ACT: Freedom and Prosperity

Rodney Hide
Tuesday, 24 May 2005

Speech to Newmarket Rotary Club, Ellerslie Racecourse, 12.30pm, Tuesday 24 May 2005.

The ACT Party stands for Freedom and Prosperity.

We support the free market, private enterprise and freedom to choose.

We oppose state control, big government and high taxes.

That’s why we oppose the Clark-Cullen government.

We oppose Helen Clark for being the bossy-boots telling New Zealanders how to live their lives.

We oppose Michael Cullen’s big spending, high taxing and wealth-sapping Budget.

We believe in New Zealand and New Zealanders. We are ambitious for our country.

We believe that New Zealand’s future is bright.

We believe that to succeed as a nation we need government off our backs and out of our pockets.

We need to be able to get on with our lives free of government interference and red tape.

We need a government that taxes lightly and spends our money wisely and well.

We need a government that concentrates its attention on core government services – like police and roads.

We believe it’s a disgrace successive governments have taxed us hard and spent up large on bureaucracy, business hand-outs and dopey programmes that no one wants or will pay for while running down our police, our military, and our basic infrastructure.

We are now taxed harder than ever before. We now get fewer basic services than we have ever had before.

And total government spending is higher than it’s ever been. And growing.

Total government spending has ballooned under Labour. It’s increased by a third in the last four years.

It’s forecast to increase another 38 per cent over the next five years.

Government is set to grow 40 percent faster than our economy.

The result is a government that is getting bigger and bigger but delivering less and less of value.

Michael Cullen teases the National Party by asking where they would cut government spending. Well, after years of Labour there’s plenty of dopey spending to cut.

I know. I have exposed more than my share fair of the Labour Government rorts myself.

But proper government budgeting isn’t just about dealing to the rorts. It isn’t just about cuts or more spending. It isn’t just about sacking a few unneeded bureaucrats.

It’s about proper financial discipline. That’s where the Clark-Cullen government have totally failed us.

They spend taxpayers’ money like winning an election is lotto. They have no care or concern for the hardworking New Zealanders whose money it is.

That attitude is the fundamental problem.

And the pressing issue is not cutting present spending as Cullen maintains – it’s about stopping it ever-increasing.

We can’t standby and let government spending constantly balloon at the expense of hard-working Kiwis.

We need proper discipline bought to bear on politicians. Not just for the next government.
But for every government.

The way to do that is through a Taxpayer Bill of Rights and proper spending caps.

Spending caps would lock government expenditure at current real levels per capita. That would mean holding government spending to present levels.

That’s the goal that we should be setting: to hold government spending. That isn’t too tough a goal, especially when you realise just how much government is spending and wasting now.

The caps would enable government spending to increase to compensate for inflation and population growth. But that’s all. Expenditure increases beyond that would need 75 per cent support of Parliament.

That’s as it should be.

That would set a firm fiscal discipline on governments that’s now totally lacking.

For example, Michael Cullen reaped a windfall as inflation and growth has pushed taxpayers into higher tax brackets. That windfall has been at the expense of taxpayers.

The Labour Party promise was that only five percent of taxpayers would pay the 39 per cent tax rate. Next year 11 per cent of taxpayers will be paying 39 cents in the dollar.

The five-percent promise is another promise broken.

The average worker paid 21 per cent as their top rate of tax when Labour came to power.

They must now pay 33 per cent. Their taxes have been hiked – even though Parliament never agreed to it – and even though no one voted for it.

That’s why government has more and more money.

And that’s why the average family’s income has been static. The average family is no better-off after five years of Labour. Inflation and tax have taken their entire extra income. They are earning more but what they get to keep buys exactly what it bought five long years ago.

Our incomes are up but government has got it all.

Spending caps would require honest budgeting by government. They would require politicians to live within a budget just like every family in the country has to.

New programmes could be funded. They would just have to be funded at the expense of old programmes instead of the taxpayer.

And if there was extra money needed for a worthy programme then the 75 per cent support of Parliament would be needed. Again, if the programme is worthy then that support should be forthcoming. Otherwise a government would have to live within its budget.

We need spending caps to ensure fiscal discipline and a freer and more prosperous New Zealand.

Let me make this assurance now. Any party wanting ACT’s support in government will need to hold government real spending per kiwi to what it is now. That is a bottom line.

We need to hold down government spending. We need to stop it from ballooning upwards.

But we also need to allow hardworking Kiwis to keep more of the money they earn.

That’s why ACT is campaigning on a tax cut for every worker.

We are the low tax party.

What about Cullen. He’s done nothing but put taxes up since coming to office. He then decides he will have a crack at cutting taxes. He just couldn’t do it.

What a fizzer! He talked his Budget up on tax cuts. And what does it give the average worker?

A pack of gum -- in three years’ time.

And what does it do for business? A re-jigging of depreciation schedules. And the resulting savings to business are off set by Cullen’s new carbon tax.

It’s insulting.

The total value of the Cullen tax cuts in 2009? $348 million. That’s less than 0.2 per cent of total government spending!

Michael Cullen would have been better not to have bothered.

The backlash has been incredible.

I have been inundated with emails, faxes, letters and phone calls.

In response I have launched a petition to get the surplus returned to taxpayers who first earned it.

New Zealanders want to show their total disgust of a government that piles up the cash for itself and politicians pet projects with no thought for hardworking Kiwis who generate it.

Well, now they have a chance to show their disgust. They can sign my petition.

Today’s a fitting day to launch ACT’s tax policy.

Staples Rodway has declared today to be Tax Freedom Day. This is the day that the average Kiwi stops working for the government and starts working for themselves.

That’s right. Up until now, you have just been working for the government to pay your taxes.

Now, the rest of the year is yours.

In Australia, they have been working for themselves for ten days already – and Peter Costello has cut their taxes yet again.

The Staples Rodway research shows it will take 143 days for the average New Zealander to pay off his or her income tax, local body expenses, and other taxes such as petrol tax, cigarette tax and alcohol levies.

ACT wants to dial Tax Freedom Day well back.

That’s why we have campaigned every day since our formation for tax cuts.

We started out as a lone voice. Now tax cuts are an election issue.

Of course, Michael Cullen is hating it.

He has a running string of objections to letting Kiwis keep more of their own money.

The first is that the Labour Government can’t afford to cut taxes.

Well, that’s true. As long as we have Cullen and Clark in power tax cuts will never be affordable. That’s because they would rather spend your money than let you spend it.

They will always spend whatever they get and there will never be any left over.

Michael Cullen’s second objection is that tax cuts benefit only the so-called rich. That’s not true. Well-designed tax cuts make for a stronger economy that benefits everyone.

Tax cuts mean more jobs and higher wages.

It’s true that tax cuts benefit those who earn the most – but that’s because they pay the most tax. That will always be the case.

But the so-called rich will still pay more tax than those who earn less – and tax cuts will ensure a bigger economic pie for everyone.

Besides, our present tax system penalises hardwork, investment, entrepreneurialism and success. We want to cut taxes precisely to those who work, who invest and who succeed.

That’s our aim.

But that doesn’t mean anyone is missing out. More investment and more business means more jobs and higher wages to everyone’s benefit.

I have given up trying to explain that to Michael Cullen. Better just to dump him at the next election. He’s still stuck seeing the economy as a fixed cake for him to carve up.

Michael Cullen’s third objection is that tax cuts are inflationary. Tax cuts, Cullen says, will lead to higher interest rates.

Well how come we have got high interest rates, low growth, and no tax cuts?

The reason for that is we lack the investment needed to grow our economy at a faster rate.

The way to have that investment is to drop taxes.

Treasury have suggested that tax cuts at the magnitude ACT is advocating could add up to 1.5 per cent to New Zealand’s growth rate. That’s not bad.

An extra one to one-and-a-half per cent would make a big difference to New Zealand. It would leave us better able to look after our elderly, our young, in fact everyone.

Well-designed tax cuts means dropping tax rates. The lower we can drop tax rates the bigger the boost to investment and to growth. It is tax rates that work as the government-applied penalty to jobs, to business, to investment, to any productive activity.

We also need to be conscious that we need everyone to benefit from tax cuts. That’s to get everyone in New Zealand agreeing with cutting taxes.

That’s why the McLeod report recommended flattening our tax system to just two rates.

Michael Cullen paid a million dollars to get that report – and then ignored it.

Well, the ACT party hasn’t.

That’s why the ACT party’s tax policy that I am releasing today is for just two rates of tax.

We agree with the McLeod report that we should flatten our tax structure to just two rates.

First company tax.

Jim Anderton is calling for company tax to be reduced to 30%.

Eight years ago, the average OECD company tax rate was 37%.

New Zealand’s 33% rate meant we had a four percent tax advantage.

Tucked away at the bottom of the world, we need every advantage we can get.

But things don’t stay the same.

Around the world, taxes have been tumbling.

Company tax rates are dropping on average 1% a year.

This year, the average OECD company tax rate is 29%.

We have gone from being 4% below the average to 4% above the average.

This is not good for business. It tells potential investors not to bother looking at New Zealand.

They should go elsewhere.

To regain that 4% advantage, we now need company tax rates of 25%

ACT will drop the company tax rate to 25%

That will restore the 4% tax advantage New Zealand held in the late 90s.

This will be good for investment and growth.

Each percentage drop in company tax rate has a fiscal cost of $205 million.

A reduction to 25 cents will cost $1.6 billion.

ACT will reduce the top personal rates of tax from 33% and 39% to just 25%.
To match the company tax rate.

When Labour imposed the top 39% rate they said they needed the money.

They couldn’t have been more wrong.

Reducing these rates has a fiscal cost of $2.4 billion.

But ACT would not stop there.

ACT believes that tax cuts should be across the board.

It is fair that all New Zealanders should share in the dividend from economic growth.

ACT would take the middle tax rate of 21% and drop it to 15%.

That would cost $1.9 billion, less some savings from adjustments to benefits to keep the net benefit payments constant, reducing the cost to around $1.7 billion.

New Zealand would then have just two tax rates. 15% up to $38,000 and 25% after that.

All up, the fiscal cost is around $5.7 billion.

This is $1 billion less than the surplus forecast for this year.

That would mean we could have tax cuts of that size without cutting one dollar of spending – even the dopey stuff.

The one thing that ACT would do is stop taxing Kiwis hard to stuff $2.3 billion a year into a government sock called the super fund.

The Cullen Fund is dopey stuff.

The Cullen Fund is a dead weight on the New Zealand economy. It means we have higher taxes than we need to have. And it adds nothing to our productive ability.

That money would be far better used to lower taxes and to boost our economic performance.

It is economic growth that will deliver greater ability to fund super for the baby boomers and beyond. Not some government sock chock-a-bloc with taxpayers’ money.

Don Brash was right when he called the Cullen Fund financial smoke and mirrors. He was wrong to change his party’s position to support it.

Our aim should not be to make our government rich but to make our people and our country rich. Taxing hard and accumulating assets in the government is the antithesis of making for a free and prosperous country.

ACT’s tax package would boost investment, jobs, wages and growth.

It would also make an immediate difference to the lives of hard working New Zealanders.

For someone on the average wage of $41,300, this would mean the same as getting a 7% pay rise under the current tax scale.

It would mean an extra $2,000 a year in take home pay for the average wage worker.

Contrast that with Michael Cullen’s 70 cents a week in three years!

Unions up and down the country are engaged in strike action to try and get 5% pay rises.

Their members would be better off with tax cuts not strikes.

And the country would be better off too.

Remember, we’d all benefit from the higher economic growth and investment.

Higher growth means higher standards of living for New Zealanders.

If ever there was an unmitigated case for across the board income tax cuts, it is now.

Last week’s budget was a lost opportunity for New Zealand and New Zealanders.

The way to boost the lives of New Zealanders and the prospects of our nation was to have had real and meaningful tax cuts. Not pretend ones.

But New Zealanders will get to have their say this year in a general election.

The ACT party has been a solid voice for tax cuts over the past nine years in Parliament.

ACT has championed the cause for sizable tax cuts, and has never compromised its call.

After all, ACT was born out of the Association of Consumers and Taxpayers.

The ‘T’ stands for taxpayers.

ACT literally is the taxpayer’s party.

ACT is the tax cuts party.

And this election, more so than the last two or three, is one where tax cuts will be a big issue.

If people want a tax cut, they need to understand that a party vote for ACT is the best way of securing it.

This election you have two votes. ACT is only asking for one of them. The Party vote.

ENDS

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