He wants to be a tax-raising and lowering, eat-the-rich Trump-but-not-like-that of the political centre. Duncan Greive heads to Parnell for the Gareth Morgan party’s very odd first policy launch.
“Make New Zealand fair again,” says Gareth Morgan, more than once for emphasis, on a street in a suburb which has always and only and accurately been described as leafy. We’re outside John Key’s lovely mansion in Parnell, a stunt location which was not evident to invited media until we arrived. Given the prime minister’s citing of media “intrusion” as one of the reasons he’s resigning, the staging was definitely somewhat creepy – but because it wasn’t adequately telegraphed it meant only four of us showed up to the first flagship policy announcement for Morgan’s new insurgent movement, The Opportunities Party.
No matter. Morgan’s “not here to shag about”, and if he or his chief of staff Geoff Simmons were disappointed by the size of the turnout they never showed it. They’re here today to do a number of seemingly contradictory things which seem like they shouldn’t work and probably won’t – but are all the more admirable for their wide-eyed ambition.
The seemingly contradictory things are, in no particular order:
- Reform New Zealand’s tax system in a style more radical than anything since Lange/Douglas.
- Position himself as New Zealand’s Trump, a self-made rich Pākehā dude who has no mates in the rich Pākehā dude’s club, principally because he is intent on setting the club on fire.
- Then convince his target market – likely younger, left-leaning, lower income people who don’t own property and are losing hope they ever will – that he is, in fact, only Trump-like in being anti-establishment and not Trump-like in being a fucking maniac tweeting about SNL parodies and triggering foreign policy panics while being president-elect and so on.
- Achieve all of the above while being almost ascetically chill about retail politics, saying phrases like “at the end of the day” (very electable) alongside others like “we don’t aspire to government” (less so).
Like I said, a lot of odd and contradictory things to stuff into a political conversation which was already crowded with Labour chat and Mt Roskill chat and Winston chat and election year-looming chat before the most popular Prime Minister we’ve ever known announced he was stepping down out of a blue sky on Monday.
That little nugget has proved somewhat distracting for the press gallery and everyone else – but hasn’t deterred Morgan from flying up and away from the hubbub of capital city politics and some “crap” Wellington weather to a balmy Auckland to talk to the four of us about tax.
“We will gather a lot of money,” he says. “We will give every cent back.” And that’s the crux of it – while it’s a huge new grab, it is all about redistribution. Morgan says that the tax system has a massive inbuilt bias toward money accumulated through wealth and assets versus work and productive investments. His plan is to assume a particular rate of return on houses, cars, farms, equipment, intellectual property – anything with a decent value really – and tax that assumed rate of return as income.
It’s the kind of idea which is clumsy to say and not immediately easy to hold in your head, if you’re not waist deep in this stuff all the time, like Morgan is. “I can do it in three lines,” he says, and the four of us lean forward excitedly. Fifteen minutes later, he’s still labouring over minutiae. Because it is complicated. It will be phased in to avoid a crisis. There are carve-outs for over-65s, who can take something resembling a reverse mortgage with the IRD. Further carve-outs for businesses who are struggling. The precise amounts are explicitly up for debate, which means the amount given back isn’t a precise figure either.
“I’m nearly finished, guys,” he says plaintively at one point.
The regime is most effectively conveyed, like most things, by way of specific example. And luckily, he has one hand just behind him. He gesticulates to John Key’s lovely mansion over his right shoulder.
“Say it’s worth $10m,” says Morgan, sounding excited. “And that he owns it outright, with no mortgage.” What his plan would do is assume that Key’s house was earning him 5% of that – $500,000 a year. Then tax that assumed income at 30%. So Key would have a brand new $150,000 tax bill to pay. The spread at Omaha? Same regime.
(The bach in Hawaii? Dunno.)
But you get the idea. The family home – the family home – long the most sacrosanct object in all of New Zealand politics (after the family cat…) is now officially in play. Not just for capital gains, but for the rent free tax advantage it gives its owner for living there.
This is the point at which every politician from every part of the political spectrum takes heel and runs for the hills, screaming in assumed electoral agony. Morgan is hoping that he can yell the next part out before voters are out of earshot.
“In case you missed it,” the quite conversational four page PDF announcing the policy states, “I repeat – under this policy NOT ONE ADDITIONAL DOLLAR OF TAX WILL BE COLLECTED.”
The Opportunity Party’s shrieking capital letters, not mine. That’s the point he is at extreme pains to make – that while where the tax burden falls will move radically, the total amount of tax retained by government won’t change. That is to say that what we have to pay for the fancy things we like to have as a society – roads, roads, roads and sometimes a prison – will stay the same.
What will happen to John Key’s $150,000 Parnell payment, or Morgan’s own self-calculated $350,000 in extra taxable income? That will be taken from the top 20% of wealth-havers and scattered across the bottom 80% of wealth-havers-not, with particular emphasis on those earning the least.
“Isn’t it just the tax policy you unveiled in April?” asks BusinessDesk’s Fiona Rotherham. Pretty much. But now he’s running for power – not just putting out open source policy, but trying to sell it to the public.
He can at times make it sound very simple. “Key and I are both pretty wealthy people,” he said to open. “But we don’t pay our fair share. There’s nothing dodgy going on – the tax system is just very biased.”
That’s why we’re here at this nice but intrusive location, ultimately. So that Morgan can point out just how awesome it is to live in Parnell.
And it is awesome! The streets are wide and gently cambered and quiet, with large, suspiciously-kempt grass berms. Just down the hill is Tāmaki Drive, a road wrapped lazily around the water. Just up the road is the Domain and the museum. If you fall and crack your hip there’s a mint hospital a kilometre away, and if someone gets over your large iron gates there’s a friendly copper in the village.
That stuff costs money. All of us except Lindsay Perigo and maybe that guy with the sculpture farm agree that the country would be pretty weird and bad if we didn’t have it. Where we swing apart more radically is the method by which we tote up our specific share of the bill. What Morgan is saying is that the most wealthy New Zealanders should pay a lot more, and the vast bulk somewhat less.
This isn’t a new idea. Morgan talks this morning with a wistfulness common to his generation about life before 1984. The New Zealand of Muldoon and Kirk and Rowling. “Inheritance tax. Capital gains. Estate duties. Land tax. Stamp duty…” He almost sounds aroused, listing all the different taxes we used to have. At the very least he sounds like man in a hat talking about French cinema or Flying Nun’s early catalogue.
That New Zealand was pretty tax-happy. Pretty tariff happy. The government wanted to touch almost everything. It had many horrible problems which tend to get glossed by the wistful men, but let’s not talk about the social reforms here and focus on the economic ones. Morgan argues persuasively that in our eagerness to streamline our tax system, we introduced some perverse incentives privileging housing, which have subsequently meant every Boomer who could afford houses bought every house they could.
Around the same time, not coincidentally perhaps, the cute idea that “tax is theft”, as Morgan quoted to me ruefully afterwards, began to take hold amongst a part of that generation. It became a kind of sport, like Pokémon Go but with people’s lives, seeing the arcane ways you could keep your tax bill down. Funnel money through a trust. Create a series of interdependent companies which owned forests. Become non-resident for tax purposes. It didn’t really matter what contorted position you had to assume – if it was avoidance and not evasion you were a genius and not a criminal. The fact that, out of sight and mind, the stable society which all that wealth was predicated upon began to crumble and fall just didn’t seem that relevant.
The result of this tax-minimising was mostly felt in the housing market.
“When my wife and I bought our first house, income-price ratio was about four times. Now, it’s about seven times,” he says. “And more around here.”
He gesticulates up toward Newmarket and east toward Ōrākei, but really he means the whole isthmus. Auckland. The city of 99 $1m+ suburbs – up from 17 in 2013 – and one living with the fact its workforce can barely afford rent, let alone dream of consuming in any truly meaningful way. The one bursting with potential but whose growth is choked by the inability to wrestle this monster to the ground.
Morgan – funny moustache, surprisingly soft voice, deeply wonkish vibe – has finally got sick enough of it all to try and do something about it. The thing is, as radical as his solution is, his diagnosis – that wealth and property has outstripped gains in income and provided huge tax advantages to those who hold it – is broadly agreed upon by everyone from the Herald’s fund managing columnist Brian Gaynor to leftwing cause celebre economist Thomas Piketty.
Morgan himself has been fulminating for years. He released a book called The Big Kahuna in 2012, calling for a Universal Basic Income, or UBI. Back then I interviewed him for North & South and decided he was a basically nice man and a total maniac with his strange plans. Now the rest of us seem like maniacs, ignoring a world ablaze and electing incoherent reality TV bobbleheads instead of trying to have a rational assessment of what our needs are as a society and who is best placed to pay for them.
That’s critical to understand – this plan is by no means socialist or particularly statist. Morgan, while definitely strange, isn’t so strange that he’s against markets. When asked which major party he’d support if he makes it to parliament, he says with a grin, “We’re for sale to the highest bidder!”
He still thinks we need incentives which allow people like him and Key to get fabulously wealthy while others don’t. He just thinks society’s floor should be a bit higher and firmer, and that when you’ve got Parnell money you won’t miss a few hundred grand a year the way other people will a few hundred dollars.
Will it work? Probably not. Over his left shoulder, in a deeply unfortunate juxtaposition, is not just John Key’s house, but Mike Hosking’s pained grin. ZB’s Alicia Burrow, who stood close to Morgan and asked a series of sharp and informed questions of him, drove there in a ZB-branded SUV with the Hosk’s face all big over its hindquarters.
This is part of the “establishment” which Morgan’s railing against – and he would run headlong into the following morning. Paul Henry, host of Paul Henry, and in his final days, had him on to talk about his policy.
It did not go well.
Morgan opened poorly. “We’re an unregistered political party… and we’ll stay that way until we make the call. Whether we’re going to bother,” which isn’t the best rallying cry I’ve ever heard.
Henry, who is surgically adroit in framing an issue and plunging it into an opponent’s most vulnerable flank, said of Morgan’s incredibly dense and deeply-researched policy “I think it’s an envy tax”.
They then spent five minutes yelling at each other. Morgan came off, as he often does, as annoyed that he had to explain it again. And that anyone would doubt him.
“Well it depends whether you want New Zealand to be fair or not,” he told Henry. “And you’re telling me you don’t give a toss.”
“Don’t tell the economist what a reverse mortgage is mate.”
And still later.
“You’re just a tax loophole cowboy, that’s all you are.”
Henry said that Morgan wanted a “communist state”, and that will be the meme. The ‘everything is fine’ duo of he and Hosking will enjoy shredding both the policy and particularly its irritable pitchman. They carry a broad coalition of middle New Zealand thought with them. A not inconsiderable force to overcome.
Which is why it doesn’t matter that there’s a coalition from wealthy money managers to union leaders adamant that our tax policy is broken, and needs fixing. Or whether this is the right change. What matters is whether Morgan can sell this big, hairy change into middle New Zealand – or at least a big enough fringe to sneak over 5%.
It wasn’t an auspicious start, in all honestly. Morgan talks happily about the Gini coefficient and declining voter participation, and loves a good graph – but it feels like it’ll be a hard sell unless he can crank up his rhetoric really high. His media interviews have been rough.
That doesn’t make this heroic and somewhat kooky quest any less beguiling. At the very least, Morgan is a much more convincing wealthy wildcard than the giant German chaos machine who blundered into the last election.
What’s critical for Morgan and The Opportunities Party will be convincing an easily frightened electorate that the big new bill will be smaller than the big new cheque. And that he comes both as Trump and in peace.
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