Families on benefits are missing out
OPINION: With some justification, the government often brags about how well it has managed the economy through the pandemic. Even so…the low unemployment rate, the globally modest levels of Crown debt, and the increased tax take from better than expected corporate profits must still be ringing hollowly in the ears of those subsisting on low incomes.
For different ideological reasons, the policies of both major parties display little sympathy for the children of families deemed to comprise the undeserving poor. The infamous ‘‘bottom feeders’’ jibe about the poor by National leader Christopher Luxon was abysmal, but Labour also has problems in this area.
True, many low-income families did receive a boost on April 1 to the weekly payments that help support their children. Yet as poverty advocates have pointed out, the increases via the Working For Families tax credit were inflation adjusted only to
September 2021, and therefore failed to compensate for the soaring cost of living increases evident over the past six months.
The sense of tokenism was underlined by the ongoing policy refusal to allow the families of the poorest children to access the sizeable income boost associated with the other child-related tax measure – the In Work Tax Credit – simply because the families excluded are on a benefit or part benefit, if they happen to work part-time. As a result, an estimated 150,000 of the country’s neediest children are receiving less support than they otherwise might.
Ideology appears to lie behind this distinction between the children of the working poor and the children of the beneficiary poor. The Labour Party has that name for a reason. Historically, Labour has prioritised those in paid employment.
In the past, it has been known to treat the pool of people on benefits as a potential source of downward pressure on wages. In 2022 though, when the policies to alleviate poverty are supposed to be child-centric, it is hard to understand why a centre-left government is perpetuating a different tax treatment for families on low wages, as opposed to families reliant on benefits.
As Child Poverty Action Group (CPAG) spokesperson Susan St John says, ‘‘Let’s catch up to Australia where there is no such discrimination in their tax credits, against the poorest children.’’
In addition, there is a striking difference between the tax treatment of beneficiaries and pensioners. In New Zealand, we can be justifiably proud that the nation’s elderly are spared some of the worst aspects of poverty. Yet inexplicably, the tax system is notably less generous when poverty afflicts younger people and their families.
Working For Families support for instance, reduces severely as incomes rise, and much more so than National Superannuation. As CPAG has argued, from April 1 a primary earner qualifying for WFF support earning between $42,700-$48,000 would be facing a tax rate of 44.5 per cent. At $70,000 a 60 per cent tax rate applies until WFF support is entirely recouped. Yet pensioners on incomes as high as $180,000 need to pay only 39 per cent tax.
This seems neither just nor sensible. Arguably, families on benefits deserve access to all of the tax credit supports that are available to the waged poor in full-time employment.