1999 Election

Jacinda rattled and panics on income tax increases

It looks like Jacinda Ardern is rattled and has panicked following National's attacks over Labour's ever-increasing list of new taxes, with Jacinda today ruling out introducing a new, higher income tax bracket, increasing the top tax rate, or even referring the issue to Labour's proposed Tax Working Group post-election.

What's more, Jacinda appears to have only recently made this decision, possibly even just today, indicating that it may well be a captain's call, leaving her two MPs who have publicly endorsed income tax increases - Grant Robertson and Phil Twyford out on a limb and at odds with their party leader.

It really suggests two things, one is that Labour is getting messages that there's a potential backlash to all of these taxes that Labour has proposed in the past two weeks. There's been the regional fuel tax in Auckland, a capital gains tax, higher income taxes, the water tax, a tourist tax, a land value tax, and an unspecified asset tax, as well as reversing National's $2 billion families package from Budget 2017.

What's worth keeping in mind is that in 1999 Helen Clark and Labour did take an increase to the top tax rate to the polls in 1999, and comfortably won that election. From memory, I think Labour confirmed what the increase would be some two or three weeks out from the election, a window that Jacinda and the current Labour Party was currently still in to clarify what their proposed rates would be.

What I think is the issue here is that not only has Labour backtracked on its earlier pledge under the Budget Responsibility Rules it signed with the Greens to not introduce new taxes in its first term, but seek a mandate for them during a second term (an approach that worked well for National on partial asset sales in the 2008 and 2011 elections), but also the sheer number of potential new or increased taxes that they're proposed.

Essentially Labour has shot itself in its foot in two ways here. The earlier pledge not to introduce new taxes in a first term under the Budget Responsibility Rules was always going to cause tensions with how Labour would fund their election pledges. The second is that, with all these various taxes they've announced that they want, the Tax Working Group is starting to look more and more like it would just be something that would rubber stamp whatever Labour wanted.

Labour has effectively asked voters to agree to pay a tax bill that they don't have any idea what it might be, and that's a difficult pill for voters to swallow. If you're going to propose tax increases, voters want to know how much those increases might be for them, and what they're going to be funding with that extra money they're taking.

Labour has certainly got the second part of that equation wrapped up with some fairly significant spending promises in the pipeline, but that's making people nervous about how big these mysterious tax increases will be.

The question is now whether Jacinda's backtrack on tax will damage her brand in the same way that Theresa May's Dementia Tax backtrack hurt her.

Why Winston Peters will choose Labour over National

Used under a CC-BY-SA-3.0 licence

With polls showing Winston Peters (well New Zealand First, but let's be honest, Winston calls all the shots) will hold the balance of power after the election, trying to predict which way he'll jump has become a national sport for political commentators. I've been thinking a lot about this question over the past week, and I've come to conclusion that Winston Peters will pick Labour as a coalition partner, supported by the Greens in a confidence and supply agreement, over National.

Back in 1996 pundits guessed Peters would go with Labour, rather than National, as that was where much of his support from the Māori seats had come from. Instead Peters surprised everyone and opted to support National's third term. This decision would almost prove disastrous for New Zealand First, as in 1998 the party split in two and in 1999 it's party vote collapsed to 4.26% (having hit 13.35% in 1996), only being saved by Winston Peters winning Tauranga by a extremely narrow margin of 63 votes.

Again in 2005 Winston Peters surprised people by going with Labour over National or sitting on the cross-benches bartering with whoever formed the minority government. National was considered a likely fit largely because many thought New Zealand First's policy platform was relatively similar to that promoted by then National Party leader Don Brash. The cross-benches approach was also one Winston Peters himself had promoted in a speech in the lead-up to the election, saying he wasn't interested in the baubles of office.

However once again in 2008 New Zealand First's support collapses after the party was caught up in two scandals during Helen Clark's Labour government's third term. Having polled at 5.7% in 2005 and Winston Peters narrowly losing Tauranga, in 2008 they fell to 4.07% and Peters was trounced with National's Simon Bridges winning twice as many votes as him in Tauranga.

This is the crux of why I think Winston Peters will, if he holds the balance of power, pick Labour over National. Twice he's supported a third term government and both times it's nearly spelled the end of New Zealand First. At 72, Peters will know that he's eventually going to have to hand over the reigns of the party to a successor, and he'll want that person to enjoy electoral success as one last middle fingered salute to all the nay-sayers (like me) who say that New Zealand First is a personality party based solely around him.

Having twice been nearly annihilated at the ballot box by supporting third term governments and getting caught up in a mood for change, Peters will be eager to avoid that happening again by and so won't support a fourth term National-led government.

Instead, much like in 1996 where it was suggested by Michael Laws that Peters was always going to support National and used the threat of going with Labour as a way to get more policy and ministerial concessions out of National, Peters will use that same threat as a way to get concessions out of Labour. He'll also doubly know that a first term Labour-led government is less likely to do damage to the long term electoral prospects of New Zealand First following his eventual departure, as first term governments generally play it relatively safe with the policies they implement.

The real trick for National is, if it finds itself in this position after the election, to ensure that the price that Peters extracts from Labour is such that it undermines the credibility of both Winston Peters, Jacinda Ardern, and the Labour Party.

Top photo credit: European Union Centres Network 2008, used under a CC-BY-SA-3.0 licence: https://commons.wikimedia.org/wiki/File:WinstonPetersEuropa.jpg