2. Dr the Hon LOCKWOOD SMITH (National—Rodney) Link to this
to the Minister of Finance
Does he stand by his statement, regarding recently proposed tax cuts in Australia, that “There’s nothing for anybody under $30,000 a year”; if not, why not?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
No; because the advice I received initially failed to recognise the effect of the low-income tax offset, the Australian equivalent of our low-income earner rebate—
Hon Dr MICHAEL CULLEN Link to this
I think I should spread the pills out amongst them! If ever fully implemented, the proposal would see zero tax cuts on incomes of up to $11,000 a year, compared with $128 per week for those on $200,000 a year.
Dr the Hon Lockwood Smith Link to this
Does he agree that the recently proposed tax cuts in Australia would actually deliver about $8.65 a week in the first year to those earning under $30,000 a year, and why does he consider $8.65 a week—almost $450 a year—to be nothing for people in that income bracket?
Hon Dr MICHAEL CULLEN Link to this
The member did not listen to my answer. I said that the initial advice I had did not account for what the Australians call the low-income tax offset. Taking account of that the member is quite correct, but there is still no change on incomes of up to $11,000 per year.
Hon Mark GoscheHas he seen any reports on the value of delivering tax relief of around $10 per week for working families?
Hon Dr MICHAEL CULLEN Link to this
Yes, I have seen a taxation policy that proposes scrapping the $10 per child per week tax credit extension to Working for Families in order to pay for tax cuts for the better-off. I have also seen reports of a vote in this House where the National Party refused to endorse the Working for Families increase of $10 per week per child in tax credits that came into force on 1 April 2007, one of the most significant poverty elimination measures advanced for many years.
R Doug WoolertonIs the Minister concerned that across-the-board tax cuts favour the wealthier members of our society, and does it further concern him that such tax cuts often lead to user-pays regimes for Government services, thus disadvantaging further the less well-off, such as young families?
Hon Dr MICHAEL CULLEN Link to this
I have made it clear that any programme of tax cuts under the Labour-led Government must be fair, and that the cuts must also not impact upon the ability of the Government to deliver services.
Dr the Hon Lockwood Smith Link to this
Is it correct, as the Minister has just alleged, that the Australian tax package proposal did nothing for income earners earning less than $11,000 a year and delivered significant tax cuts for those on higher incomes, because in fact those earning less than $11,000 in Australia pay zero tax—unlike the situation in New Zealand?
Hon Dr MICHAEL CULLEN Link to this
The effect of the tax offset is precisely that; it is the equivalent of our low-income earner tax rebate. The National Government, in its changes in the 1990s, reduced the low-income earner tax rebate with every change it made.
Hon Dr MICHAEL CULLEN Link to this
I have seen reports showing that this Labour-led Government has reduced taxation on working families—that was opposed by the National Party. I have seen reports that this Government has reduced taxes on business on multiple occasions—each time that was opposed by the National Party. I have seen reports that this Government has reduced the taxation on savings—that was opposed by the National Party. New Zealanders need to remember that when the National Party talks big on tax cuts, its members do everything they can to actually stop them when they get in this House.
Dr the Hon Lockwood Smith Link to this
If there is nothing in the proposed tax cuts in Australia for anyone earning under $30,000 a year, is it correct that a low-income earner, say on $16,000 a year in Australia, if the proposals were fully implemented, would pay $2,790 a year—almost $54 a week—less in tax than someone earning the same $16,000 here in New Zealand?
Hon Dr MICHAEL CULLEN Link to this
The fact is that the Australian taxation system is more progressive than New Zealand’s taxation system. Tax is lower at the bottom end and higher—higher—at the top end. The National Party’s proposal at the last election did absolutely nothing about rectifying that position at all; its tax proposals would not have given larger gains to those at the bottom end.
Dr the Hon Lockwood Smith Link to this
Does the Minister stand by his advice to his Cabinet colleagues that the Government should “not adjust tax thresholds in the medium term thereby retaining fiscal drag”, and that if it does eventually adjust the tax thresholds for inflation, it should retain some portion of fiscal drag to “finance our decisions.”—is that still his position?
Hon Dr Nick Smith
Madam SPEAKERAlthough interjections are, in fact, permitted, some interjections create disorder. If that continues, then I will ask members to leave the Chamber.
Hon Dr MICHAEL CULLEN Link to this
The proposals put forward in the 2005 Budget did indeed retain some elements of fiscal drag because the adjustment was by means of consumer price index adjustment, not by means of average wage adjustment.
Dr the Hon Lockwood Smith Link to this
Should ordinary New Zealanders who currently pay what used to be the rich person’s tax rate of 33c in the dollar, and who after 8 years are still waiting to see the tax thresholds adjusted or the rates reduced, take it from the Minister’s comments that he considers tax cuts that deliver less than $10 a week to low and middle income earners to be worth nothing to them, and that he considers tax cuts that deliver more than $10 a week to be unaffordable; and should they therefore conclude that his promises to address bracket creep and fiscal drag are, in fact, worth nothing to them?
Hon Dr MICHAEL CULLEN Link to this
No, not at all. What they can take from them is what is a reality: $10 a week to somebody on $25,000 a year or $30,000 a year is worth far more than $10 a week to somebody on $150,000 a year or $200,000 a year. Yet the National Party continues to support changes that will give more to those at the top end than to those on low to middle incomes.