Cosgrove Clayton: Questions for Oral Answer — Questions to Ministers 
Cosgrove Clayton: Questions for Oral Answer — Questions to Ministers 
[Volume:618;Page:13544] 
2.  
CLAYTON COSGROVE (Labour—Waimakariri) 
 to the  
Minister of Finance 
: What flat tax rate would be required to deliver the same gains to the family on $55000 a year mentioned in the Budget speech and what would be the fiscal cost of that tax break? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 The family mentioned will get an extra $149.77 a week from the package at maturity. To get the same benefit from a flat tax would need a rate of around 9.5 percent. The cost of that on an annual basis for the current tax year would be around $15.9 billion. 
Clayton Cosgrove 
: What spending cuts would be required to fund a tax cut of that order? 
Hon Dr MICHAEL CULLEN 
: For the 2004-05 year this could be nearly covered by having no operating expenditure on health law and order defence transport and communications primary services culture and heritage recreation and housing and community development. This would still leave a gap of a couple of hundred million dollars or so. 
Dr Don Brash 
: Can the Minister confirm that assuming this family is in receipt of the accommodation supplement its effective marginal tax rate is 89.2 percent— 
Opposition Member 
: Shame! 
Mr SPEAKER 
: There will be no interjections during questions. That is a rule and that is the only time I am stating it this week. 
Dr Don Brash 
: Can the Minister confirm that assuming this family is in receipt of the accommodation supplement its effective marginal tax rate is 89.2 percent or 99.2 percent if it has a student loan and what impact does he think this will have on its desire to work overtime when such punitive tax rates apply? 
Hon Dr MICHAEL CULLEN 
: The family mentioned in the Budget speech includes a primary school teacher who does not receive overtime payments. 
Hon Ken Shirley 
: Does the Minister accept that a cut to both the company and top personal income tax rates would boost the economy and if he does not believe that can he explain to the House why a 20 percent cut to both of those rates would not boost the economy? 
Hon Dr MICHAEL CULLEN 
: The last time a Government substantially cut the top income tax rate and the company tax rate was when that member and I passed in the division lobby to vote for them in 1988. The next 5 years were the worst performing in New Zealand’s economy since the early 1930s. I rest my case. 
Sue Bradford 
: Has the Government worked out how much of the new family assistance and support is going to families earning less than $25000 a year or $12 an hour in the paid workforce and should this measure not be renamed: “The subsidy to employers who pay low wages”? 
Hon Dr MICHAEL CULLEN 
: I do not have the former figure available to me but I can tell the member that something over 60 percent goes to working families and under 40 percent to families dependent upon benefits. To the extent that the package may reduce wage demands there may be some very small element of truth in the matter but the member must remember that the majority of people in those income ranges do not have dependent children so it is not likely to be a very powerful effect. At the end of the day the Government’s package is designed to address major issues of horizontal equity—that is how people on the same income are better able to meet their differing circumstances in terms of supporting families. 
Hon Dr Nick Smith 
: I raise a point of order Mr Speaker. In his answer to the question asked by the leader of the National Party the Minister of Finance referred to a teacher mentioned in his Budget speech. I seek leave to table that Budget speech because there is no such reference to the family on $55000 including a teacher. 
Hon Dr MICHAEL CULLEN 
: The example was obviously taken from the family who up until the Budget starred on page 1 of the  
Sunday Star-Times  
and was subsequently reduced to page 7 because it was so pleased with the Budget outcome. 
Mr SPEAKER 
: I am sorry; I made a mistake. Please be seated. The member has sought leave to table the Budget speech. Is there any objection? There is no objection. Perhaps the member might like to reflect on the answer he gave and whether he wants to change it. 
Document not tabled. 
Hon Dr MICHAEL CULLEN 
: No I do not want to change the answer at all Mr Speaker but I will give further explanation. Much has been made of the marginal tax rate effect. Firstly of course the high marginal tax rate effect is a feature of the current family support system. All the Budget package does is push that further up the income scale because it provides more money for low to middle income earners. If the Opposition cares to put the case to the family from Waihi as to whether it would rather have something like $7000-odd a year less in order to have a lower effective marginal tax rate when a primary school teacher cannot earn overtime it would probably tell the National Party to get lost at that point.