Monday, November 22, 2004

Rodney Hide and hardworking kiwi families

From Rodney Hides site
The average household four years ago earned $60,560 gross. That income has increased $7,700 in the last four years. But a full $5,200 of that increase has been taken by Helen Clark’s greedy government in extra taxes. Helen Clark’s government has taken two-thirds of the increase.

But it gets worse. Inflation over that time has devalued the dollar’s purchasing power by more than 10 percent. That drops the real purchasing power of the average household’s net income by $4,200.
The average household is squeezed by taxes and inflation with the result being that they are more than $1,700 worse off than they were four years ago. That’s why hardworking kiwis are struggling.

Well, that’s half the reason hard working kiwi families are struggling. The other half of the reason is that some hard working families don't earn $60,560 today. Some families have hopeless budgeting skills. Some don't even earn $38,000, but they still work just as hard - if not harder - as many of the working rich. But, as struggling hard working families, they won`t get a tax cut under Act.

Acts policy was a tax cut for every worker - now the policy is a tax cut for every worker paying more than 19.5 percent tax.

Muriel Newman sees Acts tax policy is one of reducing poverty. Ha!

Act's policy focuses on workers, particularly rich workers with no dependant children. Because that’s the category Act MP's fit into. Act seems to think that beneficary and low-income families would be better off getting a well-paid lower taxed job. Of course some of them will need to take out a student loan to get that job - and study after work.

Act, Like Labour, is happy for beneficary families to get a job on the minimum wage, because working is better than being on a benefit, even if you are not getting as much income as that benefit. The difference between Labour and Act is that Labour wants to increase state assistance while Act wants to limit it.

The fact is that a family of three children with one parent working full time on the minimum wage will probably get more state assistance than a single unemployed beneficary, but in terms of disposable income will be worse off. If the family is a two parent family it will get more tax relief under United Futures policy of income splitting for tax purposes.

Someone tell me how Act's policy of a flat 20 percent tax rate is going to reduce poverty when the families in poverty won`t even get a tax cut. Most of the poor are getting less than $38,000. Act's tax policies are more about a greedy Government tax take than a concern for poverty.
update..update This seems relevant and makes a good point on income splitting:
If a couple running a business together can split their business income this way for tax purposes, why can they not do it for their household income, when bringing up a family is the most important business most of us will ever be involved in?

However Peter Dunne also says this:
A single income family on $55,000 a year will be $44 a week better off( with income splitting for tax purposes)

However, Working for Families would do more for those under $38,000, and for some, just the accommodation supplement will do the trick.


Anonymous said...

Hi Dave
Whilst I can't fault your figures you haven't grasped the philosophy totally.
ACT want everyone to be middle class where as Labour want us all working as we're easier to control.
It's not the way they started out but there it is.
ACT want us to make our own decisions about our life not have them make for us by nanny Hellen and her little elves.
I guess a mix of the two is best for the little people and the middle people.
The really rich don't care who's in power as they control them anyway, or move away until the tables turn again.

At least ACT have the integrity to say what they mean and do what they say.

Oh well done on getting listed on the great right wing fundamentalist Christian new site.
OH boy right above my mate voxday.

Anonymous said...

Good points Dave.

It's interesting that neither National nor Act ever mention that Australia actually has higher marginal tax rates than NZ - with a top rate of 47% for income earned over c.AUD$100,000.

They also don't mention that NZ is rated above Australia in economic freedom, competitiveness, and ease of doing business. Neither do they mention Australia's strong unions, capital gains tax, and more regulated economy.

However, they still moan on and on about how badly Labour is doing and how we need their policies to be like Australia (cf. Brash, 'Prosperity for all [rich] New Zealanders', 2003).

At present beneficiaries face extremely high effective marginal tax rates, i.e. working in low-wage or low-medium wage work is actually harder than being on a benefit due to the subsidised services lost and the extra tax paid.

Act's flat tax policy, welfare cuts, service cuts, etc. would mean that the marginal tax rate would be the same for everyone. However, it would also mean that poor people would face a huge increase on their effective tax rate due to the loss of services etc., while the the rich would be provided with a massive cut they didn't need in the first place.

Paul McMahon.

Nigel Kearney said...

Read an economics textbook before you post on this subject again. The world doesn't stand still while politicans take money from the 'undeserving' and give it to the 'deserving'. People change their behaviour in accordance with the incentives.

Every welfare payment has two effects:

1. It diminishes the incentive of the payer to engage in productive behaviour, since he gets to keep less of what he earns.

2. It diminishes the incentive of the receipient to engage in productive behaviour, since he gets paid whether he works or not.

As a nation, we cannot consume more than we produce. The amount that the rich consume hardly changes with lower taxes, they just invest more. Government policies that discourage production mean lower living standards for all of us, especially the poor.

Anonymous said...

I am utterly opposed to US-style welfare privatisation, as Newman proposes. It promotes
homelessness, family fragmentation, adolescent
youth suicide, increased adolescent drug use
and gang formation.

You want 'anti-family?' Try Wisconsin Works.

It blames victims of structural adjustment for circumstances beyond their control, and regional economic retrenchment.


Anonymous said...


If I earn $100,000pa and the top tax rate increases by 5% does that mean that I no longer have enough incentive to aspire to earn $150,000pa?

If I work for a bus company for $13p/hr and I work 4 days on three days off on rotating shifts, and my boss rings me up every off day and begs me to work (and if I refuse he hits the roof and threatens to fire me), then where is the incentive there to work hard? Where is there any 'incentive' to do low-wage work?

It is untrue that hard work pays - people who work for $13p/hr in a factory, for example, work very very hard for very little reward and little prospect of advance in position or pay.'Unskilled' low-wage labour is very unrewarding.

Unfortunately, some people are only cut out for that sort of job, and there is nothing wrong with that. What is wrong is that people treat them as though they were somehow lazy, stupid, and undeserving because they're in low-wage work.

Being in low-wage work should not mean that one cannot afford education and healthcare for one's family and self. There is a vast difference between luxuries, such as TVs and SUVs, and neccessities.

If I am living in Kaitaia and all my friends and family live there and there are no jobs, should I move to Auckland with my no money and my no support network to get the low-wage job on one side of Auckland and the expensive hovell on the other side of Auckland so that I can join the noble deserving poor?

Or perhaps instead the government could spend money developing the regional economy, providing an incentive for people to start businesses there, and also provide adequate job-skills training funding?

Maybe instead we could create Community Service Jobs and pay people reduced dole rates for working 30hrs+ a week in a menial non-market job. But, surely, that would be an unjustifiable and inefficient interference in the market... but I wouldn't know.

BTW- For more info on effective marginal tax rates see:
Brian Easton (
Jonathan Boston, 'Building a responsible society' (1998). Boston is Professor of Public Policy at Vic.

Greyshade said...

A couple of points. United Future support Working for Families and their income splitting benefits would be additional to the WFF package.

If you want to check-out effective marginal rates for particular families I have a calculator on htp:// (also link on my blog - This calculates tax, benefits, net income ad average effective tax rates for the finacial years 2005-2008 (covering the introduction of WFF). You can compare differnt incomes (or splits) by entering them one after the other.