Woodhouse MichaelTAXATION (INCOME TAX RATE AND OTHER AMENDMENTS) BILLFirst ReadingDebate resumed from 1 December.Hon MICHAEL WOODHOUSE (National): Thank you Mr Speaker. When it comes to economic philosophy I think it's fair to say that I'm more in the camp of Hazlitt than Keynes. We have seen some very strong Keynesian economic responses to the recession with the pumping of massive amounts of Government spending as part of the COVID-19 recovery. The great author and economic philosopher Henry Hazlitt would have a lot to say about that if he was still around. He was very much a supply side economist recognising that each action needed to take into account not only the immediate but also the longer-term effects so not only the people who were one group that was affected but a vast number of other groups.But we have what we have. We have what the Government is doing which is effectively pump-priming the economy pouring a huge amount of money to stimulate the economy during a recession. That's OK if it's short-term bolus but not long term and we have this for as far as the eye can see. But if you look at the importance of pump-priming what should actually go along with that increased Government spending is interest rate reductions and we have that. But the third leg of the pump-priming stool is tax cuts in order to stimulate the economy. Instead we have the prospect of tax increases.So the tax increases that are being proposed by this bill are actually a handbrake on the very thing the Government wants to do which is to stimulate the economy. What the Government wants to do about its tax policy is two things: firstly it has to be effective in achieving its goals and secondly it has to be fair. Now in order for it to be effective—Hon Dr David Clark: That's right.Hon MICHAEL WOODHOUSE: Yep Dr Clark agrees. But the academic literature is very split on whether or not tax cuts will stimulate an economy and whether tax increases slow the economy down. I favour the academics that say actually a tax cut will stimulate growth. There's empirical evidence to that degree. I'm reminded of the words of Winston Churchill actually who said that I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." That's exactly what we're trying to do with this bill.Actually I'm interested that many of the people in this House who believe that taxes are actually effective in stimulating the economy are the same MPs who would argue that imposing a tax on capital income is going to constrain capital growth. That's what they want it to do. That's what they want it to do to dampen house price inflation. So if higher taxes on capital growth will blunt the effect of them surely they've got to be consistent and acknowledge that higher taxes on income are going to have exactly the same effect.I'm actually amazed that the Green Party intends to abstain on this bill. Apart from anything else it lacks the sort of conviction that they would normally have about that. I would have thought that they would have supported any tax increase but to say that they won't support this tax increase because the Government is not considering another tax increase is hardly Green Party whakapapa I would suggest.The second leg of this is fairness and I'm really interested in the fairness argument here because it is only fair that those who earn more pay more and I strongly agree with that. As an upper-income earner for most of my career I've been very happy to do that and we have an income tax system that has to be efficient and broad based - low rate. But it's also highly distributive through things like Working for Families and accommodation supplements. The effect of that is that half of all households with children receive more in welfare payments and tax credits than they pay in tax that single-income families with two children don't pay a dollar of net income tax until their income exceeds $60000 and that the top 9 percent of income earners are now paying a whopping 42 percent of the total personal income tax—42 percent. And you know what?Dr Duncan Webb: That's fair.Hon MICHAEL WOODHOUSE: I think that's fair—exactly Dr Webb. It's highly progressive when it's described in those terms but it's fair. But it's frankly not fair to burden the top 2 percent of taxpayers who are already paying about 20 percent of that tax burden with more.As Mr Bayly indicated in his speech it's highly unlikely that this will actually raise more than a very small amount of revenue. If one looks at the impact assessment that has been tabled with this bill the IRD agrees. It says that "the estimates are highly uncertain." They arise because they "are sensitive to assumptions about how … people change their behaviour … There is significant uncertainty in these assumptions". So not only does it not feel fair to me it's not going to make a blind bit of difference particularly in the context of the massive massive spending that the Government is doing. It should be cutting taxes not increasing them and the process has been appalling.I can't support the passage of this bill under urgency. I can't support it in principle anyway but to be driving this through under urgency is quite wrong. As a former Minister of Revenue I became very familiar with the tax consultation process that IRD embark on the generic tax policy process. The number of committees the small-business tax advisory group the larger corporate group Chartered Accountants Australia & New Zealand of which I am a member—all were heavily consulted on all of the policies that were being considered under my watch. So I went to the IRD website and if one searches the IRD website at the moment for the page "How we develop tax policy" this is what comes up: "Page not found!" You can't even find out how IRD develops tax policy because the internet's broken. Maybe they took it down. And if you go to the consultation page there's nothing on it. It says "There are currently no items that we are … consulting on."As for the New Zealand Bill of Rights Act (BORA) vet that we have seen for the amendments to the Tax Administration Act this is extraordinary because the power to demand information has failed the New Zealand Bill of Rights Act and is considered by the Attorney-General to be inconsistent with the right to freedom of expression and the right to be secure against unreasonable search and seizure. Now this is a classic. Who issues the BORA vet? The Attorney-General. Who is the Attorney-General? The Hon David Parker. Who does he issue the BORA vet to? The Minister of Revenue who is the Minister in charge of this bill. Who is the Minister of Revenue? David Parker. [Interruption] Absolutely.I'm sure the new chair of the Privileges Committee which has an item of business before it about the judicial role of inconsistency of legislation with the bill of rights Act will be interested in this development. And who was the most recent chair of the Privileges Committee considering that business? The Hon David Parker. So it is a triangular muddle that one person is responsible for and one person can fix and the way to fix it is to take clause 33 out of this bill fix it reintroduce it and send it to the select committee so that those people that would normally be consulted on it are able to have their say.I'll have a lot more to say about this bill in subsequent readings and in the committee stage. In fact I should say this: I will be introducing an amendment to the bill by a Supplementary Order Paper that actually deletes clause 33 altogether because I think not only does it fail the BORA vet it fails any sort of fairness—the fairness that the Government wants to talk about. It simply doesn't pass muster. The bill is philosophically wrong. It's ineffective it's not fair to those who already pay the lion's share of income tax it's being rushed it breaches the bill of rights and National is going to oppose it."