Cullen is not finished yet

Michael Cullen must still be receiving his $1062 per day, as he is railing everywhere about the failure of the Capital Gains Tax… at least to anyone who will listen. I guess that he has to justify the enormous amount of taxpayers’ money he is probably still collecting, and so he keeps on and on.

Please remember that he never proposed a CGT when he was minister of finance. He also told the current government that the Tax Working Group couldn’t make it work, and was sent back and told he had to make it work somehow. So exactly why he is now bitterly defending a tax he never supported himself is hard to understand. It must be that $1,062 per day that keeps him motivated. He has now written a column for A Newspaper that describes his position. Read it and have a good laugh. quote.

Since Prime Minister Jacinda Ardern announced that the Labour-New Zealand coalition had been unable to agree to implement any form of extended capital income taxation (and that while she was Prime Minister the matter was now dead) there has been a great deal of misinformed or ill-informed comment criticising these announcements. end quote.

It is not a Capital Income Tax. It is a Capital Gains Tax. Capital Income is interest, dividends, rents… any of those income streams that you get as passive income from capital assets. A Capital Gains Tax by any other name is just as putrid as ever. quote.

The least justified of these has been the accusation that the Prime Minister showed a lack of leadership. She only had to stamp the ground, apparently, and Winston Peters and New Zealand First would meekly acquiesce in the passing of legislation to which they were opposed. end quote.

Unless Winston actually threatened to pull the plug on the government if the tax was not dropped, I disagree with this statement. Remember that she was taking it to the next election, and it was not a done deal until they won. She could have still done this, but didn’t. quote.

This shows a fundamental misunderstanding of how a true multiparty MMP government has to work. The three parties involved in the current Government are independent entities with their own policies and public constituencies. Maintaining such a government in a stable mode entails accepting precisely what happened in this case: if there is no agreement there can be no progress on the matter. end quote.

Compromise is the name of the game with MMP. I refuse to believe that Winston could not have been persuaded to introduce a CGT in some shape or form. I believe it all came down to the government’s ineptitude and lack of understanding of economic issues that meant that, if they couldn’t deliver the tax in exactly the form that the TWG proposed, they were never going to do it. They just didn’t understand the issues well enough to present a counter-proposal to the most draconian CGT system in the world. We can blame Sir Michael himself for not understanding the true ineptitude of this government. quote.

Some of the factual commentary on the final decision rejecting any widening of capital income taxation also seems wide of the mark. New Zealand First did not commit at any stage, as far as I am aware, to support for a Capital Gains Tax (CGT) limited to rental property.

That is not surprising. Capital assets, such as rental property, are more likely to be held by older, pakeha New Zealanders than any other group. That is precisely New Zealand First’s primary support base. end quote.

If Sir Michael would stop looking down his nose for just one second, there was an easy way around this, which was adopted in Australia. If the government had exempted all capital assets already owned at 1st April 2021 (the likely date of the introduction of the tax), then NZ First’s support base would have been safe. The only reason this was not done was, once again, the government did not have the expertise. It was the Tax Working Group’s report or nothing. quote.

As I warned on many occasions, it was always going to be hard to get Peters and his colleagues over the line on a CGT. In any case, New Zealand First’s current polling levels scarcely suggest it has political capital to burn.

end quote.

Maybe not, but Winston still has one major asset. His is the tail that wags the dog. He can pull the plug on this government any time he chooses. That is why we do not have a CGT as of today. quote.

The real failure in the debate was the absence from it of all the groups who might be expected to support a fairer tax system. Only near the end did a group emerge, but it muddied the picture by throwing into the debate a whole set of other proposals as well. end quote.

Ah yes. All 5 of them. quote.

Where to now with no new tax base? All is not lost. The immediate need for the Government is to recognise the fact that the continued existence of a substantial boundary between what is called income on capital account and income on revenue account presents an ongoing challenge for the enforcement and integrity of the tax system.

A Newspaper. end quote.

I disagree, Sir Michael. Most of your proposals were, in fact, a tax on inflation. I support, in principle, a CGT that taxes genuine value increases on capital assets, but without inflation adjustments, people would simply end up worse off. You, with your disdain of ‘rich pricks’, but your love of art, surprisingly exempted, do not allow for this.

Then again, do not be surprised. He has to be able to justify his $1,062 per day from the public trough somehow.