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"Labour and Tax" - Cullen speech

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Nothing gives me greater pleasure than to talk about tax because National is now revealing just how much its agenda is one of personal greed, Labour finance spokesperson Michael Cullen told a public meeting in Ponsonby this evening.

"In fact, although tax is one of the litmus tests for where parties stand, it is not one of the key issues in this election in terms of deciding how people are voting. For some of the very well off Labour's policy has given them the reason they seek to do what they were going to do anyway.

Most people are more interested in economic development, jobs, health, education, and superannuation. And most know that tax cuts don't help any of those issues.

And its important to remember that a National/Act coalition would be dragged towards Act's extreme agenda. Act's policies mean finding within the first term of such a government savings of $4billion a year.

Even the extreme move of freezing all pensions and benefits for a three year term could save only about $500M a year.

The other $3 ½ billion would have to come from actual cuts to the pension and benefits plus savage cuts to health, education, the police, and other areas of key expenditure. And remember this is only the beginning! Mr Prebble has said he wants a cut in government spending equivalent to $12 billion a year. That is equivalent to more than the entire net cost of superannuation and health and would still leave big savings to be found elsewhere.

How have we ended up with this kind of nonsense being purveyed as serious politics?

The answer is through a volatile and potent mixture of greed, self-delusion, ignorance, and duplicity. And that's just to consider Act's more attractive characteristics.

It is, above all, because the public debate has been captured by the spokespeople for the greedy. And, with extraordinary gall and yet extraordinary success, they have been all too successful in characterising those who speak for the bulk of the people's interests as captives or proponents of so-called 'special' interests which are different from those of the country as a whole. Thus, almost incredibly, more weight is placed upon the views of those who bleat about paying a little more out of a large income than of those who speak for the homeless, or the sick, or the elderly, or the unemployed.

Of course, what these people on the right claim is that everyone will be better off if we ensure that the very wealthy get even wealthier.

A great deal of pseudo-sophisticated economic clap-trap is used to support this particularly gross form of trickle-down theory.

And yet the evidence, within some broad limits, is very weak. If we look across the range of developed countries there is not much to connect average tax rates with average GDP growth levels.

Nor is there real evidence to connect tax cuts to growth. Indeed, there really cannot be on a sustained basis unless, in some mysterious way, tax cuts lead to stronger growth in
productivity. So, in theory, if we abolished public health spending and cut tax accordingly, growth might lift if the money so freed went into more productive activity.

But much would go into private health insurance, a more litigious system, and generate greater demand for health care while a significant percentage would miss out and become a more expensive burden upon society.

In New Zealand, the theory that slashing taxes will generate growth has been tested on a number of occasions and found wanting in recent years. Yet still the ideologues prattle on, citing IRD financed studies that purport to show that growth is maximised if tax revenue is about 20 per cent of GDP.

Those studies are rubbish. They are based on a Mickey Mouse model of the economy, data series whose sources remain unidentified and conform to no known official series, spurious correlations and a range of other technical errors. What is remarkable is that anybody can take them seriously - even Treasury doesn't!

That doesn't mean we can hike taxes however much we want in whatever we want. There are real questions of efficiency, avoidance, confidence, and equity which have to be addressed. They are often complex issues that involve trade-offs.

So what is Labour proposing?

Quite simply, a modest increase for the top five per cent of taxpayers. Each dollar of taxable income above $60,000 a year will incur an extra 6 cents in tax. The net result of all that is that MPs will lose about three quarters of their recent pay increase. I'm sure your hearts bleed.

Why do this? Firstly, because we need the money. The extra $400M a year will go a long way to funding Helen's seven basic pledges. That $400M plus the $400M of tax cuts we are not going to have will pay for the seven pledges. And that combined $800M plus the additional $800M of tax cuts only going to those on above average incomes and to companies foreshadowed by National will make a significant difference in our ability to grapple with our social and economic problems.

Mrs Shipley, at odds with her Treasurer, has now signalled her determination to proceed with a three cent cut to the top rate.

So what is National now promising? It's worth going through the numbers. For a married superannuitant the tax cuts will deliver nothing - except the promise of poorer health services, the completion of the cut to 30% of the average wage, and further unfairness.

For a person on $500 a week it will deliver a tax cut of $3.19 a week with the certainty of increased education costs for their kids.

For an ordinary MP it means an extra $31.44 a week. For a cabinet minister an extra $67.44 a week. And for the Prime Minister, an extra $108.35 a week.

No wonder it is Mrs Shipley's biggest issue and the one thing she leads on! Of course Act is even worse - they would increase her income by $455.75 a week - more than many full-time workers take home!

Labour says the Prime Minister can afford a tax increase of a little over $176 a week - wiping out the net effect of the recent pay increase. And a cabinet minister can afford to pay an extra

$98 odd a week. And an MP an extra $25 odd a week. Because thereby we will contribute to paying for our pledges to help ordinary New Zealanders, not feather our own nests.

Big Mother needs to be reminded that a parent's duty is to feed the rest of the family first, not wolf it down and then see what crumbs are left over.

So it is a litmus issue. It is, at heart, about the direction we move in. Further down the road to a greedy, selfish society with inadequate social services, or changing course to build stronger health care, higher quality education, fairer pensions.

Mrs Shipley calls this going back. Big Mother tells us we will be watched for any signs of care or compassion, of backsliding towards a fairer society.

We say, quite simply, that we do have choices about where we go in the future.

What will the money be spent on? The answer to that is overwhelmingly in four areas: supporting economic growth and development, improving health care, reducing the costs of tertiary education, and restoring the level of the pension.

No wonder the National/Act coalition finds it so unacceptable. No wonder indeed that there are such screams of rage from the spokespeople for the wealthy. Because what we are saying is that we do not intend that they should get richer faster while the great majority are left behind. It punctures their whole conceit about their place in New Zealand society.

There will be no increase in GST or company tax. We will not be introducing a general capital gains tax or inheritance tax or whatever. There will be a general review of the tax structure taking a long term view of what will be most robust and efficient. But any recommendations for structural change, if adopted, will be put to the people in the 2002 General Election before enactment.

That's it. That's the big bogey the National Party is spending nearly all its money on. Nothing could more clearly show they have nothing of relevance to say about the future of New Zealand. Their future is a tight-lipped, mean-mouthed, bullying, condescending future in which the few continue to gain at the expense of the many.

Ours is inclusive, caring, and realistic. We say that in the end a society works best that works together, that emphasises its common bonds as well as common decencies. The people decide what they want on 27 November," Dr Cullen said.

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