Smith Lockwood: Taxation (Annual Rates of income Tax 2005-06) Bill Taxation (Urgent Measures) Bill Student Loan Scheme Amendment Bill — Third Readings 
Smith Lockwood: Taxation (Annual Rates of income Tax 2005-06) Bill Taxation (Urgent Measures) Bill Student Loan Scheme Amendment Bill — Third Readings 
[Volume:628;Page:793] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 One of the interesting facts about a lie is that no matter how often it is repeated it makes it no less a lie. The facts of the matter around apprenticeships are that in the early 1990s the National Government when I was Minister passed the Industry Training Act. It increased the number of apprentices in this country fivefold in 5 years and that Labour Government that Mark Gosche is a part of has not changed the Industry Training Act at all because he knows that it has been highly successful. 
Mark Gosche claimed that National has no idea what ordinary New Zealanders want from their Government. I can tell Mark Gosche that ordinary New Zealanders do not want a Government that taxes them more and more. As they work harder as their wages and salaries go up they go into higher tax brackets which means they pay more tax and take home no more pay. That is what is happening in this country. Despite increases in wages and salaries the after-tax take-home pay under this Labour Government has not gone up and New Zealanders do not like that. 
New Zealanders do not like a Government that thinks it knows best. New Zealanders do not like Ministers who think they know best and that they should tax people more and more because people are too stupid to spend their own money and only these Labour Ministers know how their money should be spent. 
It is a tragedy that tonight we are confirming these tax rates that mean New Zealanders will pay even more tax. As they get their wage increases they will go into higher tax brackets and pay an even higher percentage of their income in tax. Of course Dr Michael Cullen will then achieve even more massive surpluses and he can therefore claim he is being fiscally prudent. But he is grabbing massively more tax from his fellow New Zealanders—he is spending massively more money. As my colleague the Hon Bill English said it is a billion dollars extra a year just to cover the increase in core public sector wages. When I was a Minister our total Budget increases a year were $600 million and now just the wages of the core State sector each year will cost a billion dollars with no other policy increases. 
It is sad that today New Zealanders are not facing the prospects of lower tax rates which they could have been had the Rt Hon Winston Peters chosen not to get into bed with Labour. Doug Woolerton must be very proud of the fact that tonight New Zealanders face higher taxes—because they will now face higher taxes. Confirming the same tax rates means that people will pay more tax. As their wages go up they will go into higher tax brackets and pay more tax. Doug Woolerton must be struggling to justify how New Zealand First has done that to working New Zealanders. 
I want to spend a little time on the Working for Families package that Mark Gosche claimed National did not want to talk about. We are very happy to talk about this package because it is turning tens of thousands more New Zealand families into beneficiaries. That is wrong. Doug Woolerton when he spoke before claimed that I bang on about these issues around the Working for Families package. I do not want to be unfair to Doug Woolerton but so many people do not understand—although I must say that Gordon Copeland is starting to understand on the select committee. Gordon Copeland fought to get a bit put in the select committee’s report on this bill that showed that not everyone on the Government side was unmindful of the massive marginal tax rates that three-quarters of New Zealand’s families now face. 
 Most people think that the marginal tax rate they face is 21c in the dollar if they earn under $38000 33c if they earn up to $60000 or 39c if they earn above $60000. That is not true. Three-quarters of New Zealand families face far higher marginal tax rates. Any member in this Parliament could give an example and I will tell them the marginal tax rate that a family will face. Let us just pluck a figure out of the air—say a family on $60000 which is well above the average. Now we think $60000 puts them on the 39 percent tax rate. If we are talking about a family that is wrong. That is not what happens at all. Under the Working for Families package a family on $60000 with dependent children—whether one two three four five or six children—does not face a marginal tax rate of 39 percent but according to the Inland Revenue Department pays 60.2 percent on every dollar earned over $60000. The Government takes more of the next dollar earned than the family gets to keep. 
We could name any income we like; it still applies. Take $90000 for example which is way above what most families earn. If the family earns another dollar and there are three children the marginal tax rate is 60.2 percent on that next dollar. This is just crazy stuff. Labour members say this package is good for families. Where is the incentive for families? Where is the reward for a family that wants to earn a bit more money to take the kids somewhere for Christmas? Let us look at the family with one child on $25000 which is a low-income family. Maybe it is a woman on her own with one child on the domestic purposes benefit with earned income—wages—of $25000. Do members know what tax she pays on her next dollar? She pays 92.2 percent tax. If she earns another dollar she keeps 7.8c out of that dollar. For goodness’ sake! Yet the former president of New Zealand First has said I am banging on. Three-quarters of New Zealand’s families with children face those marginal tax rates and that is what this Working for Families package is doing. It is not about banging on; it is not a technical thing. 
R Doug Woolerton 
: Yes it is. 
Dr the Hon LOCKWOOD SMITH 
: Doug Woolerton says it is. Families face those marginal tax rates. If they earn another dollar that is the tax they pay. 
Let us take any combination—for example someone with two children who has been on the unemployment benefit but is trying to get off the benefit. If the family was on $40000 of earned income then on the next dollar they would be taxed 54.2 percent. It is generally thought that the highest tax rate that people face is 39 percent. That is not true. Families face those sorts of marginal tax rates. It is not just technical; it is the rate they face. If they try to earn another $100 the worst-off families our lowest-income families that are not on benefits not on the standard domestic purposes benefit or unemployment benefit our poorest families that are independent of the benefit system—and I want the Maori Party to listen because I am sure Tariana Turia would be concerned about this some of these may be Maori families—if they try to earn another $100 to buy Christmas presents for the children they lose $101.20. They are worse off. It might be 10 hours extra work at $10 an hour to earn another $100 but they actually take home less pay! 
Labour members think that that is good. Doug Woolerton thinks that it is good. This bill although it does not introduce that takes the number of families that are caught in that trap of facing a 101.2 percent tax rate from 1000 at the moment. This year there are 1000 families caught in that. When this bill is fully implemented 3600 more families will be caught in that trap whereby they pay a 101.2 percent marginal tax rate. It is shameful what Labour is doing to those low-income families.