Woodhouse Michael: Budget Debate 
Text is incorporated into the Bound Volume 
Woodhouse Michael: Budget Debate 
[Sitting date: 12 June 2012. Volume:680;Page:2828. Text is incorporated into the Bound Volume.] 
MICHAEL WOODHOUSE (National) 
: 
 There was a speech that focused on the burning issues of the day did it not—the colours of the Canterbury Earthquake Recovery Authority! Goodness me! In this debate I just want to talk about the issue of fiscal policy in general and the fairness of our tax system. I find myself in the unusual position of reflecting back on Budget 2010 and the reason for that is the many references made in this House to the cost of tax cuts for those in the upper income bracket—in particular the references from Dr Norman who has gone on ad nauseam over the last month about his belief that the National Government’s tax cuts in 2010 far from being fiscally neutral actually cost “$2 billion and counting”. I have got no ability to say whether or not that figure is correct but whether or not it is it is certainly not the full story. In fact it seems that Dr Norman may have been taking some policy advice from the former member Stuart Nash. Remember Mr Nash in this House last year talking about farming incomes?  
Hon Amy Adams 
: That’s right. 
MICHAEL WOODHOUSE 
: That is right—remember? He talked about gross incomes. Never mind that that is not what one pays tax on. One pays tax on net incomes. Well Dr Norman is telling half the story really really well because whether or not the cost of the tax cuts to the upper income earners was $2 billion that was just one element of about 13 or more separate levers to fiscal policy that this Government has made including increases to GST that have resulted in upper income earners paying much much more of that tax the removal of depreciation on residential and commercial rentals and the closure of a number of loopholes that were unintended consequences that benefited upper income earners in tax transfers like Working for Families student allowances and child support. Those loopholes were actually introduced by Labour and supported by the Greens. But the biggest one—the biggest one of all—was that the difference between the trust top tax rate and the top personal rates was so wide. I remember the Tax Working Group actually said that in the past we had one of the least distortionary tax systems in the OECD and then we went from that to one of the most distortionary under Labour.  
So although there was a reduction in the top personal tax rate in 2012 to remove that distortion it is completely incorrect to say that that had a cost of $2 billion. I much prefer to refer to the more independent and non-partisan commentaries of the accounting firm of Deloitte which in its 2011 Budget report confirmed that the 2010 tax switch was “indeed fiscally neutral according to the tax bands”. As far as I am concerned that argument was over more than a year ago. Dr Norman can go on and on and on all he likes but that does not make it any more true. Indeed those changes that we made meant that three-quarters of New Zealanders pay a top personal marginal tax rate of 17.5 percent. Half of all households pay no net tax at all and 17 percent—17 percent—of households pay 97 percent of the net income tax burden in this country.  
But Labour and the Greens say 97 percent is not enough. They would want to put that top tax rate back up and punish hard-working New Zealanders even more. We know what they would do with those tax increases. The cuts actually gave New Zealanders a choice and those cuts came across the board. They had a choice to either spend them save them or reduce debt with them. We now know what they did with them. They saved them and they reduced debt with them because our savings rate is going up and our private debt is going down. But Labour and the Greens do not think that the public should have a right to decide what to do with their money. They think they know better than the public how the public should spend their money. So they went to the electorate last year and they said: “We are going to take those cuts back off you. We are going to take that tax cut back off you because we know better how to spend it.” Well I think the electorate spoke very clearly about what it thought about that policy. It spoke then and it spoke now— 
Andrew Little 
: You’re making it up! 
MICHAEL WOODHOUSE 
: I would like to know what that member thinks I am making up because absolutely every one of these things has been verified. The people around him are not making any noises about it because they know what the truth of it is. They know what the positive impact of those tax cuts and fiscal prudence was. And that is what the electorate knew too because this Government does not treat the electorate like idiots. We can go to the electorate with tough decisions like partial floats like the mixed-ownership model— 
Dr Megan Woods 
: Like class sizes. 
MICHAEL WOODHOUSE 
: —yes like class sizes—that is right. And OK maybe there is another discussion still to be had but at least we are listening. At least we are listening and that is a damn sight more than the public is doing to the policies of those members. Who knows what those policies are? There is no alternative being thrown up except tax borrow and spend. I think the public has spoken very clearly about that.