Just a quick reaction to Labour’s CGT announcement from me borrowing from a few economists social media commentary. Super rushed so excuse typos.
Labour’s post-long-weekend promise lands with a familiar thud… a shiny new tax to fund a shiny new entitlement. Chris Hipkins announced Labour would introduce a narrow capital gains tax (CGT) on profits from investment and commercial properties sold after July 2027. The money, he says, will fund a “Medicard” providing three free GP visits per year.
Source: 1News
It looks like perfect political formula; take from a few, give to the many. But it has the same problems that dog every Labour tax-and-spend scheme: complexity, bureaucracy, and a refusal to confront the real structural issues in our economy.
As RNZ reported, “family homes, farms, small businesses, KiwiSaver, and other investments” are all excluded from Labour’s proposed CGT. The party insists this will “make the system fairer,” but these exclusions of the biggest reservoirs of wealth render the concept a bit pointless.
Economist Tony Burton put it bluntly on Linkedin:
“Nothing wrong, and a lot right, with a CGT in principle. The important words in that last sentence were ‘in principle’. The devil is very much in the detail.
The big economic/fiscal and equity benefits of a CGT would come from taxing family homes and farms. People with money/wealth put a lot of it in their family home like everyone else.
The scheme and its implementation described here sound a lot like the one proposed in the Cullen Report. They estimated it would take 5 to 10 years before government revenue increases became significant. That’s a lot of time for political pain before there is revenue gain.”
He’s right. If you leave out the family home and farms, you leave out most of the wealth. And if it takes up to a decade before the policy generates meaningful revenue, then the “free doctor visits” will need to be funded via other means. So how does Hipkins mean to fund them?
The health sweetener at the centre of this plan of three free GP visits per year sounds generous, but it’s largely symbolic. Under 18s already get free doctor visits, so the change only applies to adults. For many, that’s one or two visits more than they’d make anyway.
My GP charges $74 for an appointment which appears to be about average. Under Labour’s scheme I would save up to $222 per year in exchange for them introducing a new tax. That is up to $4.27 per week.
Meanwhile, the cost of setting up and administering this new Medicard system will be enormous. New IT infrastructure, integration with GP billing systems, eligibility verification, and the creation of yet another layer of government bureaucracy.
This is classic political arithmetic; announce a simple “benefit” for voters, bury the complexity in the fine print, and hope no one notices the administrative costs eating the supposed revenue gains.
Economist Eric Crampton nailed it in his X post reacting to Labour’s announcement:
“There’s a defensible but debatable case for a clean CGT.
But one riddled with exemptions?
And aimed at expanding government services rather than dealing with the giant looming fiscal-demographic problems in the 2030s and 2040s?”
New Zealand’s real fiscal challenge isn’t a shortage of taxes. It’s the looming cost of an ageing population, health spending, and superannuation. A tax riddled with carve-outs won’t fix that. It just props up more short-term spending while ignoring the structural reform needed to prepare for the decades ahead.
If Labour truly believes in a capital gains tax, they should make the case for a clean, broad-based version, not one riddled with exemptions and political calculations. If they truly believe in health equity, they should propose ways to strengthen the system’s capacity, not hand out gimmick cards.
Instead, what we’ve been given is another tax-and-spend placebo in exchange for a saving that wouldn’t buy us a coffee a week. A policy that looks compassionate, sounds alright, and does almost nothing to fix what’s actually broken.
New Zealand doesn’t need a Medicard. It needs a government willing to stop confusing motion with progress and to face the hard fiscal truths waiting in the decades ahead.
Ani O'Brien comes from a digital marketing background, she has been heavily involved in women's rights advocacy and is a founding council member of the Free Speech Union. This article was originally published on Ani's Substack Site and is published here with kind permission.
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