Cullen Michael: Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Bill — First Reading Second Reading In Committee 
Cullen Michael: Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Bill — First Reading Second Reading In Committee 
[Volume:647;Page:16251] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Bill be now read a first time. 
 This bill has three essential elements and I will deal with them in ascending order of importance. One element is a series of relatively minor corrections to current tax laws—largely corrections to the Income Tax Act. Since that large expansive omnibus legislation was passed a few errors have been found that need correcting quickly. The second element of somewhat greater importance relates to the issue of charities. Two things are done in that respect. The first is to clarify that certain kinds of bodies are charities. This includes for example State schools and integrated schools. The second is to provide a transition element because—sadly I think—the Charities Commission has been much slower than the Government anticipated in dealing with the applications for charitable status and a number of charities would lose their tax-exempt status on 1 July if no remedial action were taken. This provides for any body that currently has a tax-exempt status and that has applied for that status under the new legislation to continue to exercise that status until the Charities Commission has made a ruling in that regard. 
Thirdly of course the most important part of the legislation is to implement the new tax rates announced in the Budget. This bill therefore provides for the implementation of a complete new tax scale system which has within it the following elements. Firstly there is the abolition of the low-income earner rebate which has become more and more out of date in terms of the size of that rebate and which simply adds complexity to the tax system. It therefore replaces the current effective bottom tax rate of 15 percent up to $9500 with a new bottom rate of 12.5 percent which on 1 April 2011 will reach $20000 with the initial move on 1 October this year being $14000 a year. The effective 21c rate will then move to a new threshold of $40000 on 1 October eventually rising to $42500 on 1 April 2011 and the 33c rate will extend out to $70000 on 1 October going to $75000 on 1 April 2010 and $80000 in 2011. 
These changes deliver significant tax cuts across the board. In the first stage they deliver tax cuts of $12 to $20 a week per individual taxpayer rising to $22 to $55 a week for an individual taxpayer by 1 April 2011. These are the largest changes to individual taxes for a very long time within New Zealand. We are bringing forward the Working for Families adjustment to much longer than 1 October in terms of actual tax rates particularly at the bottom end because the $9500 threshold has not been moved since 1988. Therefore for people—[ 
Interruption 
] Yes indeed. National never moved the $9500 threshold. It never gave tax cuts to the lowest-income earners in the country—never. National never gave tax cuts to the lowest-income earners in the country—never ever. It never lowered the company tax rate—never ever. It never lowered the tax on savings—never ever. Only the Labour Government has done that. What we want to know is whether National will today vote for tax cuts for individuals. 
Hon Member 
: No they won’t. 
Hon Dr MICHAEL CULLEN 
: Well they cannot make up their minds indeed. We heard this afternoon from Mr Key and I watched Mr English’s mouth drop as he thought “My God! He’s about to announce a much bigger tax cut.” I could see him getting ready to grab his coat and pull him down at any moment. Bill English has read the Budget. He knows we are forecasting cash deficits of $3.5 billion a year. He knows therefore that the National Party cannot promise billions of dollars a year in additional tax cuts over and above this Budget. 
The second time when he looked terrified even more worried was when Mr Key said: “We’ll have to cut Government spending to fund any additional tax cuts.” Bill almost grabbed him and said: “Don’t say that. That’s not the game plan. That’s not what we’re saying. What we’re saying is we’ll cut out bureaucracy and we will save all this money in cutting out bureaucracy so we can have these huge tax cuts so that every individual can buy an extra 20 large blocks of cheese a week.” Why an individual would want an extra 20 large blocks of cheese a week is not apparent but that is what the National Party was promising this afternoon in Mr Key’s speech. Indeed the whole speech of Mr Key was: “I have a plan. I just can’t remember what it is. I just hope that sometime between now and the election I will find that plan somewhere in Bill’s back pocket because Bill is responsible for writing the plan for the National Party.” 
These tax cuts are spread across the board. Proportionately people on modest incomes around the minimum full-time average wage get a bigger proportion of the tax cuts than people on an MP’s salary or people on a Deputy Prime Minister’s salary. I do not have to go back to Napier at the weekend and explain to people why I am getting proportionately a much bigger tax cut than people who often work at rotten jobs. Those are jobs where they work hard jobs that are often dirty jobs where they are not treated well and the National Party has always said to those people: “You should get a measly tax cut if anything because we’re all about giving tax cuts to those at the very top.” Somehow or other to quote Mr Key “We ‘belieeve’ in tax cuts.” He sounded like the Rev. Wright in Washington. “We ‘belieeve’ in tax cuts. ‘Halleluuja’ brother!” In America every politician has to believe in God and has to mention God after every three sentences unless of course he or she really believes in God in which case he or she does not have to keep saying it. But in New Zealand we have to “belieeve” in tax cuts—halleluja brother! It is a religious belief. 
What we are about is helping families. We are about helping people who are facing pressures on the family budget. Does anybody really believe that anybody in this House is facing the pressure of higher petrol prices and the price of a bigger block of cheese? Really? Anybody in this House? No not at all. The people who need relief from that are the people on below-average incomes average incomes and a bit above. We need to do something about that top tax threshold because we have people paying that rate now who were never intended to be in that top tax bracket. Senior teachers nurses and people like them are now finding themselves in the top tax threshold. 
But let us get real. They are not going to work harder. I know a few teachers—I know some quite intimately to coin a phrase; well one anyway. I know they are not going to work harder just because they are paying 33c in the dollar instead of 39c in the dollar. They already work hard on behalf of the children of this country. We do not need these religious beliefs. We need a belief in fairness and in social justice and that is what this tax reduction does. It says that all Kiwis should share in the dividend of growth to which they have been contributing over the last 8½ years. We have grown faster than Australia Britain the US Japan and the European area and it is time to stop condemning ourselves because of that success. Everybody should share in it. 
If there is one thing I do not apologise for—and it is no chip on the shoulder because I am a highly paid person—it is that people who work hard at low-paying jobs deserve as much respect as those who work hard at jobs that are highly fulfilling. The notion that we have to reward those who work in highly fulfilling jobs miles more than those who work in the jobs we cannot do without who work hard in our society is simply not right and not fair. I believe in social justice. I believe in every Kiwi having a fair go. I am moving a bill today that is doing that in the tax cut area and we on this side of the House are proud of that fact.