Clark David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeClark David: Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill — In Committee[Sitting date: 17 June 2014. Volume:699;Page:18573. Text is incorporated into the Bound Volume.]Dr DAVID CLARK (Labour—Dunedin North):Thank you for the opportunity to speak on Part 1 of the Taxation (Annual Rates Employee Allowances and Remedial Matters) Bill which as you have rightly pointed out confirms the annual rates. It is important to note upfront that these tax rates that will be confirmed correspond in greater part with the changes brought in by the National Government in 2010 in its tax package where 40 percent of the value of its so-called tax cuts back then went to the top 10 percent of earners. If we think back we will remember also that the bottom 20 percent of earners got just 2 percent of the value of those tax cuts. That is the time as well as those following the debate at home will remember when GST went up from 12.5 percent to 15 percent.If people can cast their minds still further back they will remember Mr Key saying that he would not change GST at all. He made a promise.Iain Lees-Galloway: I remember it well.Dr DAVID CLARK: My colleague Mr Lees-Galloway remembers it well. Then Mr Key came in and changed things. He said that it was a dynamic environment and he was going to make the change. What we saw there was that the Government was very keen—very keen—to lighten the tax responsibility of the wealthiest New Zealanders those who earn the most. We know that 75 percent of those with a net worth of over $100 million in New Zealand do not pay the top tax rate. We know that in New Zealand inequalities are growing and are at their highest levels ever in recorded history. So we know that we are living in an unjust situation and that we can trace that back to those tax changes that were brought in by the National Government opposite on those benches in 2010.That is why we are here today being asked to confirm a set of tax levels that see the wealthiest 10 percent growing ever richer while the rest of New Zealand struggles to keep up. We know that median wages have dropped over time in real terms that the cost of living keeps going up and that ordinary everyday middle New Zealand is struggling. We also know that those who are at the bottom end are struggling even more than before and that that is restricting the opportunities they have to participate. Kids going to school hungry do not learn as well as kids with a full stomach. We know that. It is not rocket science. But today in Part 1 of this bill we are being asked to confirm the tax rates that see that ever-widening gap with those at the very top having that greater concentrated wealth that we know is getting greater and greater and greater by the day. There have been studies that have come out in the last 2 days confirming that that wealth that those at the very top hold is increasing that the 1 percent right at the top hold an increasing level of wealth in our society. And then there are the rest of us: the other 90 percent who are really struggling to get by to make ends meet. We know we have the lowest rate of homeownership now in New Zealand in 40 years slipping below 50 percent.We know that that is another signal of this growing gap between rich and poor. The current tax rates that we are being asked to confirm are 10.5c on income up to $14000 17.5c on income from $14000 to $48000 30c on income from $48000 to $70000 and 33c for income of $70000 and over.The other thing that we are not being asked to do here interestingly is to introduce pro-growth tax reform. So this bill has as much in it as it does not have in it. We learn as much about this bill from what is excluded from the confirmation as from what is included. Once again that is about protecting the interests of the very wealthiest. We know that in fact almost every Western country has a capital gains tax. New Zealand is in a minority in not having a capital gains tax. The joke used to go that it just us Switzerland and Turkey and we know Switzerland is a tax haven and does New Zealand really want to be another Turkey? Why on earth do we not have a capital gains tax? We know it is fair. We know that the OECD Treasury the IMF—those big international agencies—and all respectable economists think that it is important to have a broad tax base as broad as possible to neutralise investment decisions and signals in the economy so that people make rational choices about where they invest their income. Instead in New Zealand where we do not have that capital gains tax we have the situation where people are choosing to invest heavily in the speculative sector.As they invest in the speculative property sector they are making houses less and less and less accessible to New Zealanders who are struggling each day to make ends meet. The flip side of that of course is that our businesses are also struggling because that capital is not available to them. I use the example of a plumber. Let us imagine a plumber who has worked hard scrimped and saved and has two rental properties. He has actually done quite well over the course of a lifetime. We will not go into the plumbers and drainlayers debate today but if we imagine this plumber who has worked hard who has scrimped and saved and who has two rental properties right now it is a no-brainer for that plumber to buy a third because there is a tax advantage potentially in buying that third house.What ought to be the case is that that plumber ought to be thinking about whether they should invest in their friend’s innovative business down the road that needs a new die cast for a new plumbing device that could be exported. It is a high-risk opportunity and it has a tax almost certainly attached to it and therefore it is a different proposition from buying another rental house. As I have said it is obvious right now that that plumber should go for the tax advantage that is presented in the additional rental property in terms of the economically rational thing for them to do. It should not be that way. It should be the case that that person has got a real decision on their hands. They may still choose to invest in the rental property but they should have a real decision about whether they support our export industries and whether they are supporting the future prosperity of New Zealand with it.Unfortunately the Government does not seem willing to go near pro-growth tax reform. It does not seem to want to have the research and development tax credits that we know would give us a lift in our economy. It does not want to adopt the capital gains tax that we know would make the investment signals neutral across the economy and would make it a fairer tax system. It instead is wedded to these tax changes it made in 2010 which see the wealthiest few get ever wealthier at the expense of the rest of New Zealand.So we on this side of the House are disappointed with Part 1 of this bill no doubt because it is a missed opportunity. We know that if we grew the economy and made the most of the opportunities here we could actually have more of the pie to share. We could afford to fund our schools and hospitals better. We know that this Government has an atrocious economic growth record—the worst economic growth record of any Government in the last 50 years. That record of this Government is its shame because its trading partners have enjoyed some very mild conditions through the global financial crisis. Australia never really went into recession. China was just off the double digits.Simon O’Connor: How do you believe this?Dr DAVID CLARK: Right the way through—right the way through. The member opposite might like to consult the facts which might give him a new world view. If he looks back to the global financial crisis he will see very healthy economies that we were trading with and New Zealand not making the most of that opportunity and in fact really struggling under the guidance of a Government that will not go near pro-growth tax reform and a Government that seems wedded to protecting the interests of the wealthiest few at the expense of the rest of New Zealand.So that is why the Labour Party on this side of the House has trouble with Part 1. We want a more positive New Zealand. We want a New Zealand where everyone has the chance to get ahead. We on this side of the House want to work for change that takes us forward over the generations that makes opportunity for every New Zealander that means that every New Zealander can aspire to owning their own home and aspire to a decent income and decent work and that means that they can look after their families and brighten their prospects under a Government that puts people first and looks positively to the future—the opportunities that we know are there and ought to be there for every single New Zealander.Instead opposite it is just business as usual and politics as usual. The Government keeps just reconfirming these same tax rates year after year and watching that gap between rich and poor get wider and wider and wider as the very wealthy get wealthier and wealthier and the other 90 percent struggle to get by. That is what we have when we are stuck with this Government. That is what we have stuck with in Part 1 of this bill. It is a real shame—a missed opportunity. It could be so much more positive.A Labour-led Government will lead positive change for New Zealand. We will make a difference. We will work together with New Zealanders to ensure that everyone has decent work that their families can get ahead and that they can really aspire to own those homes that are getting further and further out of reach with the property speculation and the absence of support for small business. This Labour Government will make these changes and we look forward to the upcoming election when voters will have their chance to say that they do not want this business as usual. They do not want this politics as usual. They do not want Part 1 of this bill which just confirms the status quo and just confirms that the gaps get bigger and bigger. They want positive change. They need a Labour Government.