Hide Rodney: Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Bill — First Reading Second Reading In Committee 
Hide Rodney: Taxation (Personal Tax Cuts Annual Rates and Remedial Matters) Bill — First Reading Second Reading In Committee 
[Volume:647;Page:16266] 
RODNEY HIDE (Leader—ACT) 
: 
 I have listened to the speeches on this tax legislation with some interest and I should tell Mr Harawira that although I am no fan of this Budget either and will not be voting for it—it is not as good as Labour says it is—I have to say I do not think that it is as bad as he paints it. But let us talk particularly about tax legislation and reiterate that the ACT party will be supporting this tax cut. We see it as a faltering baby step in the right direction. But I will pick up on the discussion that has been around the traps here and just warn us as parliamentarians about a trap we are falling into. I am thinking of Mr Harawira in particular when thinking of tax design as to who gets what. That is how we are thinking about the Budget. If we are thinking about our country and our young ones we should actually be thinking about where we will be in 5 years’ time in 10 years’ time in 15 years’ time and in 20 years’ time. That is what matters. Actually a few dollars this week and a few dollars in October sort of pale into insignificance compared with what we can achieve over the next 5 10 or 15 years. By that in particular I am focusing on economic growth because that is what will provide the jobs the incomes the housing the environment the health service and the educational service we all want. 
Listening to the speech I heard about everyone wanting the good things but not talking about how we build an economy to provide for them. I think that is how we should be thinking about tax cuts too—that we should be thinking about whether there is a way we can cut taxes that will make a bigger cake rather than just carve up the one we have. 
I also want to pick up on a point that the Greens made about what is fair. You know fairness is in the eyes of the beholder I guess and let me just illustrate that with two points. Jeanette Fitzsimons’ point was that the fairest tax cut we could have—and I think Mr Harawira was saying this too—is a tax cut that gives the same amount to everyone and that is “fair”. But I am not so sure that their policies would do that. Let me give members an example. I think we have created this with this tax policy too. For example the first $10000 or the first $5000 is tax-free. And one thinks “Well that’s great because everyone gets the same amount.”—but I can promise members that they will not. The people who overwhelmingly will benefit from that tax policy are the wealthy. Why? Because anyone with a business that is doing well will employ his or her children spouse mother and mother-in-law and pay them all $10000. They will pay them $10000 and that $10000 they pay them will no longer be taxed at 39c in the dollar; it will not be taxed at all. And enormous income-splitting will be seen as a consequence. What is fair about that? 
In a funny way we have added to that problem with Mr Cullen’s Budget by going to 12½ percent and 39 percent so there is a greater incentive. We have already seen it happening. We will see a greater employment of business people’s family members in order to minimise those people’s tax liabilities and that is quite a significant thing. 
The other reason why I question fairness from Jeanette Fitsimons’ point of view is that she says: “Well it should be the same so that somehow the way we are taxing people now is fair and we should not adjust that process in any way shape or form.” But how can that be? We set the tax policy basically back in December 1999 and it came into effect in the year 2000. Since then we have had inflation and bracket creep. So instead of say 5 percent of people being taxed at the top rate we actually have say 12 percent. So all those relativities have changed. But somehow Jeanette Fitsimons is saying: “OK what we are doing now should be the measure of whether it is fair.” but that would mean that what we were doing back in 2000 was not fair because what we were doing back in 2000 was different. 
I also think that when we think about tax cuts we should be realistic. And here I want to chide New Zealand First members because I think they want to make the first $5200 tax-free. Well we heard from the Minister of Revenue and the Minister of Finance that to take the amount to $10000 would cost—I think from memory—$3.9 billion. It is a flat rate up to $9500 so if we are to make $5200 tax-free it will cost exactly half of that. So we are talking of just on $2 billion for the tax cut to make $5200 tax-free—$2 billion a year. I think New Zealand First also said that it would take the rate of GST from 12½ percent to 10 percent. I would vote for that—absolutely. It was promised to be 10 percent and it should be 10 percent. But I think I heard the Minister of Revenue—and I am looking across at officials to see whether I have the numbers right—say that on the current Budget that is about $2 billion $2.5 billion or something like that. So New Zealand First would actually have to cut Government spending by $4.5 billion. But all I heard from New Zealand First in its Budget speech was how much extra spending it had through its good initiatives and that it was disappointed in the Budget that there was not more spending. Well we cannot have it both ways. We cannot cut $4 billion a year out of the Budget and spend more money without cutting a huge amount. 
Sue Moroney 
: National thinks they can. 
RODNEY HIDE 
: Well to be fair to National it has not said what its tax cut plan is. It might be that Ron Mark’s numbers do not add up but at least he has put the numbers out. We have to be realistic. But the point I would make—and this is probably why ACT is so low in the polls—is different from everyone else’s. I think that before we talk about fairness we should think about where we want to be in 5 years’ time or in 10 years’ time in terms of the economic pie. So instead of arguing about $10 $16 or $20 a week we should ask whether we want to continue to be say $450 a week behind Australia in wages on average. Do we want to be poorer than Tasmania? I do not think so but I think that on the present course we will sink further behind. I think everyone including the Government is concerned about the number of New Zealanders who are leaving for Australia and further afield and why they are doing that. A lot of Maori are going I tell Mr Harawira—probably an entire electorate. They are doing that because it is more creative and more entrepreneurial it makes more money and it gives more opportunities. 
Is that going to get better or worse? I think it will get worse. We can imagine hitting—to coin a new phrase—a tipping point where so many of our young people will have left that it will actually become a cumulative flood of more and more people going. We have to ask ourselves whether these tax changes we are having will bring our kids home. Will they reverse the trend of young Maori and other young New Zealanders to head overseas? I do not think so. If we start thinking like that—and I know that this might be offensive to people’s ears—we should say “Let us have a tax policy that delivers growth.” and then we are actually talking about getting the top rates down. 
It is absolutely true I tell Mr Harawira that if we go to a flat tax rate of 20c in the dollar or of 15c in the dollar that those on high incomes will pay proportionately less tax than they do now. But that is because they pay such a lot now. So those people on $80000 compared with those on $20000 do not pay four times as much tax; they pay 50 times as much tax depending on where they fall with children and whatever. So they are paying a lot of tax. It is true that people might say “Oh well this is what an MP gets.” If people are worried about what MPs get then let us cut MPs’ salaries. But let us not drive tax policy by what the Leader of the Opposition or the Deputy Prime Minister might get; let us drive tax policy by what is good for the country. I ask Mr Harawira to imagine us getting the tax rate down to 20c in the dollar. Then we would start growing the economy. Would that not be the best thing we could do for the young people of New Zealand! Thank you.