Working for Familes vs Tax Cuts
I'm actually a closet fan of "Working for Families" type programmes. A tax rebate programme to assist families meet the weekly bills and put food on the table is very important to ensure children from low income families are not overly disadvantaged.
If I were implementing a tax/income support programme in terms of low income families, I would retain the in-work payment - it has the right incentives for ensuring work pays the bills. I would also have moderate tax cuts to reduce the marginal tax rates (which I would also work on making these less.) For higher incomes, the moderate tax cuts would boost incomes for all families.
Labour's version of "Working for Families" fails in two important areas.
Firstly, Working for Families is far too generous. Not only in the sense that the payments are too big, but that the programme is available to families that are not struggling to pay the bills. On the offical Government website, it states that financial support is available to "all families with children earning up to $70,000 a year". With two children, you can earn up to $81,540 a year before becoming inelligible for assistance. Families where the joint income is seventy to eighty thousand a year are not low income families. If you suggested a decade ago the idea that a family with two children earning $60,000 per year needed extra financial assistance you would be looked at like you needed locking up.
Secondly, the marginal tax rates for those families face when increasing there income is too high - up to 90%. As the Dominion Post pointed out in a recent editorial "Casting the net wider so it covers some families earning more than $100,000 a year will further reduce the incentives for individuals to acquire extra skills and take on additional responsibilities. Why bother when it doesn't greatly matter whether you earn $38,000 or $60,000? The state will make up most of the difference."
If I were implementing a tax/income support programme in terms of low income families, I would retain the in-work payment - it has the right incentives for ensuring work pays the bills. I would also have moderate tax cuts to reduce the marginal tax rates (which I would also work on making these less.) For higher incomes, the moderate tax cuts would boost incomes for all families.
Labour's version of "Working for Families" fails in two important areas.
Firstly, Working for Families is far too generous. Not only in the sense that the payments are too big, but that the programme is available to families that are not struggling to pay the bills. On the offical Government website, it states that financial support is available to "all families with children earning up to $70,000 a year". With two children, you can earn up to $81,540 a year before becoming inelligible for assistance. Families where the joint income is seventy to eighty thousand a year are not low income families. If you suggested a decade ago the idea that a family with two children earning $60,000 per year needed extra financial assistance you would be looked at like you needed locking up.
Secondly, the marginal tax rates for those families face when increasing there income is too high - up to 90%. As the Dominion Post pointed out in a recent editorial "Casting the net wider so it covers some families earning more than $100,000 a year will further reduce the incentives for individuals to acquire extra skills and take on additional responsibilities. Why bother when it doesn't greatly matter whether you earn $38,000 or $60,000? The state will make up most of the difference."
posted by Michael at
9:01 PM
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