News of the finance and information workers union
Return to Flash contents | Next Story | Previous Story | Flash Archives
July 2005
‘Working for Families’ is a tax cut
CTU Economist, Peter Conway, critiques the recent political debate on tax cuts and finds that the tax cut news might not be as small as indicated if you take account of the $1 billion Working for Families package.
Tax cuts, inflation, government spending level and quality, and public
debt are all to the fore at this time in election year. Various parties are now in a bidding war to see how much they can give in tax cuts. Tax cuts risk a flow-on effect of cuts in important government services or at the very least an inability to increase spending where needed. They tend to favour those on the highest incomes and they can be highly inflationary.
When the National Party cut taxes twice in the mid-1990s, the over $2 billion of tax cuts went mainly (71%) to those in the highest incomes bands. These tax cuts were made at a time when we had hundreds of foodbanks handing out food parcels each week to hungry families, infectious diseases spreading because of overcrowded houses, a collapse in industry training, high unemployment, massive under-investment in roading, the rail network and other infrastructure, and a desperate need for economic development on a regional and industry basis. These tax cuts were not only unfair, they were incredibly shortsighted and workers are still paying the price.
This Government has in fact introduced significant tax cuts through Working for Families. It is basically a $1.2 billion a year package aimed at low-income families. Much of that is yet to be implemented. There has been a lot said in the media last month about the Australian budget having a $22 billion tax package. However that is over the next four years. Over one year it is more like $5 billion and Australia is five times the size of New Zealand. The equivalent tax cut package in New Zealand would be about $1 billion a year; roughly the same size as Working for Families. Furthermore, the Chief Economist of HSBC Bank pointed out that the Australian tax cuts were “markedly more generous to the well off than the not so well off”. The average increase was $A6 a week but the top earner will get $86 a week.
Meanwhile the National Party has a major problem with its tax cut promises. There are over two million workers in New Zealand. A tax cut of $30 a week costs $3 billion. So significant tax cuts will have to come at the expense of spending or higher government debt.
The 'Working for Families' Package
What does it mean for us?
Not everybody is entitled to assistance from the Working for Families package, but many people are. Almost all families earning less than $45,000 are entitled to something, and so are many families earning more than $45,000.
For example Louise and Alan are a young South Auckland couple with two children aged 2 and 7. Alan is a bank teller working full time and earning $32,000 a year. Louise works at an insurance company part time for 12 hours a week and is earning $12,000 a year. Together, they have a combined income of $844 a week. They pay $300 a week in rent and have about $3000 in assets.
Under the Working for Families package they are entitled to $58 a week accommodation supplement and to a child tax credit of $46 per week. They are also entitled to $2.91 for each hour that either of their children is in approved childcare (early childhood education or after school care).
To check if you are eligible visit or phone:
www.workingforfamilies.govt.nz
Accommodation & Childcare 0800 774 004
Family Assistance 0800 227 773
