Rich households still get income support

Government support is flowing to even the wealthiest of households, data from Stats NZ shows.

According to information compiled from the Household Economic Survey, overall 29 per cent of households receive government benefits and transfers, excluding superannuation.

That includes Working for Families, accommodation supplements, jobseeker support, sole parent support and student allowances. More than 42 per cent of those earning less than $20,000 per year receive a government transfer. But so too do 18.8 per cent of households earning more than $150,991 and 24 per cent of those earning between $100,001 and $150,000.

Tax Working Group data showed a similar picture – it said the top three household income deciles had 11 per cent of the government transfers, excluding super, and even the wealthiest decile had 3 per cent.

Economist Gareth Kiernan said it seemed a high percentage of high-earning households at first glance. But he said there were ways it would be feasible.

‘‘Anyone with five or more children earning $150,000 is eligible for Working for Families.

‘‘A household with four people earning $40,000 each and paying $200 a week in rent would be eligible for the accommodation supplement.’’ Working for Families credits are available to households earning up to $120,500 a year if they have six children.

Eric Crampton, chief economist of the NZ Initiative, agreed it was likely the bulk of payment to the higher earners came via Working for Families. ‘‘Benefit payments always involve terrible trade-offs. If programmes like Working for Families reduce payments very sharply as family incomes increase, they will better target payments to those in most need, but at the cost of strongly discouraging a second earner from working in a household with a higher-earning primary earner. The effective marginal tax rate – the combination of income tax charged on incomes and the clawback of incomelinked benefits – can become prohibitively high. And so there are Working for Families payments that do go to some households in higher earning brackets – and especially for households with many children.

‘‘All countries have to deal with this kind of problem. Work in 2011 assessed New Zealand’s overall transfer system as being among the target efficient in the OECD, meaning a greater proportion of redistribution here reaches those on lower income.’’

ACT Party leader David Seymour said New Zealanders would be better off with a flatter tax structure that would reduce the need for these sorts of benefits.

But he said if the country was committed to a progressive tax system, there were reasons why people in all income brackets could qualify for government support.

Welfare researcher Susan St John, a member of Child Poverty Action Group, said Working for Families payments were welltargeted. Higher earners would not get much money unless they had very large families.