Cullenomics

Rodney Hide Thursday, 2 June 2005 Speeches - Taxation

Speech to Cambridge Rotary, Cambridge, 7pm, Thursday 2 June 2005

The ACT party stands for private enterprise and free markets.

We oppose big government, high taxes and state direction and control.

We oppose the Labour government.

Minister of Finance Michael Cullen is a socialist.

He believes in big government, high taxes and state control and direction.

That’s why ACT stands four-square opposed to his policies and his government.

Michael Cullen’s first action on becoming Minister set his style: he hiked taxes on those he deemed rich - those earning over $60,000.

The money wasn’t needed. Michael Cullen hiked taxes on the so- called rich out of spite.

ACT opposed that tax hike then. We oppose it now.

Since taking office, Michael Cullen has kept taxing New Zealand hard. He has introduced or increased more than 30 taxes, levies and duties.

When asked last year by new ACT MP Kenneth Wang whether he could think of taxes, levies or duties that he had reduced, he was lost for words. He said he couldn’t think of one.

“I cannot think of a single one that I have reduced, at this point,” he told parliament.

There’s a reason that Cullen puts taxes up and never down: he believes he can spend your money better than you can.

The ACT party believes the opposite. We believe that the spending decisions made around the kitchen table and dinner table are far better than the spending decisions made around the cabinet table. I mean, which of you would use your money to fund hip hop tours, a braying port-a-loo to Venice, and hand-outs to millionaire businessmen?

When he put income tax up Michael Cullen said it didn’t matter. The “rich” would just have to pay a bit more.

Higher income taxes would have no effect on economic performance, he said.

But he then turns around and justifies higher taxes on cigarettes, alcohol, and petrol (through the carbon tax) with the argument that these extra taxes are needed to make us smoke less, drink less and drive our cars less.

He can’t have it both ways. Of course, Michael Cullen is just using whatever argument suits his high-taxing purpose.

His own Treasury advisors tell him that ACT’s tax cuts would boost growth by 1 to 1.5 per cent. That’s an extra $2.2 billion a year. That’s $2.2 billion we are missing out on because Michael Cullen thinks tax cuts don’t matter.

And what a tax cut we could have. We have done the numbers. The Treasury has costed our policies.

ACT says we should have a tax cut for every worker.

ACT says we should return the surplus to the hardworking Kiwis who first earned it.

That’s what ACT will do.

ACT will drop the top tax rate to 25 cents in the dollar.

ACT will drop the company tax rate to 25 cents in the dollar.

ACT will drop the middle tax rate of 21 cents to 15 cents in the dollar.

For someone on the average wage of $41,300 a year, these tax cuts mean an extra $2,000 a year, almost $40 a week.

It is the same as getting a 7% pay rise under the current tax scale.

Unions are striking for 5% wage rises. Their members would be better off with tax cuts, not strikes. And the country would be better off too.

Cullen spent one million dollars on the McLeod Tax Review. The advice was to lower and flatten taxes by going to just two rates.

But of course, Cullen knew better. He threw the McLeod report in the bin.

ACT’s tax package is easily affordable. Its fiscal cost is $5.7 billion a year. That’s assuming not one extra job, not one extra dollar worth’s of investment as a result of the cut taxes. The $5.7 billion cost is very conservative. And that $5.7 billion is $1.7 billion less than the surplus.

It’s not that Michael Cullen hasn’t promised tax cuts. It’s just that he’s never delivered.

In September 1999 he said that Labour “would look at lowering business tax if elected” (Evening Post 22 September 1999).

He told the Asia Society in Hong Kong in April 2000 that the “Government wanted to reduce the 33 per cent company tax rate when it could afford to” (The Press 13 April 2000).

In December 2002 he declared that low to middle income families could look forward to tax cuts in 2004 (New Zealand Herald 20 December 2002)

But he never delivered. Until Budget 2005. And then what was it? A packet of chewing gum in three years’ time

There is no money for tax cuts. But there is plenty of money for Cullen to spend.

Total government spending has increased by a third under Cullen.

The expansion of government has been substantial. The number of state employees has grown 40,000 alone.

Government spending is forecast to increase another 38 per cent over the next four years.

It’s set to grow from $53 billion in 2004 to $73 billion by 2009. That’s 40 percent faster than the economy.

The high taxing and high spending Michael Cullen has had an impact.

The average family is no better-off now than when Labour came to power.

Their income is up. But all the gains have been taken in tax and higher prices.

Not content with spending our money, Michael Cullen has decided to save for us as well.

The Cullen fund sucks in $2.3 billion a year.

Don Brash was right when he called the Cullen Fund financial smoke and mirrors. He was wrong when he turned around and supported the fund.

The Cullen Fund is dopey stuff.

The Cullen Fund is a dead weight on the New Zealand economy. It drives up taxes. And it adds nothing to our productive ability.

The expansion of government has proved inflationary.

Inflation is already at the top of the target band. The Reserve Bank has little leeway.

The pressure of extra government spending has driven the real exchange rate up to shift resources from traded goods (i.e. exports) to non- traded goods, i.e. the government sector.

Michael Cullen now blames the worsening balance of payment on us. We are not saving enough.

Do you notice that about this government? Nothing is ever their fault.

And so his big plan in Budget 2005 is to bribe Kiwis with their own money to save.

Of course, if Michael Cullen dropped taxes Kiwis would have the necessary money to save.

But he’s a socialist and that solution will never occur to him.

He doesn’t come out and say it like that. Instead he’s long on excuses about why New

Zealanders shouldn’t get to keep more of their own money.

He’s still arguing that tax cuts can’t be afforded.

That’s rubbish.

Just look at the Government’s balance sheet. The Government’s net worth is to forecast to increase from $35.5 billion to $63.1 billion over the next five years. That’s a yearly increase of 12.2 per cent, $5.5 billion a year.

There’s plenty of room for wealth-creating, investment-enhancing and growth-promoting tax cuts.

Michael Cullen’s government is rich, yet hardworking Kiwis are poor.

The other argument that Cullen trots out is that tax cuts would boost interest rates.

That’s quite wrong. As Cullen admitted in Parliament this week, taxes increase prices.

I mean that’s his rationale for taxing petrol, cigarettes and alcohol.

He doesn’t tax them to make them cheaper.

Taxes increase prices. Tax cuts lower prices. And that includes interest rates.

Cut taxes, and interest rates will fall. Borrowers will no longer have to compensate lenders for all the tax that Cullen is now making them pay.

New Zealand is a great country.

The ACT party’s job is to make it even better.

We have the people and the policies to ensure a freer and more prosperous future.

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

ENDS

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