As promised a little while ago, it’s time to get micro on policy and examine a bit of macroeconomics. Let’s retrace the recent history of the top tax rate, one little move in a sea of hundreds.
In 2020, Grant Robertson pledged to raise the rate from 33% to 39%: a move I take no issue with, that does little to actually improve equity or government efficiency in our country. There are obvious counterarguments I have little interest: this incentivises tax evasion, this punishes work,this is disincentivising high-income New Zealanders (many of whom have socially beneficial careers, e.g doctors) to work as many hours. The concealed potential harm is an extension of that last problem: it makes more sense for them to focus on profiting off of assets, fuelling the housing boom on capital gains, on which they will pay 0% tax in the long term.
Such arcane details did not cut through to the public, because National and ACT had no interest in pointing them out. Why admit that the system is rigged towards the boomers already on the asset ladder, against young professionals working hard, let alone working class Kiwis? It would be a massive own goal. They instead chose silence to win political points. Labour, meanwhile, by speaking up on these traditional grounds, appeared to left-wing supporters to be implementing their desired redistributive agenda, without actually doing much in practice.
Instead, according to classic right-wing dogma about hard work and productivity, National simply promised to repeal the measure, with no economic counterbalances elsewhere to ensure equity. Amidst a society-wide COVID crisis and rampant inequality, the vulnerability of the best off was not the vulnerability most Kiwis were feeling, making this an already ineffectual stance.
Moreover, this made Robertson’s core economic attack in 2020 more salient: National were promising at the same time to lower government income through tax cuts, to lower deficits and debt by spending less, and to spend more on causes like infrastructure. This is not impossible to do through some deft accounting, but it does not sound plausible in the best of times, let alone under a National capable of budget holes of billions.
The height of the top tax rate debate came as, over in the UK, a certain cheese-loving PM decided to trial the Henry J. Waternoose III approach to tax reform. To be associated with defending the rich, especially as Luxon took over from Collins, was one thing. To be tied to an ideological project reeking of Rogernomics was another thing entirely. New Zealand politics avoids ideological programs like the plague. Robertson gleefully piled onto National week after week for their “Liz Truss tax cuts”. The Reserve Bank declaring war on inflation gave National the necessary cover: they took the first opportunity to doublethink the fiscal irresponsibility of such a policy and pull the plug.
At every stage Grant Robertson played his hand perfectly. The individual policy probably shifted few voters. However, the way this was executed supported critical narratives that Labour was best-placed to handle the impending economic calamity (then expected to be a recession, not a cost of living crisis), and that National could not take the heat.
The policy was a vote-getter - and it was cynical. The impression of good economic management was more important than the substance (e.g capital gains tax). All parties must make some compromises with the reality that nothing can be done if nobody votes for you; your power scales with your polling. Make too many choices meant to muster a majority, and everybody will love you for a little while. Soon they’ll wonder why they ever wanted you.
This is the shortest article in a while, so I’m going to sneak an update on the blog in the back end here. I made a lot of schedule commitments I couldn’t keep up while I was in university - watch YouTubers for sufficiently long and you’ll see the same pattern pop up. Now that I’m out, I intend to keep it up more regularly, while still hoping to iterate on quality.
That’s a lot of words to say I’ll be publishing a new article weekly, probably on Wednesday afternoons. The content will remain focused on political narratives and electoral scheming, as it’s been for a long time. I’ve been squirrelling away thoughts on films, shows et al. for another project I may update about some time. For now, with the election coming up here and the American presidential primaries starting up, I’m really in my wheelhouse. Of course, avoiding burnout from repetition is important, so I’m also looking to come at the usual topics from some different angles. Looking forward to it!
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