ACT’s response to the National Government budget

Speech delivered to ACT members
10.30am, Sunday 18 May
Andiamo Café, Herne Bay

ACT will be voting to pass the budget as part of our supply agreement with National. Having seen the alternative proposals of Labour and the Greens this week, we are certain we made the right choice to provide the National government with a supply agreement that has given the country stable government.

However, this is not the budget ACT would have produced.

Last weekend, I published ACT’s alternative budget. By eliminating $4 billion of corporate and middleclass welfare, we could reduce the top rate of personal income tax from 33% to 24% and the company tax rate from 28% to 24%.

These calculations were based on Treasury figures then available. Following Thursday’s budget and the announcement of $1 billion more government spending, I can today announce that we have redone the numbers and ACT’s alternative budget would now reduce company tax rate from 28% to 20%.

Cutting the corporate tax rate is not a vote winner. Focus groups do not identify it as the issue that most concerns them. It doesn’t even get into the top 10. But nothing would do more to boost economic growth and prosperity in New Zealand. With a top personal income tax rate of 24% and company tax rate of 20%, New Zealand’s long-run growth rate would rise from 2.5% to 5%. In 15 years, our incomes would double.

Yet National has decided instead to content itself with half the economic growth and spray $1 billion around in election bribes:

• Extended paid parental leave

• Free GP visits for children under 13

• An interest-free loan of $375 million for New Zealand Transport Agency for Auckland transport projects

• A further $198 million injection into Kiwirail to make its freight operations commercially viable, taking the cost of bailing out the state company to more than $1 billion.

None of this spending will accelerate economic growth. On the contrary, it will slow growth.

Taxes reduce the rewards of being productive, and tax-funded consumption reduces the cost of being unproductive. The more the government takes and gives, the less incentive we have to invest, innovate and work.

There is nothing is this budget to encourage people to work more, invest more, save more, study more and train more. Has the National Party quietly given up on closing the income gap with Australia?

Tax-and-spend is also morally corrosive. I attended the Canterbury University Societies Open Day in March. A student approached me and asked what ACT was going to do for students. I told him that we were going to reduce the top rate of tax. If he did well at university, got a good job and earned a high salary, he would keep more of the money he earned.

This wasn’t the answer he was looking for. He wanted his fees reduced. In fact, he had been impressed by Winston Peter’s tertiary education policy on which fees would be zero, with the cost of providing a university education borne entirely by taxpayers.

Even without knowing these taxpayers, their situations, personal ambitions and so on, he believed that any who refused to pay for his degree ought to be imprisoned (that being what eventually happens to someone who refuses to pay her taxes). He wanted me to take money from people by force and give it to him. He seemed to believe that living in a democracy was something akin to being born into a mafia family. You get a say in who is going to be extorted and you can get your hands on a share of the proceeds.

He should have been ashamed of himself. But, of course, he wasn’t. Far from it. He believed himself to be the virtuous one, and me to be some kind of dark and heartless worshipper of mammon.

Last week someone from Young Labour responded to our proposal to reintroduce interest on student loans by pointing out in a blog post that I am Jewish, and that Jews care about nothing but money. When someone suggested that he should not display such anti-Semitism, he replied that normally he would not express racism but that my wickedness really did require him to call a spade a spade – or a Jew a Jew, in this case.

Alas, this entitlement mentality and the twisted morality that attends it is now so entrenched and widespread that it is taken as nothing more than plain common sense.

Last Saturday, I appeared on TV3’s The Nation to debate the other minor party leaders prior to the budget. Linda Clarke was on the panel that discussed our performance afterwards. Without any argument or evidence, she dismissed my detailed plans for cutting corporate and middle-class welfare and reducing tax rates as “mad”. It was just obvious to her that low government spending and low taxes is a mad idea.

Guyon Espiner interviewed me on Radio New Zealand a few days later. He claimed that by cutting the top rate of tax from 33% to 24% I was making a gift to people who earn over $70,000. This language is used all the time but it is bizarre. Of course, the government could tax all the money you earn. But it does not follow that your post-tax income is a gift from the government. You might as well argue that your TV is a gift from your local burglar because he has chosen not to steal it.

These journalists are not biased. They have simply internalized the prevailing economic ideas in New Zealand. During that debate on The Nation it became clear that all my opponents, with the possible exception of Peter Dunn, did not believe in private property.

On the topic of Auckland house prices, Winston Peter’s claimed that “we are selling our houses to foreigners”. When I pointed out that houses are not collectively owned and that individual New Zealanders were selling their houses to whomever they chose, he insisted that I was wrong about this. And, as you can imagine, Russell Norman and John Minto agreed that the government should decide who you may sell your house to – or, in other words, they agreed that it is not really your house.

Russell Norman’s enthusiasm for the State is so great that he believes not only that all property is the creature of the state but that all children are too. When I suggested that paid parental leave should be abolished, he claimed that this would mean no more children being born in New Zealand.

These are reasons to be very happy we have a National led government. But they are also reasons to be disappointed by National and this budget. National is all too willing to buy votes by giving taxpayers’ money to groups they think will respond favourably. National does not share ACT’s principled objection to this corruption of democracy.

National reveals it confusion about the proper role of government not only in this budget’s spending hikes but in one of its cuts. While blowing an extra billion on middle class and corporate welfare they plan to cut spending on courts by $31 million, and on corrections by $100 million.

The police budget has been frozen for the fifth consecutive year, and Government has no plan to increase it before 2018. Accounting for inflation, that’s a cut.

ACT believes that fighting crime is the first duty of the State. That’s why we have already announced our policy of three-strikes and you’re in for burglary. There are 115,000 burglaries a year in New Zealand.

The government could reduce that dramatically by putting career burglars in prison. Alas, like Labour, National prefers to use taxpayers’ money to dress up like Santa Claus. Keeping people safe in their homes does not look like a gift from the Government. Paying for you to have time off work does.

National is a party of “but”s. Yes, we believe in low taxes, but … Yes, we believe in personal responsibility, but … Yes, we are tough on crime, but …

Well, National should get off their “but”s. When ACT returns to parliament with nine MPs in September, we’ll be able to make them.

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