Heather Roy's Diary: Dr Cullen's Daylight Robbery
act-new-zealand
Fri Sep 28 2007 12:00:00 GMT+1200 (New Zealand Standard Time)
Heather Roy's Diary: Dr Cullen's Daylight Robbery
Friday, 28 September 2007, 11:32 am
Column: ACT New Zealand
Heather Roy's Diary
Dr Cullen's Daylight Robbery
A Lotto win of $775.56 on Saturday evening would bring a smile to the face of most Kiwis, and there would be a fair bit of discussion around the family dinner table about what to spend it on - $775.56 would almost buy a basic health insurance policy for a family for a year; it would make a tidy dent in the skyrocketing rates bill for many family properties; or it would pay the 'donation bill' for two children at primary school.
But forget Lotto; $775.56 is the average amount this government overtaxed hard-working Kiwis who earned over $60,000 in the 2005/06 financial year - the wealthy, according to Finance Minister Dr Michael Cullen, because they pay the top rate of 39 percent tax.
This $775.56 probably doesn't sound like much to Prime Minister Helen Clark and Dr Cullen but to most families - even those earning $60,000 or $70,000 - it would help out nicely. Worse still, having been earned by them in the first place, it belonged to them.
In 1999 Labour introduced a new top tax rate of 39 cents in the dollar and, on December 23 1999, Dr Cullen gave a speech in Parliament saying that:
"Ninety-five percent of people will not be asked to pay more tax. Instead only the top five percent of income earners will pay more".
I recently asked written Parliamentary Questions of Minister Cullen to see how we were getting on with his promise. The reality is that it was never kept: when the new higher tax rate was introduced the top five percent of taxpayers earned $66,000 and over, not $60,000. By the 2005/06 financial year, nearly 11 percent of taxpayers were being hit with the top tax rate when the threshold should have risen to $79,000 to keep his five percent promise. The figures for the year ended June 30 2007 aren't available yet, but it's a fair bet the numbers being overtaxed continue to rise, contributing even more to the burgeoning surpluses.
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While it's easy to talk in percentages, this sometimes masks the real extent of the problem. In 2000, when the new tax rate kicked in, 194,000 people were paying the 39 percent tax rate. By 2006 the figure had ballooned to 352,000.
I also asked what the cost would have been to enforce the 39 percent rate on only those earning over $79,000 - where the threshold should have been - in the 2005/06 financial year. The answer was $273 million - the amount that income earners were overtaxed. If divided into the number of people in the top tax bracket, the average amount that those affected were overtaxed can be calculated: 352,000 workers were deprived of an average of $775.56 because they were overtaxed (www.act.org.nz/cullen\_over\_taxing\_352\_000\_kiwis).
A fair-minded government would have kept its promise and adjusted the five percent threshold year on year but, instead, Labour has acted dishonourably in order to swell the government coffers. Expect an election year spending spree funded, in part, by unwitting taxpayers made victim of another broken promise.
Welfare For The Wealthy, Or Taxing The Beneficiaries? Dr Cullen has often quipped that those paying the top tax rate do so because they're wealthy. In the same 1999 speech announcing the new rate of tax, Dr Cullen said:
"This is a small increase of six cents in the dollar for those who can most afford to help sustain basic services like health, education and superannuation".
Answers to written Parliamentary Questions I received this week have thrown that statement into doubt. These answers revealed that of those paying the top tax rate, 2,000 are parents in families receiving financial assistance through the Working For Families package.
Dr Cullen needs to make up his mind: either those earning over $60,000 are wealthy enough to pay the top rate of tax, or they are not and are instead genuinely in need of financial aid.
The Working for Families package was designed to provide a top-up for lower to middle-income working families - one would not normally expect high income earners to require financial assistance.
ACT believes these families deserve this money - but as a tax break, along with all other workers. This would have the added advantage of not costing a fortune in bureaucracy, or time wasted on applications and eligibility assessments. As a rule of thumb it is generally considered that every time money is churned through a government department around 10 percent is lost. The wisdom of government taking in taxation with the left hand, and giving to a favoured group through the welfare system with the right hand is seriously flawed. How much more evidence do we need to establish that tax cuts for all are long overdue?
Lest We Forget
September 26 1907: Following the 1907 Imperial Conference, the New Zealand House of Representatives passed a motion respectfully requesting that His Majesty the King "take such steps as he may consider necessary" to change the designation of New Zealand from the 'Colony of New Zealand' to the 'Dominion of New Zealand'.
The alteration in status was stirred by a sentiment on the part of then Prime Minister Joseph Ward that a new term was needed to distinguish New Zealand from non-self-governing colonies of the time, like Fiji. The adoption of the 'Dominion' designation would "raise the status of New Zealand", and "...have no other effect than that of doing the country good".
On September 9 1907 a Royal Proclamation granting New Zealand Dominion status was issued in which King Edward stated:
"... We have therefore by and with the advice of Our Privy Council thought fit to issue this Our Royal Proclamation and We do ordain, declare and command that on and after the twenty-sixth day of September, one thousand nine hundred and seven, the said Colony of New Zealand and the territory belonging thereto shall be called and known by the title of the Dominion of New Zealand. And We hereby give Our Commands to all Public Departments accordingly..."
ENDS
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