Taxation (Urgent Measures and Annual Rates) Bill

I will restrict my comments to one brief call on this very specific clause. It sets the rates for the 2009-10 tax year, and as such it brings us to the heart of a point formerly made by the Minister of Finance. His suggestion was that nobody would be worse off, because the progressive tax reductions that had been put in place by the previous Government had not been implemented yet. Well, if that were the case, there would be no need for this part, which changes the tax rates for the coming year. This particular clause is necessary because Labour’s proposed rate reductions are already part of our law.

That takes us to why significant proportions of the New Zealand public will, in fact, lose. Before I return to the specifics of the mechanisms that mean that many New Zealanders will lose, let me clarify a very important prior point, and that is the difference between the average-income earner and the median-income earner. We know that the “average” income is $45,000. It is very interesting that in my electorate of New Lynn 66 percent of all taxpayers earn less than $40,000—earn significantly less than the average income. Two-thirds of people on less than the average wage? What is that about? It is because the average is skewed by a small number of very high earners who drag the average above the median. So when we say that the average-income earner gets $1.92 out of the National Government’s tax reduction, and anyone on below $44,000 with children gets nothing or loses, we are actually saying that two-thirds of all taxpayers in my electorate of New Lynn are either not affected or worse off, and only one-third gains. In Mr Tremain’s electorate of Napier 71 percent of all taxpayers earn less than $40,000, so 71 percent of his taxpaying constituents—if they have children—potentially are worse off as a result of this tax change. Why is that? When we get into the mechanics of the bill—

💬 Hon Steve Chadwick: Is that “nobody”?

That is nobody who will be voting for Mr Tremain next time.

This issue is of particular importance to the Māori Party. The Māori Party is supporting this bill. If two-thirds or more of all taxpayers across the country earn less than the average income, and therefore are going to be losers under this bill—if they have children—imagine the implications for Māori communities, whose incomes are skewed below the mean. The vast majority of Māori New Zealanders will be hurt by this bill. We know, as a start-off, that most people who voted for Māori Party candidates gave Labour their party vote, so this is a sensitive matter for the Māori party members anyway, given that they have gone into coalition with National—all for two seats outside Cabinet.

💬 Hon Clayton Cosgrove: Mana-enhancing!

Mana-enhancing for the individual Māori Party MP but not for the community. Those people will be asking their representatives why they have done this. Why have they inflicted upon them, in the first business week of the House, a tax increase?

What is the mechanism? I see that Mr Tremain still does not understand. If one is on an income of between $14,000 and $20,000, by April 2011—following the period during which this clause applies—one would, by law, have been on a marginal tax rate of 12.5 percent under Labour; under National those people will be on a rate of 21 percent. That is a big difference. That is a big, big difference. Merry Christmas to all of those people who thought that they were going to get a tax cut!

💬 Hon Clayton Cosgrove: They did not tell us that before the election!

They did not tell us that before the election. I think this measure is a symbol of a much, much deeper problem, and, of course, it is a problem that the Māori Party will have to wrestle with, and that is that National campaigned on the glossy idea that everybody would have everything that he or she would have had under Labour, but with a few fresh faces to carry it forward. It was a very palatable suggestion. It fed into that old idea that it was time for a change—“But we actually quite like you guys, so we do not want too much change.” Mr Key understood that, and he campaigned on not making too much change.

But the rhetoric did not match the reality. On the first business day of the House, in comes a tax bill that gives a tax rate cut and a threshold lift to upper-income earners, and, of course—supported by the financial sector—penalises real businesses, our innovators and exporters, which lose their research and development tax credit, and penalises low and middle income families, the heartland of New Zealand. It disproportionately penalises Māori and Pacific Island New Zealanders. Good luck to Mrs Turia, good luck to Dr Sharples, and good luck to all the Māori Party MPs in their next round of hui as they explain what is in this bill for ordinary Māori people, who will be paying more, not less, tax during the period to which clause 29 applies.

This is an interesting clause—and in ways a somewhat unusual one—which is a kind of historical relic. We have to pass legislation to confirm the annual tax rates, even though in Part 1 of the bill we have set the annual tax rates for 2009-10. In Part 3 we have another provision to confirm that we have actually set those annual tax rates for 2009-10. One may well ask why on earth we have to do that. Well, the historical reason is quite simple: we are confirming the Sovereign power to tax, and we are not allowing the King, or in our case these days the Queen, to levy monies without the consent of Parliament. Although in one bit we have said that those are the tax rates, in this bit we confirm that it is the intention of Parliament, and we have the authority of Parliament, to levy those particular tax rates.

This is interesting because this is the one year in which nobody loses—2009-10—because the current tax law provides for a series of tax cuts in 2010-11. In 2010 the bottom threshold will move from $14,000 to $17,500, and then to $20,000 on 1 April 2011. On the other hand, the changes made in Part 1 will remove that increase to that threshold, so on incomes from $14,000 to $20,000 a year, a higher level of tax will be paid. But that change will not occur until 1 April 2010, so for this one brief year of glory the National Party will be able to parade around the country saying that nobody is worse off as a result of its tax changes.

But wait—help is on the way from this side of the Chamber, as has so often been the case so far in this Parliament. We have had to help those members procedurally, and we are now going to help those members in terms of what they will try to tell everybody up and down the country. Very shortly we will come to an amendment when we get on to the next question. It will continue the ability to ensure that nobody is worse off as a result of this bill, by providing a mechanism where nobody will see themselves worse off than they would have been under the provisions in place before this bill is enacted and comes into force.

That is where it will be very interesting to see how people vote. I am particularly interested to see how the Māori Party votes both on this clause and on later clauses. The Māori Party has been calling, I think, for a kind of expansive policy—for the first $25,000 to be tax free, for the lowering of GST, and for an enormous range of things, which add up to a vast and gob-smacking sum of money that would clearly have to be raised by an enormous number of raffles being run up and down the country, because it would run into many, many, many billions of dollars a year. What it had to do with Māori needs is by no means apparent to many of us. Those members now have the chance to decide whether they really want to vote for big tax cuts at the bottom or big tax cuts at the top, because this tax bill provides for tax cuts at the top and increases in tax at the bottom.

I do not think the Māori Party members understood that. I do not think they were properly briefed on that. I do not think that when they signed up to something that was supposed to be mana-enhancing, they thought they were signing up for the exact reverse of what they had promised their constituents. We will be happy to help their constituents, as well. We will be happy to remind them of how their members have voted, because we know that for small parties of only five members it can be very difficult communicating with their constituents and telling them what they have done. We will be very happy to assist in that and make sure the Māori Party’s constituents are properly informed about how their members have voted within Parliament.

We will also be very interested to see what judgment those constituents make upon that party. It is not beyond the realms of possibility that those constituents will decide that having seen a tax increase over what they were expecting to get, that is somewhat mana-reducing from their perspective rather than mana-enhancing. It may well be goodbye to the Māori Party at the 2011 election, which will solve a lot of problems for a lot of people. But of course Mrs Turia has a way of making up the difference. She believes that Māori own the foreshore and seabed; no doubt she will be charging for entry to that at some point in the future under a National Government, and that may well make up some of the difference for some of the families involved.

I think not; I do not see the National Party going down that route. The polling tells us—amazingly—that people believe that any change to the current law should reduce Māori rights, not increase them. So I strongly advise the Māori Party to adopt the route that Ngāti Porou has taken, and to advise people to negotiate very strong agreements that will give proper recognition of those rights rather than hold out a false impression that something more significant can be gained from a National-led Government, which will certainly not be the case when reality sets in. Like the Resource Management Act changes, it will be the reverse of what many people were hoping to see.

Therefore, this small part confirms those annual tax rates. For this one brief year of glory nobody will lose, and then the losing will begin.

I rise to take a brief call on this particular section of the Taxation (Urgent Measures and Annual Rates) Bill, as well. As has been said by the previous speaker, this section of the bill sets the tax rates for the forthcoming years at the rates that have been set out earlier in the bill. In other words, this entrenches for the future a decrease in taxes that is weighted to those who already earn the most, and a tax increase for those on lower incomes. It is exactly the opposite of what Māori Party members say that they stand for, given that Māori are disproportionately among those who are low earners. Their already low socio-economic status will be hurt by the provisions in this bill that will entrench tax cuts for those who are better off and tax increases for lower-income earners.

This also entrenches the somewhat inconsistent position taken in the legislation, compared with the National Party rhetoric in prior years. Over prior years they have continually said that the price point or the income point at which the highest tax rate kicks in should be raised. The Labour Government legislated for an increase to $80,000, above which the higher tax rate kicked in. This new tax rate kicks in the highest tax rate at $70,000. This seems to me to be yet another broken promise by the National Party compared with the rhetoric of yesteryear, on what is but day two.

Here we have a National Government doing exactly what the Labour Party predicted it would do; that is, prefer the interests of those who are already well off over those who are less well off. Far from being the friendly face, from being all things to all people as National members tried to present themselves over the last period prior to the election, they are already being exposed as preferring the interests of those who are better off over those who are less well off. It seems unimaginable at a time when we have rising unemployment, as that means that there will be more people on low incomes, as they are reliant on part-time rather than full-time work. They will fall within the low-income bands rather than the high-income bands. Against that reality that we know is real at least for a short period in New Zealand, given international events, those members are proffering a tax package that reduces the tax entitlements of people who are on lower incomes and prefers those who are on higher incomes. It is funded, of course, by the research and development tax credit cuts that were spoken of recently, and also by the gutting of KiwiSaver. So we have fewer jobs in the economy, and those on shorter hours of work as a consequence, with lower incomes, will be among those who suffer the tax consequences of a lower taxable income. It is a matter of some concern for me that the first act of National Party members is to visit the cost of their unwise tax cuts upon those least able to afford the loss of income that will accrue.

Earlier in the debate I took out a copy of the National Party’s taxation policy. In referring to this part of the bill, I note it confirms the tax rates going forward for 2009-10. I reflect on Dr Cullen’s words and those of my colleagues Mr Parker and Mr Cunliffe, when they talked about fairness. I look back at the National Party’s weighty document of propaganda and recall how all the National members—some soon to give their maiden speeches, some from Māori constituencies as well; and now supported, aided, and abetted totally, sycophantically, by the Māori Party—went around and said National knew that New Zealanders wanted a tax system that was fair. I reckon we could probably all sign up to that; we all say we want a tax system that is fair. The problem lies in the definition of fairness. If members look at the confirmation of these rates, they will see that what we would define as fair, and what most ordinary New Zealanders would define as fair, is not something that the National Party defines as fair.

National Party members told everybody before the election, not about these rates and how they would be confirmed today, but that the tax system would be fair. The document also states: “National’s tax package will give households confidence and some cash in their back pockets.” I just ask, as the Government confirms these tax rates, what is fair about what we have heard today, when, for instance, a person with no children and an income of $23,999 a year will get nothing? I wonder what Mrs Turia and Ms Parata, the new member who will purport, I suspect, to represent a Māori constituency, will say to their constituents when they go back to the marae. As the National Party confirms these rates, they know that those at the very bottom will get no assistance at all, or will end up paying more tax than they currently pay. I wonder how those members will respond when somebody on the marae stands up, probably quotes this document, and asks Ms Parata or Mrs Turia: “How do you define fairness?”

To be charitable to the Māori Party—let us be a little bit charitable—maybe it got sucked in by this bill. Maybe the Māori Party members did not read it or it was not explained; maybe they were hoodwinked, or maybe they were not told. Let us be as charitable as we can. But they have been told today and they were told yesterday about this measure; it has been explained over and over again. What will be etched in my memory is the face—and I have some sympathy for him—of poor old Hone Harawira, as he buried himself behind the desk yesterday and put up his hand to vote with the National Party—

💬 Hon David Cunliffe: Trembling!

—knowing that morally this is wrong. He knows that all the constituents he works for—and I am told he is a damn hard-working MP and is respected, as Mr Mallard said last night—will be sold out by this measure in toto. I am going to find the situation very interesting, as we deal with the confirmation of these rates, when some of the Māori members go back to their marae and their communities and somehow explain this measure to them. It is going to be an interesting course of events.

It shows me that this is a traditional National Party move: to have an election, promise fairness, equity, aspiration, love, peace, and happiness to all, and then to do people over—put the sword into them and slash at the most vulnerable part of our communities. The National members are doing that before Christmas under urgency, with no select committee scrutiny, in the vain hope that people are tired of politics. They hope people will want to get out to the barbecue and go to the beach with the family, to have a few sausages, play a bit of golf or whatever else, and be with their kids, and will not concentrate on politics. They hope and pray that our communities are thick. Well, I say our communities are not thick, and when people open their pay packets in the months and years to come, and when they try to do some good for their children and their loved ones—

💬 Chris Tremain: I raise a point of order, Mr Chairperson. Clause 29 is a very narrow clause. The member is an experienced speaker. He is way outside the scope of clause 29, which is very narrow.

Speaking to the point of order, I have consistently referred to the confirmation of the tax rates, and I am now explaining the consequences of confirming them. That is in order.

The CHAIRPERSON (Eric Roy): The Hon Clayton Cosgrove.

Thank you very much. The National members may not like that, or course. They do not like to hear that. They do not like it when Dr Cullen repeats that. A couple of them over there grin and laugh, and they do not like it when we repeat what the consequences of the actions taken in this Parliament over the next few hours will be. They can jeer and they can laugh. Mr Dunne is a straw man who blows with the breeze—the great man of common sense. I suspect that deep down—although he has his backside in the LTD, I have respect for the member—even he knows this is wrong. Even he knows this is wrong, deep down.

It is very interesting, I say again, as we confirm these rates, that not one member in the National Party has contradicted Dr Cullen, me, David Cunliffe, Mr Mallard, or Mr Parker, when we have stood up and given case after case of situations where injustice will occur as a result of confirming these rates. Not one of them has contradicted that. I would have thought that if we were wrong, OK, we were wrong. But the National members should tell us that, give us the evidence, stand up, and justify their position. They cannot do so; they will not do so. They have no evidence. I look forward to holding up this document around the country and inviting people to say whether, in their communities, they have been treated with fairness, with dignity, and with respect. Have they had their aspirations warmed and supported, and have they chosen a brighter future, when those who need some dough and some help are being sold out by those guys over there?

Debate interrupted.