of past and serving Labour leaders who invariably dismiss the whole idea of significant tax reform as electoral poison. Those members brave enough to defy this junta are subjected to the Labour eye-roll – a gesture signalling both political naivety and economic stupidity – from which its victim’s career seldom recovers.

It is worth teasing out both the causes and the consequences of the baleful Labour eye-roll. Above all else, it represents the idea that there are some policies which are simply unacceptable within the context of the neoliberal order introduced by the Fourth Labour Government and consolidated by its National Party successors.

New Zealand’s reasonably flat income tax, supplemented by its highly regressive Goods and Services Tax, is sufficient to keep the country’s no-frills welfare state coughing-and-spluttering along – but that’s all. More importantly, the filing of land, wealth, inheritance and (most especially) capital gains taxes in the “Under No Circumstances” file, makes damn sure the welfare state stays that way. More than that, New Zealand’s tax system presents no serious impediments to the steady accumulation of massive personal wealth. Nominally “progressive”, the tax system’s actual effect is to exacerbate inequality – not reduce it.

Those who position themselves as “centre-left’ on the political spectrum are supposed to know all this and, more importantly, to have come to terms with it. They are further supposed to understand that any attempt to change the arrangements that have now been in place for the best part of 40 years will, inevitably, be met with the most vicious resistance. Any politician, or political party, setting out with the intention of seriously addressing inequality – i.e. of dismantling the neoliberal status quo – are asking for the worst kind of personal and political trouble, and, most assuredly, they will find it.

All of which makes David Parker’s commissioning of the IRD’s and the Treasury’s reports into the “fairness” of New Zealand’s taxation system a decidedly subversive act. Not least because, for the first time, the New Zealand voter has been given the hard data on who gets what out of the system. The conclusions to be drawn are not exactly flattering to the very rich. If those advocating for a CGT and other redistributive tax measures may be compared to a revolutionary band hiding out in the mountains, then Parker’s reports are the equivalent of a bloody great ammunition dump!

The brute fact of these explosive reports on tax, like the brute fact of the controversial He Puapua Report, points to a Cabinet riven by powerful factions that must, somehow, be placated. Or, if placating them is not an option, bringing potentially dangerous moves to a sudden halt by issuing a “Captain’s Call”. Knowing that she could count on the support of Winston Peters, this is exactly what Prime Minister Jacinda Ardern did to prevent her own cabinet, caucus, and Green Party allies from introducing a CGT in her Government’s first term. She made it clear that a CGT would only be introduced over her dead political body.

Those who doubt this analysis should consider the recent statements of Foreign Minister Nanaia Mahuta. Questioned closely on New Zealand’s stance in relation to the AUKUS anti-China agreement linking Washington, London and Canberra, Mahuta stoutly stood by her assertion that the biggest threat facing her Pacific neighbours was Climate Change. Delivering a stinging blow to those public servants who have been briefing intensely on behalf of those who would have New Zealand become a sort of AUKUS auxiliary, Mahuta declared that her country’s foreign policy would be determined by “the Cabinet” – not unelected “government agencies”.

The only sensible reading of these comments is that serious disagreements exist within both Cabinet and the Labour Party caucus over the merits, or otherwise, of aligning New Zealand too closely with those powers seeking to “contain” China – still the country’s biggest trading partner. It is entirely possible that Mahuta, who (successfully) led the charge on Three Waters, has put herself at the head of the faction determined to confront the negative impact of colonialism in the South Pacific – not just in the past, but today.

All of which suggests that Labour’s ability to hold the neoliberal consensus together is nowhere near as strong as it was under Helen Clark and Michael Cullen, or the troika that emerged triumphant from the ideological conflicts that divided Labour between 2008 and 2017 – Jacinda Ardern, Grant Robertson and Chris Hipkins. Thanks to Peters, NZ First, and Covid-19, Ardern was (just) able to keep Labour’s lid from blowing-off during her first term. Paradoxically, by leading Labour to an absolute majority in 2020, Ardern only made it more difficult to say “No” to her cabinet and caucus.

The carefully planned “coup” which (with Ardern’s assistance) placed Hipkins in the Prime Ministership on 22 January 2023 may now be viewed – at least in part – as an attempt by the Troika to re-establish its control of the Sixth Labour Government’s overall direction – mostly by reining-in the factions’ more outré policies. Clearly, this attempt has met with only partial success. Pressure is building inside Labour for serious change, and Hipkins is struggling to contain it.

Certainly, his refusal to slip a few rounds of Parker’s ammunition into his prime-ministerial rifle and open fire on National, came as a deep disappointment to a great many of Labour’s members and supporters. Disappointment that was only compounded by his evident lack of enthusiasm for responding to the unfairness exposed in the IRD’s report with tangible tax reform.

It is this perception of Labour not being willing to take the bold steps necessary to improve the lot of working-class New Zealanders, that Nicola Willis is exploiting for all she is worth. Those disillusioned by Hipkins’ reticence are, however, unlikely to spot the contradiction in the National Finance Spokesperson’s position.

What is National defending working people from, if not Labour’s refusal to do anything meaningful about the inequities of the tax system? But, if Labour’s not going to do anything about tax, then why is she insisting (on the basis of at least two independent sources!) that redistributive tax reform is exactly what Hipkins, Robertson and Parker are plotting to announce just days out from the October election? Both of these claims cannot be true.

Leaving us with another, related, question: What is a massive pile of ammunition most likely to call into existence, if not the people, and the guns, to use it?

Chris Trotter is a political commentator who blogs at bowalleyroad.blogspot.co.nz.