Norman Russel: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — First Reading 
Text is incorporated into the Bound Volume 
Norman Russel: Taxation (Consequential Rate Alignment and Remedial Matters) Bill — First Reading 
[Sitting date: 28 July 2009. Volume:656;Page:5167. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak to the Taxation (Consequential Rate Alignment and Remedial Matters) Bill. The Green Party will not be supporting this bill. We did not support the original set of tax changes. These consequential changes flow out of that original set so we continue not to support them. 
The reason we do not support them is that they are bad policy and they are wrong policy. They are bad policy for a number of reasons. If we are to try to deliver a stimulus package giving very large tax cuts to the very well-off is not the best way to deliver it. In fact it is the worst way to deliver a stimulus package. If we were to design a tax system for a recession and we wished to deliver a stimulus to our economy to try to keep people in jobs giving large tax cuts to the well-off would be exactly the wrong thing to do. That is why we are not voting for this bill and why we did not vote for the original changes. It is bad policy. 
It is also wrong policy. It is ethically wrong. It is wrong to give tax cuts to those who are already the wealthiest. That is just wrong. There are no two ways about it and there is no other way to look at it. We have a society that is racked by inequality. New Zealand is a society that has gone through enormous inequality as a result of the changes started in the 1980s that have made us more and more unequal. In fact we are a world leader in inequality. Thanks to the policies of the 1980s and 1990s New Zealand is a world leader in inequality. We have become unequal faster than any other country on the planet and that is something we should be ashamed of. 
Carol Beaumont 
: It is a great shame. 
Dr RUSSEL NORMAN 
: It is a shameful thing. In one of the most unequal countries in the OECD to give very large tax cuts to the well-off while giving absolutely zero—nothing—to those who earn under $40000 is immoral. It is not just poor tax policy; it is immoral. It is not compassionate conservatism or God-fearing conservatism; it is wrong and immoral. To give very large tax cuts to the very well-off is the wrong thing to do. It is the unethical thing to do and that is why we will not vote for it. I call on Labour not to vote for it either. Why would Labour vote for this bill? It does not even support it. 
The bill is also bad policy because it means that the stimulus package we are delivering now has to be borrowed from future generations. The tax cuts one way or another have to be paid for by borrowing. We are taking from future generations to pay for the stimulus package or to pay for the tax cuts whichever way one cares to look at it. Our Government borrowing will be much higher by the order of maybe $10 billion over the next 10 years or more as a result of these tax cuts. Because of the tax cuts we are giving to the very wealthy we have to borrow more from future generations to fund either those tax cuts or the stimulus package whichever way one looks at it. It means that future taxpayers have to carry a higher level of debt as a result of these stupid tax cuts—tax cuts that are bad policy. 
Mr Cunliffe quite rightly said earlier that when we give tax cuts to the very wealthy they tend to save them. If we give tax cuts to those at the bottom end of the income spectrum they simply spend them. That is why tax cuts targeted towards those at the bottom actually have a much greater stimulatory effect than tax cuts delivered to those at the top. So it is not only wrong policy because it is immoral and unethical and it is not only bad policy because it means that future generations will have a higher level of Government debt as a result of this but also it does not even give us the stimulus we want. 
This is dumb policy not only because of what it is but also because of what is not there. What are not there are measures to address the fundamental problems in the New Zealand economy such as the housing bubble. We all know that the housing bubble and the misappropriation of investment funds into investment properties in New Zealand is a major problem. Everyone talks about it. Everyone says it is a major problem but no other party in this Parliament has the guts to stand up and ask what we are going to do about it. 
We know what we have to do about it: we have to change taxation rules so that they target investment properties. Currently taxation rules favour investment properties. The taxation rules say to people with a bit of extra money to throw their money into investment properties because it is a great thing to do. Accountants from the top of the country to the bottom are telling people on middle to high incomes that they should put their money into investment properties. That is what they advise people day in and day out. The reason they do that is that the tax system rewards people for doing it. We are stupid. We have a tax system that rewards people for doing exactly the thing we know is the wrong thing to do in our economy which is to throw billions of dollars into investment houses. 
If we are to address this major problem we need to change the tax laws. We know what has to be done. We have to ring-fence the losses around investment properties and we have to introduce a capital gains tax excluding the family home so that we start to target the capital gains that come out of investment properties so that investment properties are no longer as tax-friendly as they are currently. That law change will provide a disincentive for all of those billions of dollars to get thrown into investment properties. None of the other parties in the House are willing to grasp that nettle because they are frightened of telling the people of New Zealand the truth which is that we have to change our tax system if we want to save our economy. It is a simple truth. We all know it is true but no one aside from the Greens is willing to stand up and say it. Gutless! So we need to change the tax rules. 
One of the of the other impacts of the current policy is that as the Reserve Bank does its damnedest to try to target the housing bubble it wrecks the entire rest of the economy in particular the tradable sector because it increases interest rates in order to try to suppress the housing bubble. That is what it is trying to do in order to try to stop inflation but all it does in the process is increase interest rates and increase the New Zealand dollar right across the board so that the entire tradable sector is at a disadvantage against imports. Because we will not adopt the basic policy measures that we should adopt to target the housing bubble the entire New Zealand productive sector has to suffer. 
We say we will have a high - interest rate high - exchange rate policy in order to try to suppress inflation coming out of the housing bubble. What a brilliant policy! We will wipe out the entire productive sector. What a brilliant economic strategy! We will have a high-currency high - interest rate policy in order to try to suppress the inflation coming out of the housing bubble. We could not possibly have policies that target the housing bubble—no that would be too smart! We do not like doing stuff like that! We want to have the dumb policy that suppresses the entire productive sector rather than target the housing bubble which is the cause of the inflationary pressure in the New Zealand economy! Everyone says it; everyone knows it is true. We cannot possibly have a policy that targets the cause of the inflationary pressure in the New Zealand economy—no! We have to have a high - interest rate high - New Zealand exchange rate policy that suppresses the entire productive sector! So we have a trade deficit. It is a brilliant strategy! We have a trade deficit we add it to our current account deficit—it gets incorporated every year—and we are doing a great job adding to our debt. 
When we say to the people who had just been laid off from the sawmill in Gisborne that the reason they are getting laid off is we will not have a capital gains tax they might scratch their heads and wonder what on earth we are talking about. But of course the connection is quite straightforward. One of the reasons the New Zealand productive sector is doing so poorly is that we have a high New Zealand dollar. One of the reasons we have a high New Zealand dollar is that we have high interest rates in this country so we are an attractive place for money to come. It is a stupid policy. Right now as a result of that policy people in our country are being laid off and we should change it. 
I want to touch on just a couple of other things that should be in this tax policy but are not. The thing is whether or not we like it tax is not just about raising money for Governments to spend; it also influences behaviour. Not only does it influence behaviour in the housing market and investment properties but also it needs to move our economy in a more sustainable direction. We need to adopt policies around taxation that explicitly say we have to move our economy in a more sustainable direction—that is tax policy that targets waste pollution and resource use. Only by changing relative prices will we transform our economy to be much more sustainable. The way we change relative prices is using targeted taxation. That is just a simple economic fact and we need to incorporate that fact in our taxation system. If we are serious about making the economic transformation then we need to make our economy a sustainable one—that is sustainable environmentally let alone sustainable economically. Currently we do not have an economically sustainable economy which is why our current account deficit is 8 percent of our GDP and is completely out of control. Our overseas debt is completely out of control. Our overseas debt is the second worst in the world after Iceland. Well I say to wake up guys because Iceland just went under. We will be next unless we do something about our overseas debt and our current account deficit. That is called a sustainable economy. 
So we will not be voting for this bill because it does not address any of the core issues. It is a bad bill it is an unfair bill and it does not address any of the key problems in the New Zealand economy.