The PM's damned captain's call. Can new tax policy steady the ship?

Following in the footsteps of his predecessor, Chris Hipkins has ruled out capital gains and wealth taxes. With those sunk, how much territory remains for the party's soon to be announced tax policy?

Mōrena and welcome to The Bulletin for Thursday, July 13, by Anna Rawhiti-Connell. Presented in partnership with Z Energy.

In today’s edition: Hipkins missed out on bilateral with Zelenskiy; largest net migration loss to Australia since 2013; a beautiful tribute to poet, essayist and Spinoff contributor Paula Harris; but first, the left are disappointed as the tax can gets kicked down the road while the right says Labour can’t be trusted on tax. New tax policy is on its way but Hipkins is already managing expectations.

Image: Tina Tiller

Piketty will be disappointed

Yesterday at noon we published the first piece in a new series called the Spinoff Books Confessional. Just an hour before, prime minister Chris Hipkins had dialled in from Lithuania to say “that under a government I lead there will be no wealth or capital gains tax after the election. End of story.” It is entirely coincidental that the first person to take part in our new series was revenue minister David Parker and that the book he said he thought everyone should read was Thomas Piketty’s Capital in the 21st Century. The thesis of Piketty’s 2014 book is that the average return on capital exceeds the rate of economic growth, and without countervailing factors, inherited wealth will grow faster than earned wealth, leading to levels of economic inequality that could threaten democracy. His prescription to address this was a change in taxation policies, specifically the introduction of a wealth tax. Following the release of government research that found New Zealand’s wealthiest individuals pay less than half as much tax as “middle” New Zealand in April, described by Parker as “ground-breaking”, Piketty told the AM Show the finding that the tax system “is so regressive at the top” was “depressing”.

Hipkins robs Robertson of his Robin Hood moment

“Depressing” might be an apt description of how some would describe yesterday’s announcement, not least of all because it was prompted by the release of budget documents that showed Labour was looking at a range of new tax options. The government had planned to introduce a wealth tax in the May budget, or a tax switch as it’s been termed. Simply put it was a Robin Hood manoeuvre that would create a $10,000 tax-free threshold paid for by taxing the highest-earning individuals. In an extensive review from the Herald’s Thomas Coughlan (paywalled) of the winding road to Labour once again bottling it on tax, Coughlan notes that the policy “had the potential to blow National’s package out of the water”. Hipkins pulled the pin on it at the last minute, saying the government did not have a mandate to make such a change. Fronting on the call from his captain yesterday, launched from across the seas in Vilnius, finance minister Grant Robertson said he clearly thought these ideas had merit given the time he spent working on them. In The Post this morning, Luke Malpass writes (paywalled) that while Robertson will understand the political logic, it can not be easy for him.

Likely coalition partners sound warning, National says Labour can’t be trusted on tax

Regretfully I don’t have the word count to run back through the pros and cons of a wealth tax and why despite that, increasing tax revenue somehow, someway, is also a necessity. Forgive me for linking back to a Bulletin from March that covers that. It’s a policy Treasury is cautious about. That was reiterated again yesterday in the published advice from Treasury. “While the wealth tax is likely to meet your revenue and distributional objectives, this will come with economic and integrity costs,” it reads. It goes on to say that there are other options for meeting “revenue and distributional objectives at lower economic and integrity costs” including a capital gains tax and inheritance tax, “both of which are common in OECD countries”. At the risk of repeating myself (I’m going to anyway), I wrote in March that “I wonder if we grip onto wealth tax because it seems like the most overt way to express frustration at what many view as a growing and vastly unfair disparity, especially between generations.” That’s certainly how both the Green party and Te Pāti Māori feel. The Greens have a wealth tax central to their tax policy and Te Pāti Māori have talked about “taxing the rich”. Both parties have warned Labour that ruling out capital gains or wealth taxes could threaten their chances of a coalition deal. National has leaned back into its line that Labour can’t be trusted on tax. Stuff’s Bridie Witton interrogates that this morning.

‘Some people might call it boring…’

As Coughlan writes, “It’s not clear whether killing the tax solves many problems for Hipkins. Labour’s base is likely to be demoralised, and National will make sure that every voter knows the Greens are saying that Hipkins is in no position to rule any such tax in or out given he will almost certainly need their help to form a government.” The Herald’s Claire Trevett reports this morning that Labour is due to set out its new tax policy “within the next week or so”. The expectation is that it will focus on income tax thresholds rather than other taxes. Hipkins is already pouring water on any elevated expectations saying that “Some people might call it boring, but the times call for restraint and simple and smart policies which grow our economy, help drive inflation down and provide targeted help to those families who need it the most.” BusinessDesk’s Pattrick Smellie shares his own hunch (paywalled), writing that Labour might explore removing the GST on fruit and vegetables. It’s regarded as messy tax policy but as Smellie writes, “tax purity never won anyone an election.” He goes on to say that for “a governing party in increasingly dire need of a lift,” making food cheaper during a cost of living crisis might be a win. We’ll know soon enough whether, to quote Smellie, “Labour is going to drop the price of figs, or produce a tax policy so limp as to barely count as a fig leaf.” A damned captain’s call indeed.

The power meter helping you lower your carbon emissions

Faced with the double whammy of chilly winter temperatures and a skyrocketing cost of living, many people are eking out extra savings on our power bills by moving our electricity usage to times of day when prices are lower.
With the new Green Meter by Electric Kiwi, there's another option. The Green Meter produces a constantly updated CO2 forecast for the Aotearoa electricity grid, allowing you to know when your electricity is cleaner, and therefore often cheaper.

Read more on The Spinoff now (sponsored)

Hipkins misses out on bilateral with Zelenskiy, has hallway chat instead

As Stuff’s Thomas Manch reports from Vilnius, Lithuania, prime minister Chris Hipkins missed out on the planned bilateral with Ukrainian president Volodymyr Zelenskiy that was meant to take place overnight (NZ time). Hipkins’ scheduled meeting with Zelenskiy was delayed as the Ukrainian president met with US president Joe Biden. Hipkins needed to catch a flight out of Vilnius and had to settle for a hallway chat with Zelenskiy instead, where he reiterated New Zealand’s support for Ukraine. As Manch writes, Hipkins had a package of further support for Ukraine ready for a bilateral meeting, making the announcement after the exchange. The government will provide $1.2m for the United Nations de-mining programme in Ukraine, $500,000 for the International Atomic Energy Agency to help maintain safety at nuclear facilities, and $3m for the recovery of reconstruction of Ukraine.

Largest net migration loss to Australia since 2013

Stats NZ released net migration figures yesterday and while they show the total number of migrants moving to New Zealand was the second-highest number on record, net migration to Australia is at the highest level it’s been since 2013. Data for 2022 shows a net migration loss of 13,400 people from New Zealand to Australia. That’s a return to pre-Covid levels. Migration back the other way, from Australia to New Zealand, has not yet bounced back to pre-pandemic levels. Speaking to a nurse who has made the move, Australia’s tax free income threshold is cited. The first $18,200 of income earned by residents there is tax-free.

Now is a great time to support independent journalism in New Zealand.

The generous support of our members powers all of The Spinoff's journalism, including our coverage of the upcoming election. If you value what we do and believe in the importance of independent and freely accessible journalism here in Aotearoa – tautoko mai, donate today.

Click and Collect

• A huge deep dive on the three strikes law here (paywalled) from the Herald’s Derek Cheng. The law was repealed last year by the Labour government and is now back on the table as part of both National and Act’s law and order policies.

• Wellington City Council considered evacuating Loafers Lodge due to safety concerns before fatal blaze

• Massey University is moving forward with its plans to cut jobs and is calling for voluntary redundancy of up to 125 positions

• In 2022, Dr Ashley Bloomfield directed 14 local authorities to add fluoride to some or all of their water supplies by July 31 this year. Despite overwhelming evidence that there are no adverse health effects of any significance arising from fluoridation, residents in Nelson packed a council chamber to protest the upcoming move.

• Huw Edwards named as BBC presenter at the centre of a scandal involving allegations of payments for sexually explicit images.

Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.

If you liked what you read today, share The Bulletin with friends, family and colleagues.

Right now on The Spinoff

Tommy de Silva has a guide for those looking for last minute advice on celebrating Matariki and Tara Ward rounds up all the best TV specials to watch this Matariki. Shanti Mathias talks to fans of Auckland's most coveted accessory, the AT Hop key tag. Alex Casey goes inside the mission to make secondhand shopping more inclusive. Sela Jane Hopgood reports on a free online Sāmoan language course filling the gap created by a shortage of Sāmoan language teachers.

Sporting snippets

• Gregor Paul on why New Zealanders may soon be feeling a little short-changed about how often they are able to see the All Blacks at home (paywalled) with the Silverlake deal creating pressure to showcase the national team to new audiences

• Ameliaranne Ekenasio is the 14th captain to lead the Silver Ferns at a Netball World Cup. Suzanne McFadden tracks down the rest to find out where they are now.

Moe mai rā Paula

Paula dances the tango. Photo courtesy of Richard Love.

Yesterday we received confirmation that writer and poet Paula Harris had died after being missing for two weeks. Paula was a stunning writer who first contributed to The Spinoff in 2018. She wrote unwaveringly and beautifully about life inside her mind, and this morning it’s an honour to publish her dear friend Anna Sophia’s tribute. I have read a lot of Paula’s work over the years and it never fails to make me feel something (usually many things) but right now, I fondly remember her delightful essay about the time she spent Christmas with Alison Holst. It’s a perfect display of how warm, funny and quietly devastating Paula Harris was. She will be very missed.

— Madeleine Chapman