Cullen Michael: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
Cullen Michael: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
[Volume:651;Page:227] 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 I am going to talk about high marginal tax rates and I think it is worth reminding the Committee of what probably almost everybody in this Chamber has forgotten. At one stage Sir Roger proposed a form of guaranteed minimum family income that was never put into place in its original form which up to an income at that time of $23000 a year—and this is the 1980s we are talking about; well over $40000 a year in modern money—had a 100 percent effective marginal tax rate. That is what Sir Roger actually wanted to be his legacy. But let us take this extraordinary argument. Sir Roger was always a wonderful person for making up figures and then expanding on them. Without the discipline of a whiteboard he gets terribly lost in the thicket of non-facts—90 percent of those earning less than $20000 a year are high-income earners! This is his kind of reverse logic. Of course 90 percent of those earning $200000 a year are poor whereas 90 percent of those earning less than $20000 a year are rich! 
Now of course some people on low incomes are well-off for two reasons. First they fiddle their taxable income. That is probably the most important reason why they are rich. Perhaps the most important reason why most people are rich is that they have managed at some point in their ancestry to fiddle their taxable incomes because most people who are rich have inherited their wealth not made it along the way and that also needs to be remembered. The second point— 
Hon Dr Richard Worth 
: That’s not right. 
Hon Dr MICHAEL CULLEN 
: That is right actually. Even in New Zealand that is true. The second point is that of course some second-income earners in families have low incomes. It may be a spouse who has a partial income or an investment income that is small and so on. But of course given what Sir Roger started with—ignoring beneficiaries and superannuitants—with one enormous expansive wave of the arm at least 800000 New Zealanders disappeared just like that. There were 500000 superannuitants as a start. They are not to be encouraged to work hard. He said that the purpose was to have the gap between earned incomes and benefits yet he will not reward those people who are trying to move off benefits and have partial additional income whilst maintaining family responsibilities. If one is a sole parent and the choice is between earning $10000 or $15000 a year part-time or $30000 to $35000 a year full-time and one is trying to bring up three kids what is actually the most socially desirable outcome in that situation? Will it always be the full-time job? In many instances it is better if that person can work part-time and receive some assistance from the State so as to spend sufficient time devoted to those children. I have to say that it is hard enough bringing up kids when there are two parents. When there is only one it is a very hard job indeed. We cannot just ignore those people. 
Even then if the worry that Sir Roger has is that some people on low incomes actually have high incomes in the wonderful sort of world in which Sir Roger moves where the people with whom he spends most of his time do not have high taxable incomes at all—indeed it is only when they have made a mistake that they have a taxable income at all by and large—then deal with that issue. This is complex enough already. Imagine the poor employer under the independent earner tax credit: “Madam have you got a partner?”—“Well I had one last week I’m not sure this week. We had a bit of an argument this morning.” If people have a partner and they have kids they do not get it; but if they do not they do. That will be a difficult one for employers because if they are deducting this off at source at 10 bucks a week they will have to ask an awful lot of penetrating questions. This party opposite that is so keen to take the State out of people’s homes is now putting the employers back into them and they will be asking questions in a world where life is very different from the old days of the married tax code and all the rest of it. And employers are going to have much-increased administration costs because of this and much-increased compliances. They are not going to thank the Government at all for the enormous complexity of this mechanism. 
What we do know is that it is going to take money off lower-income people because it is not quantified. The Government has had to quantify this. It told us clearly that $730 million over 5 fiscal years is the cost of making sure nobody is worse off but that is the next 5 fiscal years. That includes this year and next year when in fact it does not matter until 1 April 2010. The real cost is over $200 million a year. That is what is being taken off low-income earners earning between $14000 to $24000 year and families earning at least under $44000. But many are actually earning more than that. If they are two-income families they can be earning well over $44000.