Income Tax (Adjustment of Taxable Income Ranges) Amendment Bill

on behalf of Hon Simon Bridges: I move, That the Income Tax (Adjustment of Taxable Income Ranges) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.

I have the pleasure of introducing this bill on behalf of the Hon Simon Bridges, who as the leader of National proposed this as a substantial issue, of dealing with the costs of living and making sure that New Zealand families were not disadvantaged through the rise of inflation and what it meant in terms of pushing people up into a higher tax bracket. It is a great piece of legislation. I’m very grateful that the Hon Simon Bridges, first of all, worked on the idea and then was lucky enough to have the opportunity to have this bill drawn from the ballot box so that we can debate this issue.

I think, in today’s context, where we are seeing skyrocketing costs of living, particularly the effects of that on people who are on benefits, low-income families, and superannuitants, the issue of tax creep is a very, very significant issue. We estimate that the average New Zealand householder is now about $9,000 worse off over the last three years as a result of increases in rent. We’ve seen rent increases over $100 per week, and of course people who are renting are, in the main, either young people waiting or hoping to buy a house, which is increasingly out of their reach, or people who simply do not have either sufficient income or sufficient deposit to buy a house. And, of course, with the way things are working and moving in the housing market, that is an unlikely possibility that is increasingly becoming a reality for many.

Now, we’ve seen increases in power costs, we’ve seen increases in food costs, we’ve seen increases in fuel costs—all that is making our lower-income people particularly worse off, and people are struggling. New Zealanders are struggling now under the burden of increasing costs, and most of that is driven by inflation. It’s certainly the measure of how we deal with the issue of costs of living, but inflation is driving a lot of those increases and making New Zealanders, effectively, worse off—less pay to have discretionary income, or even to meet the main parts of their household budget. And, of course, we had a Budget that was focused primarily on beneficiaries. A lot of money was directed toward beneficiaries, but nothing was, really, directed toward superannuitants and low-income families.

So this bill is about how we deal with the issue of inflation when it comes to tax, and this issue is referred to technically as “fiscal drag”, but, in effect, what it means is that, through the effects of inflation, as people’s incomes increase with inflation, they increasingly have to pay more rates of tax. So the current thresholds, as many will know, up to $14,000, you pay 10.5 percent; between $14,000 and $48,000, you pay 17.5 percent; $48,000 to $70,000, you pay 30 percent; and $70,000 to $180,000, we’ve got this new tax rate that this Government brought in only very recently, where you pay 39 percent—33 percent but, once you get over $180,000 you get to 39 percent. So we’ve now, effectively, got five tax rates. And, as a result of inflation, what happens if you’re on—let’s say you’re on $47,000; you then start to flip over as a result of inflation. You might start to flip over, increasing your tax rate from 17.5 percent to 30 percent once you get over the $48,000.

So, if it was a case of real increase in wages above the rate of inflation, that would be fine, but what this bill does is recognise that inflation is a major driver of how people get into a higher tax bracket. And so what the bill requires is for the Government, every three years, to look at what has happened with inflation, and the inflation rate it uses is the Consumers Price Index. There’s a whole range of different inflation rates and measures—Producer Price Index. But, for the purposes of this bill, it uses the Consumers Price Index and it says that every three years there is a reset to make sure that people, effectively, if there’s been a substantial amount of inflation, will be no worse off as a result of that inflation. That means that they will still be paying the equivalent amount of tax or the tax rate that would have applied if there hadn’t been inflation. So it is a very important one about making sure that New Zealand families and individuals are not worse off as a result of inflation.

So the costs of this are very significant. It is estimated it is roughly about $700 million in cost. It’s a very significant tax change that the Hon Simon Bridges is proposing, and, of course, it helps particularly those on lower incomes, because of where the banding works, but it is a way of making sure that we can support those people, and it is a way of allowing people to have more money in their pocket as they try and deal with the increasing costs that are currently happening. Of course, we’ve seen the rampant rise in inflation. We saw the recent rate of 3.3 percent that was just recently announced. That is biting into the pockets of New Zealanders. So, unfortunately, inflation is the friend of Government but the scourge of the working family, and from a Government revenue perspective, this is far reaching in terms of the projections for income that the Government will generate from personal tax rates.

The Government collects about $85 billion in tax. That includes all the different types of taxes, but a large chunk of that is from personal tax, and so this is a significant, significant portion, about 48 percent personal tax. So this is a significant portion of the tax take, and so it’s very meaningful in terms of New Zealanders looking at their situation and going, “Am I going to be better off as a result of this?” And one thing you can be guaranteed to say is that this bill will actually make New Zealanders much better off. There are some very specific clauses in it, but the new section YA 2A, which is a new section under clause 5, requires specified dollar ranges to be reviewed within 12 months of a general election to determine the need to be adjusted to reflect any percentage movement in the Consumers Price Index. And that is the key component of this bill.

So I think this is a bill that deserves a lot of merit and consideration. I hope the Government members will take this bill seriously, because there are different ways of trying to support families. One is to increase benefits, but that only supports those on benefits; it doesn’t support low-income families. Another way, and a valid way, of doing that is to deal with the taxation system, and one option is obviously to have tax cuts, but this is another option that we proposed prior to the last election, which is very meaningful, particularly for lower incomes, as a way of making sure that people can keep more of the tax dollar, so they can keep it to spend it on their families and to look after themselves so they can get ahead and, hopefully, for some of them, may even be able to save a deposit to buy a house, which at the moment looks an increasingly difficult proposition for many. On that basis, I support this bill and recommend it to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. This is a mistaken bill. It is mistaken in terms of the dollar effect. It is mistaken as to whether it solves any problems. It is mistaken about the nature of taxation. It is mistaken in terms of the assumptions underlying it. It is mistaken in the use of the Consumers Price Index. And it is mistaken as to when this should all happen. Because it is a mistaken bill, the Government will not be supporting this bill. But let me take you through exactly why we won’t be supporting this bill, take you through at least some of these problems.

I want to start with looking at the actual effect of the move that is proposed to the tax thresholds. So, as Mr Bayly outlined, tax in this country, individual income tax, is done on a progressive basis. So we have tax thresholds, income between $0 and $14,000 is taxed at 10.5; between $14,000 and $48,000 is taxed at 17.5 percent; between $48,000 and $70,000 is taxed at 30 percent; between $70,000 and $180,000 is taxed at 33 percent; over $180,000 is taxed at 39 percent. Just to clear up one thing which some people often don’t quite understand: if you earn, say, $70,000, it doesn’t mean that all your income is taxed at 30 percent; it is only the income between $48,000 and $70,000 that is taxed at 30 percent, and amounts below that are taxed at a lower rate. That is what a progressive scale means. It means that people who earn more income pay a greater proportion of that income in taxation. So those are the tax thresholds as they are now.

This bill suggests that those thresholds should be adjusted by the inflation rate every three years. This is where, I think, it becomes critical to understand the actual numbers here. So I spent a bit of time working through the numbers and working through what it would mean for the first triannual change of thresholds. Of course, that involves making an assumption, so I assumed that we were running at, say, 2 percent inflation a year, which is not an unreasonable assumption. Over the course of three years, that results in a 6.01 percent change to the thresholds. So what does that actually mean for our thresholds? Well, it means that that first threshold at $14,000 goes to $14,857; then the next threshold at $48,000 just chunks up over the $50,000 to $50,938; the next threshold at $70,000 goes up to $74,000; and so on; and that final threshold of $180,000 goes to $191,000. So you get that shift in thresholds, and what that does is it has an effect on the amount of tax that people would pay.

So I worked through the numbers and, in particular, I worked through the amount of tax cuts that people would get—the actual tax cuts that people would get if the current tax thresholds were shifted by 2 percent inflation—2 percent each year over three years. It turns out that a person who earns $200,000 would get a tax cut of $1,200 a year, or $23 a week. A person who earned half that, $100,000, would get a tax cut of $556 a year, or $11 a week. And a person who earned around about the median wage—so it sits at around about $60,000 to $70,000, depending on which measure you are using and how you are doing it; I base it on about $65,000—would get a tax cut of $430 a year, or $8 a week: two cups of coffee, two loaves of Vogel’s, five loaves of white bread at the supermarket, $8 a week might get a glass of wine at the pub, or a beer; it wouldn’t be a craft beer. It is $8 a week, and that is for a person who is on the median income. So the effect on what money people have is actually quite small. So in terms of it actually putting a lot more money in New Zealanders’ pockets, it does not put a lot of money in the back pockets of people who earn the median income, and it puts even less money in the pockets of people who earn less than that.

💬 Hon Member: It’s proportional.

Proportionately, people who earn more get a great deal more out of this tax cut. The person who earns $200,000 a year gets $1,200 a year out of it; the person who earns only $65,000 a year only gets $430 a year out of it. Now, that is the nature of progressive tax scales, but when the Opposition tells you that this will put more money in the back pockets of ordinary New Zealanders, they are not telling you where the true effect is—they are not telling you who gets the most out of this.

The first speaker, Andrew Bayly, said what we could with this—so he is mistaken about what people do with it. The first speaker of the Opposition had the temerity to suggest that if you went without two cups of coffee a week—and this will be dear to your heart, Ms Swarbrick—you could instead buy a house. What a ridiculous notion. We know the problem with house prices in this country, and it is not going to be solved by tax cuts. Foregoing two cups of coffee will not give you the money for a deposit on a house. The Government is working on that as hard as it can in other ways, but tax cuts is not the solution there. So it was a mistaken bill in that respect.

I also think it is a mistaken bill in terms of the assumption it makes about taxation—that the amount of tax that is collected by the Government to use for health and welfare and education and roads and all the things that we like to have in this country, to use in those areas—in education, where teachers are crying for more; to use in areas like health, where people with various diseases are crying for more money to be put into Pharmac; to use in areas like housing, where we know there is a desperate need.

The assumption that lies at the heart of this bill is that instead of trying to increase what Government is doing, we should keep it the same or reduce it—we should reduce it. The assumption is that the amount of tax that New Zealanders pay each year is the right amount already, because we set the threshold in stone and then only adjust them by inflation. There is an assumption hidden in there that the 30 percent or so of GDP that is represented by Government at the moment is the right amount. I suggest, given the failures from the Opposition over the nine years that they were in Government to address the critical needs that we have in this country, that Government has not been sufficiently involved in the economy, let alone reducing it—let alone reducing it.

I also want to address one further issue—one further issue. The way that this has been set up is that it would require the Minister—the Minister of Revenue, in this case; though, I suggest it is probably the Minister of Finance that ought to do it—to every three years make a decision about whether or not tax thresholds should be changed. Why not in the nine long years when they were in Government? Why is this a policy that has only come out in Opposition? Why is it something in terms of the inflation adjustments to the thresholds—the constant inflation adjustments to the thresholds—why was it not done while they had plenty of opportunity when they were in Opposition? They did not take the opportunity then because they did not want to have the triannual discussion about threshold taxes. All they wanted to do was to sit on their chuffs and do nothing. The do-nothing Government over there that in Opposition has lots of bright ideas but actually never put any of them into practice.

So there you have it, it is a mistaken bill. They are mistaken about the effects that this would have for New Zealand. They are mistaken when they suggest that it would enable people to buy houses. They are mistaken in terms of the assumption about the right level of tax already. They are mistaken because in all the years when they had the opportunity to have this discussion to talk about how New Zealanders should be taxed, and so on, to talk about what that taxation might buy, they did not do it, and suddenly they are doing it when they are in Opposition. That is why, on this side of the House, we will not be supporting this bill. It is wrong in substance, it is wrong in its thinking, and it is wrong in this silly idea that it would genuinely put more money in New Zealanders’ pockets.

Members, it’s come time for me to leave the Chair for the dinner break. The House will resume at 7 p.m.

Sitting suspended from 5.58 p.m. to 7 p.m.

The House is resumed. At the beginning of the dinner break, the House was considering the Income Tax (Adjustment of Taxable Income Ranges) Amendment Bill.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. There’s been a lot of discussion about the content of this bill so far, so I should probably preface this by saying that the Green Party will not be supporting this legislation. One of the many reasons for that is, actually, to respond to some of the points that were being heckled before by those on the front bench of National, that this is somehow some ideological opposition—I would put forward the very proposition that this is actually an ideological proposal. We are all ideological because we have ideas and values, and that is the reason that we ran to be in this place at Parliament: to change the laws and to share those ideas and values, rally behind and campaign for them, and to, hopefully, change the rules.

So I guess to underpin some of the thematics or the reasons as to why the Green Party of Aotearoa opposes this legislation is to go into some of the thinking behind what we think of when we think of taxation, because it probably isn’t things like cancer treatment, or treatment for broken bones, or roads that we use, or the pipes that deliver water to our taps, or for the underpinning of the legal system that means that we all have rights when we buy things or when we contract if things go wrong. Nor do we necessarily think of the financial system that enables operation ease and security of banking, because this is the stuff that taxation pays for. This is the stuff that enables us to be a collective, that enables us to organise as a society, as a community.

Right-wing parties ideologically, to raise that point, have been, for a very long time—for decades—trying to stitch together taxation as this bogeyman. It means that people like Andrew Bayly can stand up with a straight face and say that this is somehow about beneficiaries and pensioners, when we had a breakdown of calculation by tax expert Dr Deborah Russell, who stated—and I think it’s really important to reiterate this—that to break down these changes as proposed would mean that somebody on an income of around $200,000 per annum would receive around $23 per week. Those on an annual income around $100,000 per annum would receive around $11 per week. Those on the median income of around $60,000 to $70,000 would get back around $8 per week. I would estimate that it’s probably about half of that, or even less thereof, for those who are pensioners and beneficiaries, once again reiterating that what we’re talking about here is crumbs for those who are on the lowest incomes and another slice for the bakery for those who are at the top.

This is the same guy and the same party who led a bill just earlier today to cut off more pensioners, migrant pensioners, from accessing superannuation in Aotearoa New Zealand. They’re also the same folks who oppose increases in benefits for the lowest-income New Zealanders. So let’s talk about the tax burden in this country, because there was a lot of heckling from the National Party just before about exactly this. They were talking about how they, when they were in Government, did make those changes to the taxation system, to those income taxes—and they did. They cut the top tax rates. And in order to help pay for that, they increased tax on goods and services, which is incredibly regressive, because guess what? It hits those at the lowest incomes the hardest. If we also want to dig more into this notion of tax burden, let’s talk about the fact that was revealed earlier this year: 42 percent of the wealthiest New Zealanders in this country pay lower effective tax rates than the lowest taxes that are paid by people who earn their money by working or through the benefit—that is, they paid an effective tax rate of less than 10 percent.

This is exactly the reason that when we’re talking about these things like taxation changes, we need to be bringing into it some serious evidence about where it is that we are investing that revenue into the infrastructure that all of us ultimately use, but also how disproportionately, when we’re talking about the costs of living—particularly as raised by Andrew Bayly in his contribution earlier, of the likes of housing in this country—which is not an issue when it comes to, for example, rents that are driven by inflation. In fact, again, as research has shown, since 1993, rents have effectively doubled whilst the quality of housing in this country has stayed relatively stagnant. The Greens could not in good conscience support this bill.

Kia orana tatou katoatoa to the House; thank you, Madam Speaker. There are times when the House comes together, and tonight, the very first bill that you saw on the Order Paper, which was in the name of Andrew Bayly, was an opportunity for the House to come together to support some residency changes to superannuation, which had consequential tax amendments. This bill is clearly not one of those times. I’d like to reference the comments by the member Dr Deborah Russell, which can be easily summarised as “This bill is a mistake”—a mistake—and one more time, it’s a mistake. The explanatory note of the bill makes reference to the cost of living, and, as Dr Deborah Russell had said tonight, for those on a medium income—she’d actually practically crunched the numbers—it’s $8 a week. For those on a higher income of $200k, it is $23 a week. This side of the House does not support this bill, as it disproportionately benefits those on higher incomes more than those on lower incomes, who tend to have greater need.

This is probably something for the member who’s sponsoring the bill to listen to: inflation is not uniform across income groups. That is a basic economic and tax principle. That’s why you have transfers if you want to help the cost of living, and you should be targeting it. That’s why you have Working for Families tax credits. That’s why you have the winter energy payment: to reduce expenses by targeting lower-income families. Lunches in schools, the removal of school donations—but the member sponsoring this bill wanted to challenge us, to say, “Did you actually look at the bill?” Well, for a number of years before I became an MP I was actually a tax adviser to, actually, some of the members on the opposite side of the House. So I technically reviewed this bill. If this bill had come before me when I was an adviser in a Minister’s office, I would have put a bright red line through it—bright red—because, fundamentally, it is a poor bill. I’m surprised the Opposition, which claims to be the most fiscally responsible economic manager, cannot see how much this fiscally is inflexible.

As covered in the explanatory note, it appears that this bill aims to improve the progressivity of the tax system—hence reference to the three-year automatic changes in living costs. Well, this bill is absolutely poorly targeted. Ongoing indexation as proposed in this bill would absolutely constrain the Government’s ability to be fiscally flexible. It doesn’t take into account the pure fiscal cost, which increases when incomes and population grow. In layman’s terms: what are you going to cut to pay for this? If the goal, as covered in the explanatory note, is to reduce taxes for households to help with living costs, then, again, inflation indexation is a poor way to do so through the tax system. That’s why you target, again, through transfers, such as Working for Families; such as the winter energy payment; or, for families, the Best Start payment.

The last mechanism in how you do it—in my opinion, the actual technical review of this bill—is absolutely unprecedented. I cannot in my tax career think of a time where you would give an unfettered level of authority to the Commissioner of Inland Revenue and to the Minister—or, ultimately, to Cabinet—to have unfettered discretion in changing thresholds. There is a reason why tax is imposed by Parliament. This bill gives that discretion, effectively, to the Minister and to Cabinet. All it comes back to is supply. The reason why you come and impose the tax in Parliament is for supply, so that whoever is in Government has the ability to fiscally manage it. You’re saying it shouldn’t come through Parliament through this: that the Commissioner of Inland Revenue should be able to just do it; that the Minister should be able to just report to the House and do it. Again, if this bill had come across my desk, I would have totally scratched through it. Give me another example of where the Commissioner of Inland Revenue has an unfettered discretion or authority to be able to change tax thresholds in such a way. Give me an example, member sponsoring the bill, since you wanted me to have a look at the technicalities of this bill.

💬 Hon Simon Bridges: It’s a statutory order.

Have a look at the bill. Have a look at the Income Tax Act. You’re looking at section YA 2—that is the definition of income. Even I know it’s the definition of income. So I suggest the member sponsoring the bill have a look at the Income Tax Act as it currently is set out and give me an answer as to whereabouts you see that unfettered discretion for the Commissioner of Inland Revenue.

Madam Speaker, I hadn’t even sought the call. Thank you very much. I want to rise on behalf of ACT in support of this bill. It is the right thing to support, funnily enough, for reasons that none of the opponents of the bill appear to understand. Let me lay that out and then give one objection ACT has that future support will depend on.

Inflation is back. Almost everyone in New Zealand is aware of it, except perhaps those working at Statistics New Zealand publishing the official statistics. You go and talk to people in the trades—they say sometimes prices and quotes only last seven days because their suppliers say prices are going to go up. You talk to people who are trying to hire staff—they say there is a bidding war on for skilled staff in this labour shortage. Wage inflation is going up, and what that means is that people have to earn more to buy the same stuff. As incomes rise so people can buy the things they need, what they find is they can’t buy more stuff but their incomes have pushed them further and further into higher tax brackets. So the average amount of tax they pay on a dollar they earn goes up because more of their dollars are in higher tax brackets, not because they can buy more but because inflation’s put the prices up—they’re just paying more tax.

Now, what’s interesting about this is that as this goes on, fewer and fewer low-income New Zealanders find that their marginal tax rate and their average tax rate is in the lower brackets. After a while, if we leave the brackets the same for long enough, then practically everybody finds themselves on higher tax brackets and our tax system becomes less progressive. Let that sink in for a moment. So the Labour Party, friend of the worker, friend of low-income New Zealanders, actually are opposing a bill that would have maintained the progressivity of the tax system by raising the tax brackets so low-income New Zealanders stay in lower tax brackets. This is the problem.

Chlöe Swarbrick gets up and gives us all the philosophy but she hasn’t thought about the basic arithmetic behind this bill, neither has Deborah Russell. The so-called tax expert points out that people who earn more and pay more tax will benefit more from tax reductions. Of course they will, that’s always true. But the relative effect of this bill will be to ensure that lower income people stay below the tax thresholds and pay lower rates of tax.

The previous National Government actually boasted that they had made taxation more progressive, and that’s why the ACT Party is supporting this bill to select committee but no further. Actually, we want lower, flatter taxes. We want all New Zealanders to pay the same tax rate on all income. If we’re going to do that, then we’re going to have a tax system which is fairer, where everyone pays the same rate, which is simple, which doesn’t involve accountants trying to shift income around between vehicles and between income years to lower the tax that they pay, and which has the right values that if you earn more you pay more but we don’t hit people harder with additional tax rates.

This bill is actually counter to the principle of lower, flatter taxes. It maintains the progressivity of the tax system. So we support it to first reading because we’re always eager to see tax reductions for hard-working New Zealanders. But we will put up an amendment to this bill at later stages which says this: “As fiscal drag pushes people into higher tax brackets and people pay a larger portion of their income in taxation even though inflation has eroded their purchasing power, here’s what should happen to the extra money that Government gets from fiscal drag: it should be used to drop the top tax rate so that our taxation system becomes lower, fairer, flatter, simpler, and more in line with the values of New Zealand, that if you work hard, it’s yours.” That has got the Labour benches confused. That’s why we’ll be supporting the bill to first reading, but we’ll need amendments at later stages. Thank you, Madam Speaker.

Thank you, Madam Speaker. If I may, I’d like to take a moment just to reflect on the politics of this bill. Currently, the income tax bracket changes require a law change, and the member who submitted this bill knows this and is trying to make it look like we would be voting against tax cuts, which is not so. So it’s a very clever move by the former Leader of the Opposition. I note that it is supported by the current leader of the opposition, the previous speaker David Seymour, who is not supporting it beyond the first reading, because obviously he needs to distinguish himself now, as preferred Prime Minister, between those two parties.

Madam Speaker, may I indulge you in how the argument from the opposite member works. The member says that inflation drives wages up and that leads to bracket creep. The member’s proposed bill sees every tax bracket change quasi-automatically based on inflation every three years, and it would require an order by the Executive Council, meaning the Government of the day would need to provide a veto against it. Can we please think about this? So the Government of the day is not required to actually state the tax changes that it supports; rather, veto against automated or semi-automated tax changes. That goes against the very democratic principles that this House is based on. [Interruption] Not only that, the change would require serious cuts to services while not delivering actually much money to Kiwis every week. [Interruption]

There are two reasons that I oppose this—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! Order! This is a robust debate, but can we keep the interjections a little more rare and a little more reasonable, thank you.

Thank you, Madam Speaker. There are two reasons that I particularly oppose this bill. The first is about the process and the second is about the substance. The process really is around Government not being able to proactively set those thresholds, but rather vetoing if the Government of the day disagrees. To my mind, as a lawyer, it feels akin to something like changing the burden of proof. The reason is this: we have said no to income tax changes for 98 percent of Kiwis. That is what we campaigned on. That is what the New Zealand public knew when they went to the polls. They agreed or disagreed and they cast their votes accordingly. How would it be, then, to suddenly, after we came into power, due to inflation, change that threshold that we indicated of $180,000 for 39c upwards to $185,000 to $190,000? My colleague Deborah Russell is quite right in saying that it is not fair on voters, let alone taxpayers, to be able to spring these changes on them without that mandate to do so, that explicit mandate, given that taxation is one of the key issues that New Zealand people vote on. I’d point out that the Opposition had the opportunity to support this during the Clark Government’s time and they did not do so, nor during their nine years of Government. So I question why they would do that now.

Secondly, I look at the substance and, as has already been traversed, this bill disproportionately benefits those on higher incomes. It has a regressive effect, which is not surprising coming from the National Party and the ACT Party. Our focus is closing the inequality gap; it is not helping the rich get richer. My colleague Barbara Edmonds has already very carefully laid out the ways that we have been able to do that through our support: lifting main benefits, reinstating the training incentive allowance, expanding food in schools, and delivering more insulation and home heating, and so on. And I would just say that the policies that we’re implementing as a Government are clearly working. Today, we’ve seen unemployment has fallen to pre-COVID levels. We’ve seen that the average hourly wage rose 4 percent to $34.76 an hour. These are relevant to putting more money in the back pocket of everyday New Zealanders.

So while it looks seductive to think that this member’s bill will lead to tax cuts across the board, in fact the member’s bill will advantage those who are already advantaged. It will increase the inequality gap that clearly goes against this Government’s mandate, and I stand against it. Thank you, Madam Speaker.

Thank you, Madam Speaker. Well, I was going to start with a chat around Barbara Edmonds, who was once Michael Woodhouse’s tax adviser when he was in Government. And Barbara made the comment tonight that if she had read that, she would have put a big red line through it.

💬 Hon Simon Bridges: But what does the member think?

What I think, Mr Bridges, is I think that Barbara, Barbara Edmonds, who’s a member of our Finance and Expenditure Committee, who once worked for Mr Woodhouse—

💬 Hon Michael Woodhouse: Lucky thing, she was.

Absolutely—and I think that Mr Woodhouse will agree she was a very good adviser, and she would have put a great big red line through this. You ask what I think? I think the advice that she has given tonight is something that I would listen to.

Then I would talk about Dr Deborah Russell—another tax expert.

💬 Hon Simon Bridges: Run us through CPI.

I’m going—do you want to talk about the Consumers Price Index (CPI)? Well, the CPI, as of course we know, is measured on a basket of consumer goods, Mr Bridges. And you know—isn’t that right? So, no houses, no houses included. So anyway, back to what Dr Deborah Russell said, and I’d like to reiterate it because she gave me a good lesson. I was really interested in this. She talked about what a 2 percent inflation rate over three years would put back into the pockets under this Bridges bill. Hmm! If you earn $200,000 a year, over three years that would be about $1,200 a year over it and $23 a week. That’s what you get if you earned $200,000 a year. Then if it was $100,000, it was about $500, and that’s $11 a week—$11 a week. Then we’ve got $60,000 to $70,000, and that was $430 or about $8 a week. Then when you get down to pensioners and beneficiaries, there’d be about half of that. Where is the equity and fairness in that, Mr Bridges? You know, where is the fairness in that? And then, you just don’t have answers—never have answers, Mr Bridges. Mr Bridges, this is your bill and by the end of us talking about it and shooting it down, at least the best thing about this is that someone else’s member’s bill is going to get pulled out of the ballot—hopefully, tomorrow—and get another good shot, because this bill—and I had a look at it, and I thought, “Well, you know, when you were in Government, why didn’t you do it then?”

💬 Hon Michael Woodhouse: We did!

No, you didn’t. You didn’t. You didn’t put this in. It’s not in law. Why didn’t you do it then? I can’t see why you wouldn’t have done it then if you were so passionate about this bill. I mean, seriously, maybe when you get to stand up and talk about it, you’ll tell us why didn’t do it. This is—

💬 Hon Michael Woodhouse: The member’s run out of material.

No, I’m engaging across the House, with the other side of it—

💬 David Seymour: The member—she ran out of material three minutes ago.

Oh, and then we get on to the ACT Party leader. Hmm! He’s got every answer to everything at the moment, because he’s just loving the sunshine—loving the sunshine, aren’t you? Loving the sunshine! Inflation is not about—this is not what this is about. This is it: National mocked inflation indexation of income tax thresholds during the Clark Government. National derided Michael Cullen’s proposed inflation adjustment to income tax thresholds in 2005, saying they were paltry.

💬 David Seymour: Someone get that member some speech notes. Get the member a debate pack.

Yes, I’m finding some notes now. And National did not introduce inflation indexation of income tax thresholds in their last nine years in Government, and now you’re sitting over there in Opposition and seem to think that this is a good bill. Well, I can tell you what: we’re going to vote it down because it’s not. Labour does not support this bill, which will disproportionately benefit those on higher income tax thresholds. This is not what this Government’s about. We’re here because we believe in fairness and that’s what we do. Good hard-working New Zealanders—that’s who we support. I am very pleased to be saying I will not be voting for this in the House tonight. Thank you, Madam Speaker.

Thank you, Madam Speaker. I’m only sorry I’ve only got five minutes to actually refute the nonsense that we have heard, because the arguments we’ve heard from the left are, frankly, intellectually bankrupt. Dr Deborah Russell is no more a tax expert than I’m 6 foot 4. And I’m going to say this about Barbara Edmonds: Barbara Edmonds, at least she knows what she’s talking about. But I will say this: if she had come to my office and put a big red line through that paper, that would have been the last act that she would have done in my Minister’s office. Now, I say this: she wouldn’t have done that, and I actually admire that, because she has become as political as she needs to be and she has a strong future in this House.

But let me just say something about what the Green member Chlöe Swarbrick said. She accused Andrew Bayly of a right-wing ideology about this bill. Well, the sad reality is this isn’t right-wing ideology. This used to be the ideology of the democratic left. I’m no Keynesian. People know that I am preferring a supply side economics approach, but Maynard Keynes saw the value in this, and he said about this in 1933: “taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance, than an increase, of balancing the budget.” And that’s because the people on the other side do not understand the difference between tax rates and tax revenue.

But I’m not going to bother trying to convince them otherwise; I’m going to talk to the people who are listening to this debate, the people who supported Labour: the nurses, the teachers, the police officers who are affected by the drag that the tax programme produces.

💬 Hon Andrew Little: Well, it funds their jobs.

Now, 10 years ago the average salary—oh, the Minister of Health should listen to this. Ten years ago, according to an Official Information Act (OIA) request replied to by the Auckland District Health Board, the average Auckland DHB registered nurse earned $63,000. Ten years later, they earn $77,000. Now, in 2010—

💬 Hon Andrew Little: Because of the pathetic pay rises under National.

Listen up, Mr Little. In 2010, that $63,000 salary was 10 percent less than the top tax rate. Ten years later, the average nursing salary was 10 percent more than the top tax rate. Now, I do the comparison. I would like to be able to compare what tax that person would pay 10 years ago compared with today, but because—and Anna Lorck and Dr Deborah Russell and Barbara Edmonds didn’t acknowledge this—the previous Government did lower tax rates, I need to use the 2010 tax base as the reference.

The analysis shows that that nurse is paying $1,878 more tax than they would have if the thresholds had been changed. That’s not more tax just because they went up in income; that is the premium for going into those top tax brackets: $1,878. Now, that registered nurse has tens of thousands of colleagues around the country, all paying $1,878 more because of bracket creep. The teachers, the police officers, the nurses, the nurse aids, the teacher aids that think they support this Government are being fleeced by the inflationary impact of tax bracket creep.

Now, at $700-odd million of this cost, yes, there is a cost, but I remind the House what the Government said when they increased the minimum wage. They said, “Oh, but that’s OK because those people will spend it and it will stimulate the economy.” It doesn’t matter how the money gets into the pockets of those hardworking taxpayers, the same benefit accrues when we raise the tax thresholds and lower the tax that those hardworking Kiwis pay. But we know that’s not going to happen, and it doesn’t happen not because, as I think Ingrid Leary said, it somehow means it doesn’t get scrutiny of this House. They don’t want to do it because they’re socialists. They want everybody to earn the same thing, they want everybody to pay the same rate. And I tell you what, that’s what happens in Venezuela and Cuba and Zimbabwe and North Korea. And if they want a tax framework that looks like that, they will get an economy that looks like those countries.

This is a really good idea, its time has come. Only a National Party in Government will deliver that benefit to Kiwis.

I believe it was Albert Einstein who said that the hardest thing in the world to understand is the income tax, and what we’ve heard tonight—and I congratulate the member for having his bill drawn. Certainly, when one looks at some of the relatively minor issues that are in bills in the term, I think this is one that has some substance. It does have some substance. It’s got enough substance that, were we to pass it here tonight, were we to pass it at any stage, it would have a considerable impact on the way we do business as a country. Therefore, there is no way we should be debating it in isolation without a full understanding of the impact it will have down the track, because, as we all know, good policy is about ensuring we understand the unintended consequences, and there will be considerable unintended consequences were this piece of legislation—this significant piece of legislation—to go through without full consideration of what difference it would make right across the board.

I invite those opposite, because we will debate many bills today, this week, this parliamentary session, and generally during those debates—in fact, during general debates; in fact, during question time. Generally, the theme coming from the Opposition is we should be spending more money on the projects or those issues which they’re raising in this House. Well, of course, a simplification of the tax system means that that money has got to come from somewhere, and that is what tax is all about. Many of the arguments being put up here tonight, particularly by the Opposition, are very much strawman—or we should say “strawperson”—arguments, because they are arguments not about this bill; they’re arguments about whether we should pay tax at all. I give it to David Seymour. At least he is honest about it. He wants those at the higher tax brackets paying less tax. Good on him. He got up there and said it. Generally, people who are in that position think it, they act it out, but they don’t say it. So good on you, Mr Seymour, because what that does is ensure that as we look at this bill, whatever we do, we’re going to end up with more inequality.

Now, I was privileged enough to have a position before I came here which took me around the world. I was president of a world body, and I got to spend time in different countries with, generally, police forces but exposed to funding regimes. I looked at the northern European regimes, particularly the Scandinavian ones, and I would like to see this country compare itself with Scandinavia much more. The first thing that most New Zealanders, if they are lucky enough to get to Scandinavia—they’ll see that it’s a country that runs pretty well, pretty equitably, and the reason why is they are pretty cold countries, and the cold countries know that unless you actually work together, then things will not work. If you try to be an individual out there, try to live out alone and each man is an island or woman is an island—I’m getting good at that—you will perish. You simply will not survive. So at the basis of that cooperation of the Scandinavian model is actually a high tax model, a fair tax model.

One thing when you do speak to Scandinavians—they do pay a lot of tax. They get their very good hospital treatment free. They get their very good education systems free. So it’s important that when we look at any change to the tax system—and once again I congratulate the member for having drawn this very significant bill from the biscuit tin, but it cannot be seen in isolation. It is folly. There are tax experts on this side of the House. There are tax experts everywhere, where we’ll quote. The one thing they won’t do is agree. So what is important is that any significant piece of legislation like this that’s being debated must be seen in the whole. It must be seen in the whole of what we’re trying to achieve as a society, and certainly merely introducing a piece of legislation picked out of the biscuit tin that is going to ensure that we have less income to make sure that we are able to be that equitable society we decide to be is a poor outcome, and for that reason I cannot tonight support this bill. Thank you, Madam Speaker.

I rise in opposition to this bill. I’d like to take the analogy that some of my colleagues have made and turn it round. The proposal here, as I understand the calculations from my friend Deborah Russell, is that a person on $200,000 would in their pocket have $1,200 per annum extra, a person on $400,000 would have $2,400 extra in their pocket every year, and a person that is only on $100,000 would get $556 per annum back in their pocket. That’s money that’s going into the coffers, at the moment, of the State and the State are using it to support a whole lot of things that need supporting. And the things that need supporting are absolutely targeted, I am proud to say, at our middle and low income earners. So that $2,400 that someone on $400,000 a year actually contributes by this method into the economy gets spent on things like lunches in schools, it gets spent on benefit increases, and that money, in turn, that is spent on benefit increases, goes straight into the economy.

Now, I actually happen to have the pleasure of the company of quite a few people who do earn $400,000 and more, and I would like to take issue—and I have before—with Mr Seymour on this. Those people are good people, but they do not work harder than our nurses or anybody in the lower brackets. I object philosophically but also practically to the suggestion that what we are doing is not looking after our hard workers. Our hard workers worked in COVID for very, very little. I was ashamed at some of the rates of pay that were around at that time for people who are actually pivotal to our economy. And I want to see an economy which really supports them and so I want somebody on $400,000, yes, to pay $2,400 more and I want to redistribute that money to people to support them in those other areas.

💬 Hon Simon Bridges: She’s proud to be a socialist.

And I am absolutely a socialist and pleased to be one, because it’s a very, very important thing that we actually address the gap between rich and poor in this country, because we will pay for it, Mr Bridges, in many ways. We have paid for it and we are lucky we haven’t paid for it more than we have.

We have a system where people have actually broken down as a consequence of this kind of cavalier policy, which in disguise it calls itself “fairness” and it calls itself “redistribution to working people.” Good, hardworking people apparently are going to buy a house with their $8. They are not. They are going to buy a house because this Government is going to support them into houses, because we are going to build houses, because we are going to actually produce emergency housing, and, actually, we’re not leaving them in cars, and this is a very, very important difference. So, yes, I think it is an ideological difference. I think it is a clear difference between this side of the House and the National Party and ACT. And I think what Mr Seymour has said when he said, “Let’s actually give this bill a go and add to it.”—a flat tax that actually means that the poorer people pay an obscene amount more than the rich people—it actually bares, it shows, what is actually going on in that party, and I hope New Zealanders take account of tonight’s comments because that kind of flat tax is actually about putting a lot more money into the hands of the wealthiest people in our economy. And guess what, Mr Woodhouse? They will not spend it in the economy; they will go to Fiji, if they can. They will go and spend it on expensive cars, they will not actually spend it in our economy in the way that our poorer people will.

It’s very, very important to me that we are closing that gap, that we are seeing the connection between people, because even if we are on extreme amounts of money in our careers—which we are lucky enough to be—we all have friends and relations and we’re all connected, and I do not want anyone left behind in this country. That is why I cannot see this bill as being anything but a stalking horse for actually putting $2,400 into the hands of our friends earning $400,000 a year. I want to see that money go absolutely to all the people in our lower brackets. Wages must go up in this country and that is a good thing. Thank you. That is why I will not be supporting this bill.

It’s great to speak on my member’s bill. This is the first member’s bill I have ever had in 13 years get to this stage of the process. I regret I wasn’t here for my 10-minute speech. I am going to try and give one now in five minutes.

I want to say just one thing to the member that’s just spoken. She talked a lot about people earning $400,000 a year—the fat cats on $400,000 a year. They pay $136,000 in income tax every single year. That’s a lot of money.

This bill is about what’s called bracket creep. It’s been inevitable in recent decades that, over time, income earners, most of us, actually—hard workers, nurses, truck drivers, and the like—have moved inevitably, unavoidably, into a higher tax bracket and therefore pay more tax: that 10.5 percent to $14,000; the 17.5 percent from $14,000 to $48,000, where 1.8 million people reside; to 30 percent for the $48,000 to $70,000 bracket. That’s 700,000 people who’d benefit from this law. And then 33 percent; that’s for $70,000 to $180,000. That is 859,000 people. That’s not just some fat cats; that’s a lot of ordinary New Zealanders paying their mortgage who would benefit from that.

What’s wrong with this increase in tax over time when people are, as some of the members have said, earning more? Well, as incomes have gone up, so has the cost of living: rent, petrol, electricity, food—that Consumers Price Index (CPI) basket of goods that the member over there talked about. And by the way, it’s going up by—what is it?—3, 4 percent at the moment; the highest in a very long time. So people are paying more tax and, in real terms, they have less disposable income to help their families with. And the Government’s tax take, their big sack of money, Grant Robertson’s big sack of money grows and grows and grows as the Government has more and income earners who pay tax have less. In that regard, you might want to say that actually what this bill is really about—in addition to bracket creep, because it’s certainly about that—is cost of living. Rents are rising at the moment, petrol costs are rising at the moment, electricity is rising at the moment, and food costs are rising at the moment.

In terms of the specifics of this bill, I just want to make a small number of points. It amends the Income Tax Act 2007. It provides for a review. There’s been a lot of nonsense spoken over on that side about what this bill does. It only provides for a review by Inland Revenue’s commissioner every three years, within 12 months of a general election, “[to] review all specified dollar ranges to determine if they should be adjusted to reflect movement in the … [CPI] in the period since the specified policy changes were last reviewed.”

The other significant clause provides that if the commissioner concludes that the specified dollar changes should be adjusted in terms of CPI and the like, they are under the regulations. But significantly—and this is why, actually, the bill is fiscally neutral—“Despite … [that], the Minister may decline to recommend that regulations be made … and, if so, the Minister must present to the House … a report that explains their reasons for declining”.

A few things flow from this. Well, in 2019 when National first proposed this, the calculations in relation to the specified dollar ranges, assuming a couple of percent inflation, meant income earners would be better off $400, then the next time $900, then $1,400 with each adjustment. And if we don’t do that, by 2023 the average wage earner will have slipped into the 33 percent—second to top now, under the Labour Government—tax bracket.

The final point I want to make is that a lot has been made by the speaker over there—the member for Ōhāriu made the point about the fiscal costs of this and what it means for the Government. Well, actually in 2019 terms—it will be more now—it was about $650 million in foregone revenue for the Government. That said, I would argue it’s not properly considered foregone revenue but, rather, stemming the growth of tax by stealth to Grant Robertson and the tax man. The Inland Revenue’s coffers have been steadily growing as a result of bracket creep for the last several decades, actually, and this merely stems that tax increase by stealth, as I say, to Grant Robertson. He’s worried about the loss of revenue. He should be more worried about the loss of revenue to income earners, to everyday Kiwis who voted for him at the last election. But, actually, if they think about issues like this and how much harder it’s getting in an inflationary environment, I wonder if they will the next time.

In conclusion, this bill deals with bracket creep. It deals with the cost of living, and it stops those tax increases by stealth by Grant Robertson.