Woodhouse MichaelHon MICHAEL WOODHOUSE (National): We could spend quite a bit of time just on that very point about the degree to which GST is regressive or not. But the reality is that the higher-income earners pay the lion's share of GST and that's fair enough. I think the question of progressivity as the Minister mentions is absolutely central to the debate on what the tax rates and tax thresholds as set out in Part 1 of the bill should actually be. As Mr Seymour pointed out we have because of the wealth transfers such as Working for Families and accommodation supplements a very highly progressive tax system and those who receive those wealth transfers—for example if they're on incomes of up to $60000 a year or more—will effectively pay no net income tax whatsoever. I think everybody in this House or at least a good number of members of this House will say that's absolutely fair. But the bracket creep and the fiscal drag that is going to be continued as a consequence of not addressing the tax rates and thresholds is actually relevant. Now there was reference I think to teachers and of course when I left the hospital I managed nearly 13 years ago nearly all of my senior nurses were not on the top tax bracket. Now a second-year nurse will pay the highest marginal tax rate on their income over $70000. Depending on their shift configuration and how many weekends they work and how many evenings and night shifts a second-year nurse or midwife would comfortably exceed the $70000. In fact depending on the shift configuration potentially a first-year nurse could do that as well. So we're now talking about the potential if not this year then next that graduate nurses are going into the top tax bracket and that was never—never I don't believe—the intention of our progressive tax system. Broad-based and low rate it should be but it is still progressive. Now the Minister referred to the Tax Working Group report and quite selectively picked some extracts from that. I think it's pertinent to consider that the chair of the Tax Working Group was the very person—it wasn't the block of cheese" tax; it was actually the "bubble gum" tax in 2007—who firstly begrudgingly waited eight years to put tax threshold increases in and then reversed them in the following year so nobody ever benefited from them anyway. The fact that the Labour Government when in Opposition committed to reversing any tax threshold changes a National Government would have put in speaks volumes to the attitude that this Government has towards tax. It might be fair it might be progressive but it's not very smart and that is because higher taxes are a drag on productivity. Now it's certainly most apparent at the extremes so very low tax rates very flat tax systems will increase productivity materially. A 100 percent tax on income would mean nobody would bother to go into that tax bracket because they get no benefit from it. The question is—and it's in theory known as the Laffer curve—where in the middle of those two extremes is the sweet spot to ensure people are most motivated and most productive in contributing to the economy and in creating revenue for the Crown to pay for its health education law and order and social services? We're not going to answer that question today but what we can see is if over 12 or 13 short years senior nurses who weren't in the top tax bracket have been replaced by second-year nurses going into our top tax bracket then we have a problem and it's one that a Government has to address at some point. I think what we know now is that no left-wing Government is going to do that. They can't stand the idea of tax reductions even in the threshold. The reason they gave for opposing a change even in the lowest-income tax threshold was the fact that I would get it as an upper-income earner. That's the degree of envy we now have and their reluctance to increase thresholds is envy."