Smith Lockwood: Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
Smith Lockwood: Taxation (Annual Rates and Urgent Measures) Bill — First Reading Instruction to Finance and Expenditure Committee 
[Volume:628;Page:222] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 It is not often that even this Labour Government introduces into Parliament legislation that I totally oppose every part of. Usually in taxation legislation there is something we can support but I totally oppose every part of this bill. I shall tell the junior Government whip who is trying to interject why that is. This Labour Government— 
Darren Hughes 
: Got re-elected. 
Dr the Hon LOCKWOOD SMITH 
: It was re-elected because it gave Winston Peters the baubles of office and that gave Labour the numbers. What a shonky shonky Government! I want to come back to why I totally oppose this legislation and talk first about the part of it that deals with expanding the Working for Families package. 
I believe that the Working for Families package is one of the most serious and most destructive pieces of legislation that has been introduced into Parliament for a long long time. The reason is that this Labour Government now sees fit to control the net income of we are told 350000 New Zealand families. This Government will dictate the income of three-quarters of all New Zealand families with dependent children. No matter how hard they work and try to get ahead in life this Government knows best. 
Steve Chadwick 
: It is nothing about dictating. 
Dr the Hon LOCKWOOD SMITH 
: The trouble with people like Steve Chadwick and Ruth Dyson is that they do not employ anyone. I do. I pay PAYE for middle-income families. An employer doing that discovers that he or she has to deduct PAYE. The employee then has to go along cap in hand to the Government to get it all back. 
Low-income families can get back more than middle-income families but the tragedy is that the effective marginal tax rates they face are not the published tax rates. The briefing papers for the incoming Government has graphs and tables that show people like Steve Chadwick what the figures really are. There are poor families in this country who face 100 percent effective marginal tax rates. Is that good? The effect is such that for families on the minimum wage there is no point in their trying to work more hours because they do not get to take home any more pay. If Steve Chadwick were to look at the tables that the Government’s own Inland Revenue Department publishes and at the effective marginal tax rates of different family configurations right through the income range she would find that on incomes of from $30000 to $65000 a year there is no point in people who happen to have three children working harder because they do not get to take home any more pay. This Government takes most of it in tax. That is outrageous because it traps families in hopelessness. There is no way those families can get out of it. 
Over the next few months the National Opposition will show just how destructive the Working for Families package is. Admittedly this legislation changes the effective marginal tax rates a bit but they extend up to a higher level of income. At the moment we think that highly taxed New Zealanders pay a marginal tax rate of 39 percent. When people talk about New Zealand’s tax system they say that 39 percent is the top tax rate. Nonsense! For the 350000 families who are caught up in this legislation 39 percent is one of the lowest marginal tax rates they face. They face marginal tax rates of way above 60 percent. This Government thinks that poorer families do not deserve to be able to get ahead in life. This Government thinks that when they try to work harder to earn more money Dr Cullen has the right to take most of it off them. If this country is to have any future that has to change. 
The briefing papers for the incoming Government show how the peaks have grown. Those peaks represent income points where the marginal tax rates change. Around that very high effective marginal tax rate for families with about $20000 of income a year there is a huge growth. 
Hon Dr Michael Cullen 
: It’s called superannuitants God help us! That is single superannuitants. 
Dr the Hon LOCKWOOD SMITH 
: Dr Cullen is not even aware for example of the research work being carried out at Victoria University on those kinds of income peaks. If the Minister were to look at those graphs he would see massive growth in the number of people earning salaries at certain key points on the income scale. What did he say tonight on television? He said that every 3 years we get the Treasury burp. Treasury is trying to advise the Minister that there are real problems in our taxation system but Dr Cullen knows best. Just like Helen Clark Dr Cullen knows best. He knows better than all the experts in Treasury. He knows better than all the experts in the OECD. Dr Cullen knows more about tax than anyone else in the world because he is so so clever. 
But I say to Dr Cullen the problem is that families suffer hugely under this kind of legislation because it destroys hope. This country will start to see that it is a disaster when the State controls how much take-home pay families can get. If members do not believe what I am saying they should read the briefing papers to the incoming Government. The serious problem of high effective marginal tax rates for families is all spelt out there. That is the first problem with regard to this bill. 
The second problem is that of tax rates. This bill reconfirms the existing basic tax rates including the corporate tax rate. Again if we read the briefing papers to the incoming Government we see that there are huge problems around the corporate tax rate. The briefing papers tell Dr Cullen and Peter Dunne that in fact we are starting to lose tax revenue. As other countries reduce their corporate tax rate New Zealand—because Dr Cullen knows best; Dr Cullen knows far better than Treasury—will not reduce the corporate tax rate and the revenue base bleeds. 
The third reason I totally oppose this bill is the interest-free student loan policy. It is probably one of the most blatant political bribes I have seen in 21 years in this Parliament. I have seen bribes over the years when politicians thought they could buy the odd vote. I designed the student loan scheme in the early 1990s so I know a wee bit about it. This measure will vastly expand the amount of money being borrowed. What is more Dr Cullen is giving dentists doctors lawyers and accountants a huge $2 billion handout over the years while families—taxpayers—on the minimum wage who may not be able to get a son or daughter into dentistry medicine or law pay for it. They pay for Dr Cullen’s and his Labour colleagues’ political bribe of giving New Zealand’s graduates $2 billion. It is like giving the graduates Solid Energy and Landcorp Farming combined. It just gives away a massive $2 billion asset to people who are some of our highest income earners. 
Those are the reasons why National and I totally oppose this bill. Every part of this bill is bad policy and we will fight it tooth and nail. The officials all agree with us. All Dr Cullen can say is that Treasury has released its 3-yearly burp. That shows his arrogance; it shows why this Labour Government is in its death throes.