Is Hipkins to be trusted on tax reform?

• Bryce Edwards writes –

Former Finance Minister Grant Robertson and former Prime Minister Chris Hipkins have been conveying how unhappy they are with the tax system. Last week in his valedictory speech, Robertson called for the introduction of a wealth or capital gains tax. And this week Hipkins gave his State of the Nation speech calling for a new public debate on reforming taxation to be more progressive.

Satirists might point out that if those two politicians ever get hold of the politicians who have been running the country for the last six years then they are obviously going to have some pretty heated words with them. It really is beyond parody that such senior members of the last government are suddenly condemning the current tax system as grossly unfair only after they’re out of power.

Robertson and Hipkins blocked tax reform

Many on the political left are aghast that Robertson and Hipkins had six years, including three years with a historic majority, to push through any radical tax reform they wanted, but are only now talking radically. The fact that both politicians are seen as playing key parts in blocking progressive tax reform, rankles even more.

For the most scathing reaction to Robertson’s sudden plea for tax reform, see Jack Tame’s Robertson’s lament for NZ’s tax system rings hollow. In this, Tame has no time for the justifications that the likes of Robertson and Jacinda Ardern have made as to why they didn’t act on tax (“we wanted enduring reform that wouldn’t just be repealed by the next government”), pointing out that their government was hellbent on pushing through plenty of other radical reforms without any popular or bipartisan consensus (“Three Waters, RMA reforms, the restructure of Te Pūkenga, the Māori Health Authority, and Auckland Light Rail”), so why were Labour so unwilling to do so on tax?

Tame explains that “ultimately they valued political capital over sticking to their convictions.” He says, “The most galling thing for those who support tax reform is not that Labour didn’t do it, it’s that the party didn’t even really try.”

Similarly, Newstalk’s Heather du Plessis-Allan has challenged Robertson’s supposed belief in a wealth tax, saying: “If he really believed the tax system needed to be fairer, he had his chance. He had the ear of Jacinda Ardern. He is one of her best friends. And he either couldn’t convince her or didn’t really try” – see: Grant Robertson is a great bloke, but he was a terrible Finance Minister (paywalled)

“Flippy Chippy Flop”

In coming out this week with yet another new position on tax reform, Hipkins has been characterised on social media as “Flippy Chippy Flop”. His various U-turns on tax don’t come across as authentic, but instead as opportunistic. This is a huge problem for Labour. Tax debates only continue to grow in importance, especially with the new Government promising their own tax reform.

The problem for Labour is that to participate in building a progressive campaign for progressive change on tax they will need to be led by someone with strong credibility on debating reform. So, does Hipkins have that credibility? Can he be trusted in tax?

To establish whether Labour and Hipkins can be trusted on tax, it’s worth looking beyond Robertson or Hipkin’s eloquent speechifying on tax reform to what the party has actually done in practice about tax in the last week:

1) Labour voted against its own policy on taking GST off food. Te Pati Māori put forward legislation on this last week in Parliament, and Labour joined National in voting down a policy that was remarkably similar to what it recently built its election campaign around. Despite the GST-off-food policy being incredibly weak, Labour and its supporters asserted it was “better than nothing”. Yet even on this weak policy, Labour has flip-flopped again. Before the vote, Labour-aligned commentator Shane Te Pou warned: “If Labour votes against this bill, a lot of Labour supporters will be very unhappy and they will not forgive or forget.”

2) Labour has confirmed it would keep the new Government’s tax deductibility for landlords unless the tax cut proves to cause a big boom in housing prices. Housing spokesperson Kieran McAnulty clarified this when speaking to property developers last week, being reported as committing to retain National’s $2.9b tax cut for landlords if it isn’t seen to cause another house price boom – see Rob Stock’s Kieran McAnulty courts property developers (paywalled)

After changing their positions so dramatically on these two issues in the last week, Labour appears to be willing to continue to capitulate on tax. And if they are so quick to change their tax policies to court property developers, then how much confidence should the public have that they will stay staunch on other progressive tax policies in the future?

Will Labour voters get fooled again?

The Labour Party’s ongoing track record is to campaign for tax reform, get into power based on their complaints about unfairness and inequality, but then to find reasons not to implement any real reform. Critics say it’s like Groundhog day, with various Labour leaders and prime ministers going through the cycle of posing as tax reformers in opposition and then delivering the status quo (with some tweaks). Helen Clark’s Labour Government did exactly this, followed by Jacinda Ardern, and then Chris Hipkins.

The latter has recently been hostile to tax reform, and last year he tied his leadership to promises not to implement progressive new taxes. But as with Robertson, he’s raising eyebrows by now posing as a tax reformer.

Labour’s tax politicking routine of selling themselves to voters on the promise of tax reform but then capitulating after the election will only work if voters naively take Hipkins at face value. But some commentators think they should. For example, Max Rashbrooke argues today in the Spinoff that although Labour has a terrible track record on tax promises, “this time it might be different”, and says that Labour under Hipkins can now be trusted on tax reform, because “the intent this time must be serious” – see: Chris Hipkins might just be the one to make a wealth tax work for Labour

Rashbrooke’s argument is that there is just too much momentum and expectation within the Labour Party for Hipkins to be able to let down supporters: “by dangling the prospect of major reform and then taking it away, Hipkins has sparked serious discontent within Labour, and indeed the wider left. As one Labour MP told me last year: ‘We’ve uncorked something here that can’t be put back in the bottle.’ Hipkins knows all this history, and must be aware that to call once more for ‘a conversation’ on tax and then do nothing would surely spark more than just discontent.”

Similarly, Rashbrooke told RNZ: “I don’t think Hipkins would raise his head above the parapet if there was no intention to do anything because why would you get everybody’s hopes up again and dash them for a second time?” – see Anneke Smith’s RNZ article, Public ‘ready to be convinced’ about capital gains tax – inequality expert

Labour’s “Wealth Tax Faction” has pressured Hipkins to act

Although Rashbrooke’s optimism might seem overly heroic it is indeed true that within Labour activists and politicians are organising within the party to make tax reform happen. There is a lot of discussion about the establishment of a “Wealth Tax Faction” coalescing around MP David Parker and other progressive members of the caucus.

A looming bitter internal war on tax within Labour threatens to topple Hipkins or at least make his party increasingly divided and unelectable. Hence Hipkins has had to quickly shift his positioning after seeing which way the wind is blowing.

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Dr Bryce Edwards is Political Analyst in Residence, Director of the Democracy Project, School of Government, Victoria University of Wellington. This article was first published by the Democracy Project.