Jacinda Ardern via Getty
Jacinda Ardern via Getty

Tova O'Brien: Jacinda Ardern and the mother of all broken promises

Opinion 23/03/2021

OPINION: Jacinda Ardern effectively introduced a capital gains tax (CGT) today, breaking one of the biggest promises of her political career - one that she staked her job on.

No one's going to be so daft as to call for the Prime Minister's resignation, but it is disingenuous politicking at its worst. 

Don't get me wrong, extending the bright-line test is the right thing for a Labour Government to do - it's their jam - but pretending it's not a CGT is about as silly as it was when National tried to argue the same.

The reason John Key's argument held far more weight than Jacinda Ardern's is because Key's CGT was only paid on houses flipped within two years, predominantly capturing investors trying to make a quick buck.

Ardern's CGT is paid on houses sold within 10 years - capturing far more 'mum and dad investors' selling up for a greater variety of reasons.

Anything the Prime Minister says about her new CGT will be couched in comments like, 'yeah but National started it...' or 'John Key did it first... '.

Sure, but Labour extended it to five years in 2018 and has now doubled that to 10 years. When is a capital gains tax not a capital gains tax?

Never. The bright-line test is a tax on capital gains. It is a capital gains tax, full stop. And at 10 years, it's a comprehensive capital gains tax on property.

Ardern ruled out a CGT in perpetuity under her leadership in an attempt to snooker National. National's best attack line at the time was its tax attack, drumming up fear about all the new taxes Labour was going to throw at you.

She made the promise when she was spearheading a Government with three heads - Labour, NZ First and the Greens. Winston Peters was never going to let a CGT slip through, but instead of saying she wouldn't implement one this term, Ardern went all in and ruled it out forever. She then went on to say she'd resign before she'd introduced a CGT.

For a minute there, it was smart politics - Ardern whisked the beating stick from National, rendering its tax attack feeble and futile. But as time wore on and as Ardern's popularity skyrocketed, ruling out a policy which is fundamental Labour Party stuff looked just plain stupid. It was a key sea-change moment in Ardern's leadership and spoke to her priorities. She chose popularity over party, politics over ideology, power over her people.

Then of course the housing crisis worsened. Labour was delivered the most emphatic of mandates at the election. And the housing crisis worsened some more.

But Labour knew all this going into the election, it knew an extension of the bright-line test was its workaround to Ardern's stupid promise, but it chose not to engage publicly on the issue in case it lost votes.

The housing crisis was in full swing before the election but during the campaign Labour would barely comment on plans to extend the bright-line test, in fact Finance Minister Grant Robertson even ruled it out. No new taxes was the promise. That's quite a big one to break. Not taking the extension of the bright-line test to the public, to the campaign, was spineless in the extreme.

Labour could have sought the mandate for this CGT in disguise at the election and almost certainly would have got it. Instead it chose to not be upfront with voters during a campaign, break a massive promise, and introduce a new tax by stealth.

Again, it was the right call for a Labour Government to introduce a capital gains tax like this, but the way it's gone about it is ugly and not how you garner trust from voters.

Tova O'Brien is Newshub's political editor