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www.mccully.co.nz 26 August 2005

www.mccully.co.nz 26 August 2005

A Weekly Report from the Keyboard of Murray McCully MP for East Coast Bays

The Tax Debate

The announcement of the National Party taxation policy on Monday marked the kickoff of a debate New Zealand needs to have. At issue is whether this country is about wealth generation or wealth re-distribution. And whether this is a country which is about getting ahead, or falling gradually further behind the rest of the world.

The past six years have seen middle New Zealanders moving into the 39% tax bracket in increasing numbers. And in its obdurate refusal to cut taxes, the Sisterhood has compounded the problem with the so-called Working For Families (WFF) policy of middle class welfare. That approach creates such high effective marginal tax rates as to destroy any incentive to earn more by working harder, smarter or longer.

The National package addresses the incentive issue in a major way by pushing out thresholds. Elements of the targeted WFF are retained temporarily pending the creation of a family tax framework. This framework will be designed to take the pressure off taxpayers with children by reducing the tax they pay – in contrast to the Labour approach of taxing them heavily and then inviting them to ask for some back by applying for welfare.

Some considerable work has been done on the framework, but its sheer complexity dictates that such an initiative be undertaken with the resources of the IRD and Treasury at hand.

Some business eyebrows were raised by the decision to schedule reductions to company taxes for April 2008. But Dr Brash has always asserted a need for cuts to personal taxes first. And his announcement carefully flagged the prospect of earlier moves on company taxes if fiscal conditions permit. And given that the alternative Budget released by John Key spent none of the extra cash contained in Michael Cullen’s belated PREFU, there is obviously plenty of scope for that.

Better Incentives

The National package will see a massive 85% of all New Zealanders paying a top tax rate of 19% - a huge incentive for those who want to get ahead. And this move was reinforced by the decision to collect tax on secondary employment at 19% (unless the taxpayer asks for it to be collected at a higher rate).

Currently, huge numbers of secondary income earners glance at a 33% rate on the pay slip and decide there is simply no point. The National plan will see only 3% of taxpayers paying the top 39% rate, with a clear signal that it, too, will be reduced as soon as the numbers permit.

But it is when you get into the detail of Labour’s middle class welfare that the real inequities emerge. Under Labour, a family with two kids earning $90,000 a year will pay 24 times as much tax as a similar family on $45,000 – hardly an equitable arrangement. And the incentives to get ahead are simply shocking. Labour will have a taxpayer with children (and therefore on WFF) earning $38,000 (well under the average wage of $43,000) paying tax at 53% on every additional dollar of income they earn. And if they are collecting the accommodation supplement, the effective marginal tax rate could be as high as 80%.

So the choice is clear: a simple, clean package which has the vast majority of taxpayers on a 19% rate, free to enjoy the benefits of working harder or smarter, versus a mind-numbingly complex middle class welfare arrangement that robs taxpayers of any incentive to get ahead. More important, the attitude and culture that will be shaped by the two opposing tax systems could hardly be more different. Which is fundamentally what the 2005 election is all about.

Reds, But not Under Beds

So negligible is their listenership that readers will not have noticed, but on several occasions recently staff at the state broadcaster, Labour Radio, have gone on strike. Ringleader of the industrial action, we are informed, has been the EPMU (Engineers’ Union) site delegate, one Brent Edwards.

Stung by a particularly outrageous piece of pro-Labour bias this week, an angry listener rang to complain. He was told to take the matter up with the head of RNZ’s Election Unit: one Brent Edwards.

Some mistake, surely.

On Bribery and Blandishments

Complete and utter shamelessness has always been high on the list of Sisterhood characteristics. The u-turns over the Treaty (post-Orewa), law and order then welfare policies as each was addressed by Dr Brash. But this one really takes the prize.

Having told New Zealanders that, to quote Dr Cullen, jam now, would mean crumbs later, a few negative post-Budget polls and a heap of scorn from anxious colleagues forced a quick revision. Now Dr Cullen has every jam factory in the country working around the clock to keep pace with his effort to drown New Zealanders in jam before 17 September.

But feedback received at the worldwide headquarters of mccully.co suggests the utter cynicism of it all has not gone unnoticed. There is a growing sentiment that the public are being taken for complete suckers. And some time around 17 September would be an excellent time to reciprocate.

Sex Change Before Hip Replacements

How very very telling. The word from New Plymouth this week is that the Sisterhood will foot the bill for a 73 year old transsexual to have a sex change operation. At a cost of a cool $30,000.

Well, the worldwide headquarters has run a few checks. At last count there were 180 000 on the waiting list for surgery. Yes, 180 000. But somehow the sex change operation for a 73 year old rates higher on the Sisterhood’s priorities.

Now a hip replacement costs $10 000. A cataract $2 000. So in one mad bout of Sisterhood political correctness they will blow 3 hip replacements or 60 cataract operations on one sex change. Now doesn’t that speak volumes?

Paying for the Pledge

The shameless use of taxpayers’ cash to fund their re-election effort has long been a hallmark of the Sisterhood style. But is it just possible that new depths of shamelessness have been plumbed this week?

Delivered to the worldwide headquarters this week was a flashy, expensive red booklet featuring Labour Party election slogans and the traditional digitally enhanced photographs. Inside was the alleged centrepiece of the Labour campaign: the pledge card.

How strange upon further inspection to see a Parliamentary crest on both the booklet and the pledge card. Yes, the same crest which, under Parliament’s rules must be displayed when the taxpayer is footing the bill for printing. But surely not even the Sisterhood would expect taxpayers to pay for their key election brochure complete with pledge card?

ENDS

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