Some W4F thoughts

Thinking about the policy, there are a number of areas I like:

• the new package reduces the abatement rate for W4F (family support) from 30c in the dollar to 20c in the dollar, lowering the effective marginal tax rate people face. I am surprised National is not welcoming this.
• the prospect of low income families paying no net tax is very attractive. I haven't done the costing for a 0% income tax rate for the first $35k of income, but I would be willing to wager it costs "quite a lot".
• it focuses limited resources on people who have the greatest need: people with children. They're fairly expensive wee beasts; a single guy like me doesn't need more cash in the hand half so much as parents bringing up their kids do.
• it's not a benefit. It lowers tax liability the family faces. It's not universal, but is sensibly targeted where most needed.

Following on from the many other policies already announced by Labour, this is another piece in the emerging puzzle of why Labour will be re-elected. Better policy means you can deliver to the people with the greatest needs, without bankrupting the country.

The funny thing is that National doesn't believe in universal coverage of public services anyway. They don't want universal allowances or universal pensions or universal health coverage etc. They only want universal tax cuts because that's the only way they can deliver to their wealthy backers, while also throwing a few crumbs to low- and middle-income families.

Only a few days ago Steve Maharey commented in his election email newsletter why he was happy to be fighting the election on taxes. Now we know what he means. What is Don going to say in tonight's leaders debate? "Sorry, I, er, can't tell you that til Monday." Clever - not.

Comments

[Craig Ranapia]

You wrote:
it focuses limited resources on people who have the greatest need: people with children. They're fairly expensive wee beasts; a single guy like me doesn't need more cash in the hand half so much as parents bringing up their kids do.

I reply:
You know, Jordan, I'd swap the cancer - and the expenses that come with it - for a child any day of the week.

I'm severely tempted to punch in the mouth the next parent who says to me "you're so lucky you don't have children". First, it's not exactly my choice. Second, I know nobody would have children if they made decisions made on cost-benefit ratios but please... being single or in a childless couple isn't exactly an endless party where the disposable income flows like vintage Bolly.

I see no reason to change my view of this as womb-based wedge politics - with the added dog-whistle effect of "... but it's for the children". Once more, very smart politics; not so good public policy.

[rightkiwi]

Jordan says: "[National] only want[s] universal tax cuts because that's the only way they can deliver to their wealthy backers, while also throwing a few crumbs to low- and middle-income families."

If the lower tax rates are cut, everyone receives the same monetary amount (as long as they are earning). This identical monetary amount is a tiny percentage of a high income, and a large percentage of a low income. Such a policy, therefore, is highly progressive - it gives more as a percentage to the poor than to the rich.

So why do you talk about delivering to wealthy backers while "throwing crumbs" to the poor?

The only reason you would use this language would be if you were stupid (which we will assume you are not) or if you wanted to be so highly misleading that the best word to describe such comments would be to say that you are telling more Labour lies.

[Mr K]

Jordan,

Now you've had time to read more of the proposals, can you tell us anything about how it tries to reduce any possible disincentive to earning more than the a particular income threshold?

Cheers,

Mr K

[tim barclay]

Yes if your income is frozen you may well be better off under Clark/Cullen. But what if your Union gets you the 5% wage rise and you lose 80% of that because of steep adbatement rates. Or if you work hard, do some overtime and raise you pay by 10-15%. Under Clark/Cullen you will lose 80% of that. Under National you keep 80%. Suddenly you are better off under National, much better off. I just think Clark/Cullen have taken a huge political gamble when there is a lot of room to have a radical rewrite of our income tax laws that will leave everyone much better off. Not just a targeted few over the very short term.

[Paul]

So far in two policy announcements well over 1Million kiwis are substantially better off.

But I guess the icing on the cake for this was having some heavyweight support in the form of the ANZ chief economist, saying that it's as good as a tax cut and they approve the idea.

[Paul]

Two-child families earning under $40,000 will pay no tax at all.

Now that's not a bad tax cut is it national!

[Conor]

Sitting at work today one of the staff here walked in and wanted to know about why he should vote Labour and what this policy means.

He is on a middle income and has one kid and is always telling me about trying to make ends meet etc

We went to the Labour website calculator and put in his and his partners income.

He will be getting and extra $51 from next year and $61 per week in 2007 That is an 18% average net tax rate.

He walked out and said you have my vote.

There is no way National is going to top it.

All over the country thousands of people are doing the same calculations and working out how voting Labour is the best way of supporting their families.

Like it or not, targeting assistance is the best way of helping out our families.

Well-done Labour.

[Craig Hall]

Cutting the 19.5% tax rate to (say) 15% will mean more money for everyone, but most people don't actually earn the whole $38,000, so 'rich' people will retain more from it than 'poor' people (whether that's good, bad or indifferent depends on your political point of view).

It's not so much that people with children have the greatest need for the money (as Craig Ranapia rightly points out, there are others with as great or greater needs), but that society and NZ as a whole needs a population that's at least stable, and preferably increasing (sustainably).

Politically speaking, the most palatable method of sustaining population levels is children (as opposed to immigration), so policies that help families with children are more likely to succeed in the public arena than policies which increase immigration.

Incidentally, removing tax (effectively) for families making $35,000 p.a. costs just under $7,000 per family. For 100,000 families, that would cost $700,000,000. I'm not sure how many families there are on that income level, though, so it's hard to say how much it will actually cost.

[Jordan]

Tim, you are just a startling, amazing, total and utter liar with your last comment.

Working for Families does not involve an 80% abatement rate.

National does not propose a 20c flat tax rate and the cancellation of all work-related income-tested benefits - the only way to deliver what you claim.

No wonder people have trouble taking you seriously.

[tim barclay]

Working for families does have significantly higher abatement rates than the income tax system. Hence the glass ceiling it creates. A significant flattening of the tax structure instead, will leave everyone better off and people who aspire to get richer (a promotion, or a second job or overtime) will vote National for that reason. But I guess if you wanna stay poor then vote Labour you will be better off with welfare support and its glass ceiling.

[tim barclay]

Furthermore Jordan your package extends welfare support to significant new numbers of people who are not presently getting welfare support. That is my point. These people are already on the road of moving up. They do not want a glass ceiling created by Labour's welfare package. Nor do they want to fill out a whole lot of forms, line up with the unwashed. They want a fattening in the tax structure so they get to keep more as they get ahead. You have lost them Jordan quite apart from the singles and the empty nesters they are gone big time.

[weizguy]

"Nor do they want to fill out a whole lot of forms, line up with the unwashed."

I think this kind of arrogant statement just about sums you up Tim. How about we have separate lines? Or even separate Centres? One for the washed, and one for the unwashed?

You might have to design a working definition of "unwashed"...

[Logix]

Here is my prediction.

The ONLY way Brash can make "across the board tax cuts" that do not amount to just a welfare handout for the wealthy, is to completely and radically change the income tax system.

The simplest method I know to do this is to either make a step towards the Universal Income system. A simple halfway house would be to eliminate tax on say the first $25k of all income.

PS Not all of Brash's idea's are wrong. I quite like his suggestion of a "Ministry of Infrastructure"...but I guess that would smack of commie centralism for all you righties.

[Wetagogo]

Craig, Would you swap the cancer for cancer with a family?
MArried couples pay tax for benefits they cant recieve(unemployment benefit) and they pay GST for all their childrens expenses althiough their children are not earning an income.
All this before the actual expense of bringing up children to provide a future tax base for all.
Labour is onto it.

[tim barclay]

I am afraid many many people object to asking for a handout and yes lining up with the unwashed. The uptake of working for families has been quite low, the great bulk has gone to existing welfare beneficiaries who get it automatically. Just do not think working couples on an average income will want to have a glass ceiling placed over their future income if they buy into Labour's package.

[Craig Ranapia]

Wetagogo:

Humm... well, that's not quite the right line to take with me. I'm not married either, but as my partner is in full-time work (and the ambiguous status of same-sex couples is ambiguous no longer, as it should be) I wouldn't be able to access the dole either. There are substantial benefits I can't access because I'm not married/civil unionised - and nobody is putting genuine marriage equality on the agenda.

I'd also note that my partner and I are barred from adoption because of our sexual orientation. Again, that's an issue both major parties have appeared to stick in the too hard basket.

As I said above, on a pure cost-benefit analysis nobody should be having children - least of all women. And I'd disagree with Mr. Hall that giving substantial tax cuts of $89 a week to a couple with
a combined income of $98K p.a. (see page A3 of today's Herald) is going to address demographic and social reality - that our population is (broadly speaking) living longer with a better quality of life, having fewer children, and having them later.

Using the example I cited, it's certainly not cheap raising four children - especially if you're servicing a mortgage in Auckland's inner suburbs. But, as I said above, I just get rather annoyed at the implicit assumption that those who are single or in couples with no dependents, are living la dolce vita. I wish that was true, but it isn't.

As Mr. Hall has quite rightly observed, this is brilliant politics. But good politics and good long-term public policy aren't always the same thing.

[geniusNZ]

Good work by labour - as I noted some time ago - labour can always outbid national when it comes to ta cuts because their supporters come cheap.

They should win reasonably comfortably now.

I also like the slow creap toward a universal benefit...

[tim barclay]

Quite right geniusNZ, Labour hates success, they sneer at it they confiscate their income. Their idea of success is to have everyone paying obeysance to the state asking for a welfare handout to meet their needs. Have gays wearing pink triangles asking for special treament, maori wearing tats being all staunch as they go down to the welfare office with everyone else demanding their right to a handout.

[tim barclay]

PS I am ignoring the Labour Party rally for Lange, that blatant policial rally. I note the international community, you how he put us on the map with his bluster, well they are pointedly ignoring us by ignoring him. I feel sad really, I think he is a genuine person who meant well, but he did huge harm to our international standing.

[dave]

The proposed WFF tax relief package means that a couple with 4 children and each parent earning $35,000 will soon receive $10,200 a year more if they split up and take 2 children each.

SOme families wil be saying," hey, we've got kids, we cant make ends meet - lets split up.

[Craig Hall]

That seems awfully unlikely, although I guess I could see it being a possibility for relationships that were already done for. Also, running two households costs substantially more than running one household.

[Insolent Prick]

No, Jordan. The abatement rate for the WAF package still creates a severe disincentive to work harder.

Apart from the fact that it is creating beneficiaries out of middle-income New Zealanders, who work hard and take pride in the fact that they're making their own way, only to be told by Labour that the only way they can benefit is by taking a benefit--you're ignoring the point.

A taxpayer earning $60,000 per year will face a marginal tax rate of 59 cents in the dollar--or 69 cents if they have a student loan.

There is no incentive to work harder, be more productive, or earn more.