Russell Deborah; Rurawhe AdrianDr DEBORAH RUSSELL (Labour—New Lynn): 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 $14000 is taxed at 10.5; between $14000 and $48000 is taxed at 17.5 percent; between $48000 and $70000 is taxed at 30 percent; between $70000 and $180000 is taxed at 33 percent; over $180000 is taxed at 39 percent. Just to clear up one thing which some people often don't quite understand: if you earn say $70000 it doesn't mean that all your income is taxed at 30 percent; it is only the income between $48000 and $70000 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 $14000 goes to $14857; then the next threshold at $48000 just chunks up over the $50000 to $50938; the next threshold at $70000 goes up to $74000; and so on; and that final threshold of $180000 goes to $191000. 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 $200000 would get a tax cut of $1200 a year or $23 a week. A person who earned half that $100000 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 $60000 to $70000 depending on which measure you are using and how you are doing it; I base it on about $65000—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. Dr DEBORAH RUSSELL: Proportionately people who earn more get a great deal more out of this tax cut. The person who earns $200000 a year gets $1200 a year out of it; the person who earns only $65000 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.DEPUTY SPEAKER: 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.