Budget has one-child couples losing out
A nasty fish-hook in the Government’s Family Income package may leave up to 20,000 families with one child, worse off than couples with no children, Labour says.
Leader Andrew Little is calling it the ‘‘single child tax’’, and says it’s the consequence of a more aggressive abatement rate that the Government also introduced to ensure the package was targeted to those who needed it most.
But it had failed to look after a large chunk of low to middleincome families, he said.
While those families would still see a net positive gain to their weekly pay packet, those with a single child would get a smaller piece of the pie.
‘‘A one child family with one parent earning $59,000 a year actually gets $830 a year less in National’s package than the same family with no child. How is that a family package?’’
Families earning between $44,000 and $59,000 were those affected. Under the Government’s package, which was unveiled in Finance Minster Steven Joyce’s maiden Budget last week, a singleearner family on $55,000 a year would be $20.38 a week better off.
But a single-earner family on the same income, with one child under 16, would only get an extra $14.18 a week.
That took into account changes to the tax thresholds, and a boost to Working for Families, but did not include any further income boost a family might receive from the Accommodation Supplement.
It may have been unintended, but the Government had effectively passed over a large portion of middle New Zealand, Little said.
‘‘National’s Single Child Tax will see a family with one child lose as much as $830 a year in Working For Families payments.
‘‘Whenever you’re putting these packages together, there’s always a complexity about it. But I’d be surprised if they understood there’s 20,000 odd single-child families that will now be worse off – but that’s the reality,’’ Little said
Joyce said those families still saw an overall gain, and Labour was failing to see the bigger picture.
‘‘The abatement changes mean they don’t get as much from the Working for Families part of the package, but they gain more from other parts of the package, in particular the tax changes. They may also in some cases gain from the Accommodation Supplement changes.
‘‘It’s important to note that these people are already receiving Working for Families so currently get more than couples with no children who don’t get anything from Working for Families. They continue to get more until the Working For Families is fully abated,’’ he said.
‘‘One of the aims of the Family Incomes package is to focus Working for Families on lower income families and that middle income families are less dependent on Working for Families and keep more of what they earn through the tax system. This is an example of that occurring,’’ Joyce said.
The Government’s Budget centrepiece, the Family Incomes Package would provide broad tax relief for about 1.3 million New Zealand families.
But changes to tax thresholds and boosting Working for Families, while tightening the abatement rate, were the measures that would affect most people.
The $14,000 income tax threshold will rise to $22,000 and the $48,000 will be lifted to $52,000. That change provides a tax reduction of $10.77 a week, to anyone earning more than $22,000 a year, and a tax reduction of $20.38 a week for anyone over earning $52,000.
While Family Tax Credits had increased under Working for Families, the abatement rate had accelerated kicking in from $35,000 a year, and at a rate of 25 cent in the dollar, up from 22.5 cents.