English Bill: Questions for Oral Answer — Questions to Ministers Questions to Members 
English Bill: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Volume:642;Page:12126] 
3.  
Hon BILL ENGLISH (Deputy Leader—National) 
 to the  
Minister of Finance 
: Is it the Government’s policy that a person earning less than the average full-time wage of $46002 should pay 33c on every dollar they earn between $38000 and the average full-time wage? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 For those who are not eligible for Working for Families that is the current tax structure. Of course some people earning less than that amount who qualify for Working for Families pay no net tax at all. 
Hon Bill English 
: Is the Minister aware that the threshold at which low-income taxpayers go on to a 33c tax rate has remained the same since he took office in 1999; and why has he made no adjustment to either the rate or the threshold of tax paid by people who earn less than the average wage? 
Hon Dr MICHAEL CULLEN 
: Yes that is correct. The primary answer to the second question is that the Government unlike the member does not believe in borrowing for tax cuts. 
Hon Mark Gosche 
: Has the Minister seen any reports on how much taxes have been reduced in the last three Budgets? 
Hon Dr MICHAEL CULLEN 
: Over the last three Budgets we have reduced taxes by $2.5 billion from 1 April 2006 rising to $4 billion a year from 1 April 2008. That of course includes the major packages around business taxation depreciation Working for Families and so on. 
Hon Bill English 
: Why is the Minister raising false hope among people who earn less than the average wage but pay 33c in the dollar tax by promising tax reductions next year when he has stated in Cabinet papers that: “We should not adjust thresholds in the medium term and thereby retain fiscal drag.”—fiscal drag being the effect of people paying more tax because their incomes have risen? 
Hon Dr MICHAEL CULLEN 
: It is possible not to appear in drag but to be beautifully clothed. There are other ways of cutting taxes. 
Hon Mark Gosche 
: What reports has the Minister received on the criteria for revenue reduction initiatives? 
Hon Dr MICHAEL CULLEN 
: I received a report that states that high-end taxpayers will save a lot of what they get if they get a tax cut so that does not go into the inflation pool. That came from John Key which makes it clear that National’s priority is for tax relief for those on higher incomes. The Government will continue to look at the possibility of tax reductions but only in a manner that meets the four key tests: we will not borrow to pay for them we will not cut services to pay for them and we will not implement them at a time that will contribute to inflationary pressures or in a way that increases inequalities. 
Hon Bill English 
: What does it say about the Government’s priorities that a New Zealander who earns $39000 faces a tax rate of 33c—and has done now for the whole 8 years that that Minister has been in charge—and that the Minister’s first tax cut was $1 billion for corporates? 
Hon Dr MICHAEL CULLEN 
: I note that the 33c rate was actually introduced in 1988 and remained unchanged throughout the 1990s. The member has suddenly had a conversion experience but unfortunately for him it was on the road to nowhere rather than on the road to Damascus. 
Hon Bill English 
: Is the Minister not aware that the threshold at which taxpayers reach 33c was adjusted in 1996 and 1998 from $30875 to $38000 and that there has been no adjustment for almost 10 years since because he regards company tax cuts as more important than tax cuts for people on $39000 who are paying the same rate as millionaires used to pay? 
Hon Dr MICHAEL CULLEN 
: The problem with the last bit of that statement is that if one cuts the top tax rate for example it would cut in at an even lower rate. Thirty-three cents was always the rate millionaires paid from 1988 onwards but of course it was National that raised the top marginal rate to 66c in the dollar. It was a Labour Government that in two steps reduced the rate from 66c to 33c in the dollar. The fact is that the Government’s priority was business tax cuts to fund economic growth. National opposed business tax cuts. I wonder whether the member ever told that to Mr Phil O’Reilly. 
Hon Bill English 
: Why has the Labour Government after 8 years in office not cut the 33c tax rate that applies to anyone earning over $38000 up to $60000 when no one would regard those people as wealthy? 
Hon Dr MICHAEL CULLEN 
: Firstly because the last time there was a cut in such a rate it was accompanied by a cut in New Zealand superannuation. That was in 1998-99. Secondly the Government restored the level of New Zealand superannuation. Thirdly the Government introduced the New Zealand Superannuation Fund. Fourthly the Government gave a huge boost to family incomes via Working for Families. Fifthly the Government has introduced KiwiSaver. Sixthly the Government is introducing tax credits for research and development. Seventhly the Government has cut business taxation. National opposed every one of those moves. 
Hon Bill English 
: Can the Minister confirm that answer by telling us that he is merely carrying out Helen Clark’s economic strategy which she described in public statements as “building up the kitty” which means getting as much tax as possible off people on $39000 to spend on Labour’s vote-buying schemes? 
Hon Dr MICHAEL CULLEN 
: We would much rather build up the kitty than strangle the cat and describe that as a free-market system.