Copeland Gordon: Budget Debate 
Copeland Gordon: Budget Debate 
[Volume:647;Page:16489] 
GORDON COPELAND (Independent) 
: 
 On Tuesday of last week I asked Dr Michael Cullen why he has never in the 8½ years that he has been Minister of Finance seen fit to cut income tax in line with the increased cost of living that Kiwis have experienced since the current tax rates were established on 1 April 2002. I specifically pointed out that although tax relief has been given to qualifying families through the Working for Families package about 2.5 million Kiwi taxpayers in this country have received no income tax relief whatever since the current rates and thresholds were established. 
In reply the Minister stated that he had good news for me because he would be announcing such tax relief in Budget 2008. He said that he looked forward to my support for those tax cuts as they would be consistent with the views that I have expressed over many years. He is right on both counts. I am of course delighted that consistent with the position I have been strongly advocating to the Minister since I first entered Parliament in 2002 he has at long last decided to adjust the tax thresholds thus bringing a measure of relief to those 2.5 million taxpayers. I guess I will go to my grave however wondering why the Minister simply did nothing for 8½ years to address the problem of fiscal drag between 1 April 2000 and 31 March 2008 because the cumulative increase in the consumer price index during that time has been a massive 23.8 percent. 
Let us be crystal clear about the matter. If the tax thresholds are not regularly adjusted to take into account the increase in the consumer price index then in real terms taxes are year in and year out being continuously increased as taxpayers move from below to above the 15c 33c and 39c tax thresholds simply because of the flow-through effect of inflation on their earnings. When that reality is understood fiscal drag becomes unconscionable. The Minister of Finance can use all of the spin smoke and mirrors he likes but he cannot conceal the fact that in real terms he has systematically allowed taxes to increase over the last 8½ years simply by doing nothing. 
So of course I share the relief of New Zealanders that something is at long last happening. But John Key is right when he says these cuts are both too little and too late. They are too little because if Michael Cullen had wanted to offset the effects of inflation from 1 April 2000 until now he would have needed to move the 33c threshold from $38000 to $47000. He did not do so. When a $9000 shift was necessary he shifted that threshold by just $2000 to $40000. He did a little better with the 39c tax bracket whose threshold should have been moved from $60000 to $74000 which is a $14000 increase. That was necessary just to cover inflation but instead he shifted the bracket by just $10000 to $70000. It is all too late because the enormous tax windfall that he has systematically extracted from the purses and pockets of New Zealanders by refusing to offset fiscal drag until now will not of course ever be refunded. 
Michael Cullen has used fiscal drag as a dragnet and used it very deliberately to draw in billions of dollars in increased taxes over that 8½-year period. When we think about it we know that fiscal drag should be outlawed. Michael Cullen boasts about his automatic stabilisers but I ask him why he does not put in place an automatic stabiliser that by mandating a regular adjustment to the tax threshold for inflation would work—just for once—in favour of the taxpayer rather than in favour of the Minister’s Treasury and its coffers. Taxpayers should demand no less because the truth is that they have simply been unable to trust successive Ministers of Finance including Dr Cullen to act justly on this issue. It is a policy whose time has come and I commend it to all New Zealanders. 
I will use the balance of my speaking time to outline the tax policies of the Kiwi Party and I begin by saying that we have a policy to increase the minimum wage from the present $12 per hour to $15 per hour but with an offsetting tax credit to employers. Other parties in the House also want to go to a $15 minimum wage but those parties expect employers to magically produce that amount so that they can pay extra money to their staff even though in New Zealand 87 percent of all businesses employ fewer than five people. Those employers simply do not have the money to lift the minimum wage and that is why we need to have an offsetting tax adjustment. Boosting wages from $480 per week—or $12 per hour—to $600 a week will give a huge boost to workers on that rate. After applying the new tax rate of 21c which comes in on 1 October that extra $120 per week will see a take-home boost pay of $94.80 per week in the hand of those workers. I repeat that it provides a boost to take-home pay of $94.80 per week for workers who are currently on the minimum rate of $12 an hour. There will also be significant benefit for those on $13 or $14 per hour. 
Again it is a policy whose time has come. There is a huge gap between our wages and those in Australia. We need to bridge it; we need to do something urgently to do that. The increase in the minimum wage to $15 an hour will lift all boats because it will eventually work its way right through our wage structure. We can begin to recover some of that gap with Australia and as a result we will see a lot more New Zealanders deciding to live work marry and raise their families here rather than going across the Ditch simply because wages there are so much better. 
The Kiwi Party also of course—and I say “of course” because this will not be news to people in this House—support income splitting for couples raising dependent children. This would be particularly beneficial to single-income Kiwi families. For example such a family with an income of $70000 will from 1 October pay tax of $17110. Under income splitting $35000 would be allocated to the wife and $35000 to the husband for tax purposes and that family’s tax bill would reduce to $12320. That is a saving of $4790 per annum or $92.12 per week for that family. This change is right and just because both partners are contributing to the raising of the family and their different but complementary roles are recognised by this change. Let me say very clearly that we recognise specifically the value of the work done by the parent who stays at home to raise the young children. That work is not only real work but also the most important work that any human being ever gets to do. 
We will also allow taxpayers to direct $100 of their own tax every year to a community charity of their choice. We believe that would be an efficient and effective way of getting about another $290 million a year to community charities and it would allow the Government to scale back the help that it gives. At the moment help is given in return for a box full of papers and against the undertaking that the charities will actually implement what the Government thinks they should do rather than what these grassroots organisations know they should do. 
We will remove GST from rates. We will make health insurance premiums tax-deductible so that more funds flow into the health sector both public and private so that we can continue to provide a world-class health care system for more and more New Zealanders. That is an obvious thing that we should be doing. We will return to local councils a percentage of the GST that is collected. We believe that doing that combined with taking GST off rates would mean that there would be no need to increase rates at the local council level for at least a 3-year period. That move would be very welcome by all citizens of towns and cities throughout the country. 
On New Zealand superannuation we accept and go with the changes that have been announced in the Budget but in addition we want to change the formula that adjusts superannuation every year on 1 April from being a retrospective adjustment to being a prospective adjustment. That would give a married couple an extra $670 per annum or about $13 per week. In addition to that the effects of our policy of having a minimum wage of $15 an hour will flow through into an increased rate of superannuation as of course it will increase the average weekly wage. 
Those policies are good policies and as a party we will be promoting them in Parliament after this year’s national election.