Copeland Gordon: Budget Debate 
Copeland Gordon: Budget Debate 
[Volume:618;Page:13570] 
GORDON COPELAND (United Future) 
: 
 During the first reading of the Future Directions (Working for Families) Bill taken under urgency and by way of interruption to this Budget debate I praised the Government’s action in that regard. We could quibble with some of the specifics but the big-picture reality is that 300000 New Zealand families and most important hundreds of thousands of children in those families will be significantly better off as a result of this Budget. That is a superb outcome and should in my view be celebrated by all parties in this House although during the debate it became clear that the ACT party should it ever become Government—God forbid!—would want to return several hundred thousands of those kids to poverty. 
ACT’s policy is for a flat tax rate of 20 percent and I remind New Zealanders today that the majority of New Zealand taxpayers already pay tax at a rate of either 15 percent or 19.5 percent. Therefore a flat tax rate of 20 percent actually represents for them an increase in taxation. I am not exaggerating when I talk about the hundreds of thousands of children being returned to poverty because this bill in fact reduces child poverty in New Zealand by 60 percent. I am heartened that Dr Don Brash in his response to the Budget conceded that the package is highly beneficial to families. However some of his caucus colleagues including those on the front bench endeavoured to convince the House during the Working for Families debate that the measure was some kind of prelude to Armageddon. 
Let me repeat my challenge to National: if it is going to repeal the measures that are lifting hundreds of thousands of New Zealand children out of poverty and improving the lives of hundreds of thousands of others who are getting by only with a struggle then let that party clearly spell it out to the people of this nation. John Key since that debate has come up with some figures that have been published and circulated in the media that indicate that there is a real problem with the Budget because it does not sufficiently incentivise those on higher incomes. He has pointed out that for one-income two-parent families with two young children in the south or west of Auckland or in Wellington City the difference in net pay between one family earning $38000 and the other earning $60000 will be only $2376. As well for equivalent one-income two-parent families with three young children in central Auckland the difference between the family on $38000 and the family on $70000 will be only $2856. 
I am not sure whether John Key’s argument about disincentives really applies. I can remember when I paid tax at a rate of 60c in the dollar and I can assure everyone in this House that far from that being a disincentive to me it was in fact a spur because I figured out that every extra dollar I could earn would put my family in a better position to enjoy the fruits of my labours. So I do think that that disincentive point is overstated. 
But setting that to one side the point I would like to make is that the answer to the dilemma that John Key has raised is income splitting. That is a United Future policy that would see families on $60000 or $70000 being able to split their family income because in both cases they are single-income families—one-income families. If the amount is split fifty-fifty for tax purposes as we propose then those families would be paying tax at a rate of just 19.5c in the dollar which is as I say below the rate proposed by ACT. In that situation the difference identified by John Key of only $2376 would lift in the case of a family on $60000 to $5346 a week—that is more than $100 a week extra—and in the case of a family on $70000 it would increase the difference from $2856 to $7776. That is more than an extra $150 a week. 
So therefore today I call on the Government and indeed the House to consider seriously the option of undertaking income splitting. Today in question time Stephen Franks pointed out that this does not benefit low-income families and I agree with him because if one’s income is under $38000 one pays only 19.5c in the dollar anyway. But what income splitting does is start in the middle group and it extends right up to people on about $120000 who would be significantly better off in a situation where one single earner—one income—is endeavouring to support not only a family but also a spouse. I believe that on the basis of fairness and equity it is an idea whose time has come and I hope very much we will hear more of that in the years to come. 
Could I also say that this Budget is not entirely the way United Future would like it to be. The Government was not prepared to heed our call that the present tax brackets be adjusted to cover inflation for the period of 1 April 2002 to 1 April 2005. United Future believes that the Government’s unwillingness to do that is a fundamental and serious error. I remember the member Darren Hughes talking earlier about fairness and he used that word repeatedly in his speech. I would like to ask the Labour Government how it can be fair whilst it is giving those tax breaks to low and middle income earners to at the same time be increasing the rate of tax for that is what it is doing in real terms. It is increasing the rate of tax for all New Zealand taxpayers who do not have children or do not qualify for this special assistance. 
That is the case because inflation erodes the purchasing power of their salaries. What those taxpayers may not understand quite so clearly is that this Government’s continuing failure to adjust the current tax rates for inflation means the purchasing power of their salaries and wages is being steadily eroded by additional taxation. 
Let me give some concrete examples. For those earning between $9500 and $10800 per annum—which is surely not much of an income in anybody’s terms but there are 100000 New Zealand taxpayers in that bracket—their taxes have been increased by more than $2 a week or $108 a year under this Government. For those earning between $10800 and $38000 their taxes have also been increased by $108 per year under this Government. For those earning between $38000 and $43000 a year—which is very close to the average level of household income in New Zealand—their taxes have been increased by up to $13 a week or $675 per annum under this Government. For those earning between $43000 and $60000 a year that increase is also $675 per annum and for those earning over $60000 a year the increase is $22 a week or $1155 per annum. 
This money rightly belongs in the pockets of our 3 million taxpayers and should not have been collected in the first place. On this point I want to be as clear as I possibly can. The reality is that under this Government tax rates have been increased and $630 million per annum is now being collected from New Zealand taxpayers by stealth. That is the position and not even Dr Michael Cullen has set out to claim otherwise—nor could he without seriously misleading the public. 
When I first raised this matter with the Government early in 2003 the cumulative movement in the consumer price index was 9 percent. By 1 April 2005 based on the Reserve Bank forecasts the movement will be almost 14 percent. Accordingly the longer the Government delays action on this matter the greater the problem becomes and I would say that the Government must adjust the brackets in next year’s Budget if it is to go into the 2005 election with any credibility and I will continue to remind New Zealanders of these realities. 
Let not New Zealand think that United Future is a lone voice on this matter. Indexation of the tax brackets for inflation has been adopted in Canada the United States and the United Kingdom. It is time for New Zealand to follow suit and there is one last opportunity for the Government to act before next year’s election. United Future also asks the Government to increase the tax rebate level for gifts to charities by individuals from the present stingy $630 a year to a new figure of at least $5000 per annum with an equivalent adjustment for companies. This has not yet been done. We want to see this issue also addressed in next year’s Budget by which time the Charities Commission will be in place and any remaining excuse for continuing inaction will therefore have been addressed. 
It might cost the Inland Revenue Department about another $20 million a year but it would benefit the charities of this country by an extra $60 million a year. The extra charitable work that could flow from that would make a significant and overwhelmingly positive contribution to the social fabric and welfare of our nation. It would represent an investment that would eventually pay rich dividends to taxpayers by reducing the Government’s own expenditure on social welfare assistance. 
I know of no New Zealander who would choose to deal with the Department of Child Youth and Family Services in preference to say The Salvation Army or Presbyterian Support Services. The difference is like night and day. It is time we began to realise that reality and gave additional practical support to our charities before it is too late.