Cunliffe David: Questions for Oral Answer — Questions to Ministers 
Cunliffe David: Questions for Oral Answer — Questions to Ministers 
[Volume:663;Page:11206] 
6. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
 to the  
Minister of Finance 
: Does he stand by his statement that the gap between rich and poor is “about the same” after Budget 2010? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Yes. The tax base broadening measures particularly those that close loopholes and change the effect of taxation on property mostly impact on wealthier taxpayers. The GST compensation measures are concentrated among low-income earners. The end result is that low middle and high-income groups all receive about the same percentage increase in real after-tax incomes. 
Hon David Cunliffe 
: How does he reconcile his statement that he is concerned about the gap between rich and poor with his admission that the Budget tax cuts have actually done nothing to close that gap? 
Hon BILL ENGLISH 
: Very easily. The Government has created a tax system with stronger incentives in the direction the economy needs to go in—that is there are more incentives towards work savings and investment and less incentives towards consumption borrowing and property speculation. That means we will have an economy with more opportunities for New Zealanders to get ahead whatever their income. 
Hon David Cunliffe 
: When the Minister said that the Government is creating stronger incentives could he be referring to the fact that according to this graph an average wage earner takes until year 5—2014—to break even after the effects of the rampant inflation that will take place next year? 
Hon BILL ENGLISH 
: No I do not. That member should recall the time when he was I think an Associate Minister of Finance when there was 5 percent inflation in this economy. I do not remember him protesting about its effect on average wage earners then. 
Hon David Cunliffe 
: When he said that incentives had been strengthened was he referring to the net position after tax of average and minimum wage earners which—by the time we take out GST inflation and accident compensation levies—does not recover in the case of average wage earners even by 2014? 
Hon BILL ENGLISH 
: The member has been doing some magic with the inflation numbers. The fact is that the inflationary effect of GST is more than offset by the reduction in income taxes. The rest of the inflationary effect is dealt with in the usual way: low-income people on income support get an annual adjustment and wage earners do their best to claw back increases in the cost of living through wage increases. That is no different from how it has ever been. 
Peseta Sam Lotu-Iiga 
: How does the Budget improve the position of lower-income taxpayers? 
Hon BILL ENGLISH 
: As I have pointed out the Budget lowers tax rates for all taxpayers and improves their incentives to work save and invest because in this economy we need a bit less incentive towards borrowing consumption and property speculation. Over 70 percent of all income earners now face a marginal income tax rate of 17.5 percent or less and a family with two children that receives Working for Families will now pay no net tax on income up to $50000. 
Hon David Cunliffe 
: If the Minister is so concerned about lower-wage earners then why did he use this “once-in-a-generation” tax cut to give himself a double-dip tax cut of $240 a week instead of focusing that money and other sums like it on closing the income gap between rich and poor New Zealanders? 
Hon BILL ENGLISH 
: I point the member to a graph that I used in I think the Budget lock-up; it is readily available to him. It will show him that over the last 15 years people on incomes of $30000 to $50000 have had about a 40 percent reduction in the income tax that they pay. Our tax system has become more progressive over the last 15 years not less progressive. 
Peseta Sam Lotu-Iiga 
: How is the cost of lowering personal income taxes distributed across taxpayers? 
Hon BILL ENGLISH 
: The cost of lowering personal tax rates is estimated at just over $4 billion per year by 2014. About two-thirds of this cost was used to reduce tax rates in the lowest two tax brackets—that is people earning up to $14000 on the lowest tax rate and people earning up to $48000 on the next lowest tax rate. This distribution demonstrates the Government’s commitment to making tax cuts across the board. The reason for that is we believe that the incentives matter for people who are on the minimum wage as much as they do for people who are above the average wage.