Hodgson Pete: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
Hodgson Pete: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
[Volume:672;Page:18939] 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 Clause 3 of the Taxation (Annual Rates and Budget Measures) Bill is a piece of law that says that tax rates are not going to change. This side of the Chamber asks why the hell not. When the global economic crisis struck we all became Keynesians around the world and we all did two things: we increased expenditure and we reduced taxes. This country increased expenditure and reduced taxes. The April 2009 tax cuts all went to rich people—that is a matter of fact. Now it is time to wind back from that Keynesian impulse and start to get our deficit of $17 billion under control. 
There are two ways of doing it: one is to reduce expenditure and one is to increase taxes. We did both the first time round but we are doing only one the second time round. We want to know why when tax cuts came they went to rich people but when costs are to be increased they are borne by low and middle income earners. That is what we want to know. It is the essence of this Budget and of the past 2 years. 
When David Cunliffe spoke he laid out the costs of the Labour tax cuts in October 2008 the tax cuts in April 2009 and the tax switch of last year. He laid it out and added up the millions. He told us where that money went and how much was lost to the Government accounts. He made it clear that the amount of tax that had been cut over the past 2½ years under successive Governments had reached the point where it ought to be partially reversed. But we are not doing that in clause 3—we are not doing it. We are leaving tax rates exactly where they were. The net result is that the rich have done better over the past 2 or 3 years and the low and middle income earners will do worse. 
Take me: I am on $130-something-thousand. [ 
Interruption 
] That seems to have caused a whole lot of interjection from a bunch of people on the other side of the Chamber all of whom are also on $130-something-thousand. My story is the same as theirs. Let us hear what that is. Roughly I am $100 or so a week better off as a result of the changes that this Government has made over the past 2 years. I am roughly $100 or so a week better off or a bit over. I have not been hurt by this Budget one iota. I have been asked to give back nothing. 
David Bennett 
: Put it in your KiwiSaver. 
Katrina Shanks 
: Give it to charity. 
Hon PETE HODGSON 
: People across the way are telling me to save it or give it to charity. They think they are being helpful. I am making a point: I am one of those well-off people who have had a significant increase in income under this Government and have not suffered one little bit from this Budget. That seems to have evoked quite a lot of emotional—almost visceral—reaction from my colleagues opposite. I simply say it as a matter of fact: I am and people like me are better off; people on half the income that I am on are worse off. That is not fair. It is not fair and it is to be found in the inaction of clause 3. 
Some interesting things have happened in the course of this debate. A couple of things have come from members on the other side of the Chamber that I think are revealing. One is that they all have notes that say something like this: 50 percent of tax is paid by 15 percent of the people or whatever it is. Those members have a research note and they have been parroting it. That means that the people on the other side of the Chamber think that the tax system as it is now is too progressive. That is what it means. Otherwise they would not bother to start parroting that stuff. 
They parrot something else. They say that they must take care of the wealth creators—they must take care of the wealth creators. That is an awful ugly right-wing argument. It basically says that low and middle income earners cannot succeed. That is what it means. It says that low and middle income earners cannot succeed; only the rich people can create more wealth so we must tax them in an ever-lighter way in order for that to happen. 
Then we get on to the silliness about dairy farmers and how much tax they pay. Let me just say that on this side of the Chamber we understand very well that taxes go up and down in business year by year. We know very well that the taxes paid by those farmers of only $1500 a year or whatever it was in that year were low because the milksolids price for the previous year was not very flash and that tends to carry over into the profits for the following year and the taxes that are paid. We know that the tax paid by dairy farmers the year before would have been higher and the year after will be higher. We know that. 
But when we look at the average tax paid by dairy farmers over years—I have been to DairyNZ to find out—we see that it is a little over $20000. If one has a business that is paying $20000 or $30000 in taxation but is using something like $2 million or $3 million worth of debt—and these days dairy farms in New Zealand are—then that is a very bad use of capital. It is a bad use of capital. Basically people are capitalising the gains and socialising the losses. We know that; it is known on both sides of the Chamber. 
That has been a pretty interesting debate but it got more interesting. Mr Dunne the Minister of Revenue—I do not want to upset him in any way—made a contribution stating that it was to do with classification. Stuart Nash received the answer that some dairy farmers had declared themselves as dairy farmers and were considered in a group and other people had not. Those others had called themselves Agribusiness or whatever so they were classified as “other”. Mr Dunne went on to make the point that the figure that the dairy farmers paid whatever it is—$2.5 million or $25 million— 
Hon Peter Dunne 
: $26 million. 
Hon PETE HODGSON 
: —$26 million—was too low. I agree with Mr Dunne on that. But the figure of $1500 per dairy farm did not change. That does not change. There is no way in the world that there will be any correlation where people who describe themselves as dairy farmers pay low tax as opposed to other dairy farmers who describe themselves as being in Agribusiness and pay high tax. That does not work. Do not run that argument around here; it will not work I say to Mr Dunne. The point is that there is an unfair incidence of burden in this Budget and it is not a good look. 
I will make another couple of points. We have one of the lowest top tax rates in the world—one of the lowest top tax rates in the world—but we never hear that from the other side. We have a whole thesis in this country that says that if there is a gap between a company rate of 28 percent and a trust rate of 33 percent then that 5 percent gap is tolerable but if there is a gap between a company rate of 33 percent and income tax rate of 39 percent then that is intolerable: 5 percent is OK; 6 percent is intolerable. I tell those members to look at other nations. They will see that their trust rates company rates and top personal tax rates do not align. Then these members should ask themselves why the growth of loss attributing qualifying companies is exploding in this country and why the growth of family trusts is exploding in this country. Those members should ask themselves whether it is because our tax law needs fixing or whether it is something to do with the accounting profession’s culture in this country. But they cannot say that we have to reduce taxation in order to avoid avoidance. That just will not work. It is just not logical by any international comparison. It will be true at the margins somewhere somehow—I absolutely acknowledge that—but I believe that it has been grossly overstated. 
We heard from the member who has just resumed his seat Michael Woodhouse an argument on the effective marginal tax rate. He was wrong on every count.