Dunne and dumber: Income splitting back on the agenda

Today, the Eternal Minister of Revenue, Peter Dunne, is scheduled to release details of his income splitting tax Bill.

Dunne has long advocated couples with children being able to split their income to minimise their tax obligations.  Fortunately, past Finance Ministers Bill Birch and Michael Cullen, and even self-styled Treasurer Winston Peters in the 1996 National – NZ First Government, would have no truck with this obsession of the Eternal Minister of Revenue.

But today, thanks to the confidence and supply deal between Dunne’s one-MP Party and National, income splitting will be back on the agenda.  National has guaranteed support for at least a First Reading in Parliament for this loopy idea.

Under income splitting the following would occur:

  • One parent earning $140,000 and one parent not working: $8800 less tax
  • One earning $50,000 and one earning $25,000: $250 less tax
  • One earning $35,000 and one earning $15,000: no tax savings
  • Parents earning the same: no tax savings

So it is highly regressive; providing substantial tax savings to some wealthy couples with children, but doing nothing to assist those on low incomes.

It is also a licence for child support avoidance. Child support is assessed on taxable income, so if one partner pays child support in respect of children from a previous relationship, the amount received by the custodial parent of those children will be reduced if the non-custodial parent enters an income splitting arrangement with his or her new partner.

It discriminates on the basis of marital status. It also discriminates on the basis of family status, because it is not proposed to be available to couples without children.

And bizarrely, given that Government is pushing single parents out to work, income splitting provides an incentive for parents with a high earning partner to stay at home or reduce their hours of work.

Let’s hope National sees sense and promptly consigns this stupid idea from Peter Dunne to the dustbin of legislative history where it rightly belongs.

66 Comments Posted

  1. People in business already do income splitting. A friend of mine employs his wife as an office worker to reduce his income. She works in the office about 10 hours a week but is paid for 40 hrs.

    What should the Greens policy be on this?

  2. My interest in Dunne’s pro-parent tax reform is that in the same week he has supported attacks on sole-parents. Is he a hypo-crit……

  3. Photo. Note I was talking about the US share market in that post. NZ’s is hardly significant. Whats left of it.
    Do a bit of research in how much of companies operating in NZ are actually owned here. Apart from Fonterra whose shareholders are on another planet entirely.oF T

    14% plus business interests rates may have a bit to do with NZ companies low margins.

  4. I have lost contact with The Greens for a while. So is there any inclination should your party increase your influence with the 2011 govt for a real review of the tax system. I thought that Nat in 08 election was going to attempt to do this. Whilst they touched on a few aspects of this e.g. Fiddling with property tax and the realignment of GST vs PAYE. There was nothing comprehensive of earth shatering. The more tinkering the more the system rewards those who can manage their way thru the tax legislation for their own benefit. Having an understanding of what is a livable wage for differing sectors of society e.g.families, elderly, invalids etc then we could build on this an appropiate rewarding tax and social welfare system that enables all in society to participate and reap the rewards of this country. Until then it is pork barrel politics with the party that can entice the swing voter will win the trophy, and cont to screw up NZ for the following generations to follow. Should we not leave this country btter than when we enterd it?

  5. “I have watched you on this blog for some time and have yet to see anything indicative of cleverness”

    ouch. I guess it’s your lack of empathy that allows you to so viciously maim my feelings. I think I’ll put an end to this thread derailment now before you kill me…

  6. Nommopilot,

    The judgment is hardly rushed. While I have probably not met you in person, I have watched you on this blog for some time and have yet to see anything indicative of cleverness; only of naive ideology.

  7. It really is just a matter of Peter Dunne wasting taxpayer money by using his small leverage to force a select committee to consider a bill that the government plainly cannot afford to implement without a much broader change to the tax system.

  8. Herodotus at 1:09 PM

    When I referred to this in my original post as “this stupid idea from Peter Dunne” I probably should have clarified that imposing it on the current tax structure, as Dunne proposes, is a stupid idea.

    As several commenters have pointed out, income splitting could work in a manner that is not so regressive with a radically restructured tax/benefit system.

    However, this is not something that could be done, as you seem to suggest Herodotus, by allowing the Bill to be referred to Select Committee as a stalking horse for radically restructuring the tax/benefit system. Under Parliamentary rules that would be way beyond the scope of the Bill, and there is no political will from National or Labour for such a restructuring in any case.

  9. “Not ‘very very clever’, merely more clever than you.”

    Way to rush to judgement there, tonto. you have no idea of my level of cleverness you just have a massively over-inflated ego which makes you somewhat pompous. This repels people, and leads you to ever more self-affirming leaps of quasi-intellectual self-aggrandisement.

    Watch me empathise.

  10. “I have no need for emotive empathy as my logic and motivation is such that I am both better able to manipulate others and more moral without it.”

    My goodness, you sound awesome. I can’t imagine why such a highly evolved being isn’t ruling the galaxy rather than just ruling the frogblog threads…

  11. @sapient. Blah blah blah

    what is very clear is that you think yourself very very clever which makes you feel great about yourself. I can empathise and I’m glad for you.

  12. Nommopilot,
    Your comment implied a functional impairment due to lack of empathy. The appropriate response to such is a functional analysis; that is what I have provided. What you provide, while true in a limited sense, is a descriptive definition and is of use only in determining if the object is, or is not, present.
    I would add that the definition you have provided is one of cognitive empathy rather than emotive empathy. I have no lack of cognitive empathy, if I did I would find it almost impossible to manipulate people; what I lack is emotive empathy.
    Emotive empathy works through a system very similar to the mirror neurons, its function is to aid the understanding of others and encourage moral interaction with others. In a way, it is a hard-coded golden-rule appeal to self-interest. I have no need for emotive empathy as my logic and motivation is such that I am both better able to manipulate others and more moral without it. Empathy hinders logic and function.

    I am not saying to kill them, the culling comment was, as previously stated, in jest. I am merely proposing to limit their reproduction for the benefit of humanity. Reproduction, inflicting your progeny on society, is not a right but a privilege; one they have not earned.

    Alas, I have unintentionally directed part of the thread off topic. While I find it unlikely that you would desire to do so (though I hope you will), if you would like to try and provide reasoning against such actions I would suggest that the general thread is the place to do it.

  13. “I don’t think that comment’s really all that fair. The Greens were pointing out these problems with WFF five years ago when it was being phased in:” So then what is wrong with Income splitting as a concept. Every commentator uses the examples of unlimited income, why not support families with this proposal and refine it by the use of the select committee (?)and recommend limits so the CEOs of telecoms and the like do not take advantage of this, say max the split by allowing say only $30k to have tax advantages. There appears to me a huge anti for this on the left, without seeing how Dunns leg can be improved to rebalance WFF, unless you have a better way of readdress the imbalance?
    Why this anti “trad” family structures, or is it because NZ has become so low wage that this is not achievable except for the wealthy few

  14. Kerry – in one debate you argue shares are way overpriced and profits made from them are miniscule for the cost.

    In this debate you argue shareholders are raking off a massive part of our GPD.

    Of course you are wrong on both extremes. Profits from the vast majority of NZ companies are moderate – average is in the 5-10% range, most of which goes to Kiwi shareholders..

  15. Always found it bizarre that Governments want to push mums out to work and replace them with childcare workers.
    Refuse to allow things like income splitting so a parent can stay home with the kids, But spend extra money on child care so both parents can work.
    The extra state child care spend probably exceeds the costs overall of parents staying out of the workforce.

    It does increase GDP as paid childcare is counted, but parental childcare is not. Also increases the number looking for work which further drives down wages. NACT’s real aim.

  16. As one of the people here who would probably MOST benefit from this, I would still scarcely call it a complete answer. Kerry gave a more complete answer, and that is part of the issue with Peter Dunne’s version. It cannot stand alone as an adjustment to the system.

    If it is to be without an added income bracket (which we DESPERATELY need), or a zero tax bracket, or anything else, then it can only be applied to people who’s partners for some reason CANNOT work, not to people who are making a choice.

    On the taxes I pay, if my wife earned even minimum wage, I would still be well enough off to afford a “house”, even at the stupid prices to which our random stacks of wet firewood have been pushed. She can’t and we can’t. Not anywhere that I’d want my kids to live and go to school at any rate.

    However, if it were a CHOICE I was making, I think I would have to say no, that money is better used elsewhere. The limit, the 140K, is a bit much, a related issue. I think the minister is influenced a bit by his surroundings.

    If taken in context with other changes, this bill might be better received.

    BJ

  17. @Herodotus 8:44 AM

    I don’t think that comment’s really all that fair. The Greens were pointing out these problems with WFF five years ago when it was being phased in:

    Ms Bradford said the Working for Families package will conceal the fact that many Kiwis are not paid a fair wage. “It’s imperative that the minimum wage is raised to $12 an hour. Working For Families has allowed too many employers to get away with paying their employees a wage that is not enough to live on. Working for Families could be called another form of corporate welfare.”

  18. “Empathy is merely a system of emulation.”

    Here’s your problem: You claim not to have it and yet you claim to understand what it is, which you clearly don’t. Empathy is the ability to understand the emotions of others by imagining yourself in their situation. Because you are the most intelligent being in the universe, you are incapable of imagining what it is like to be alienated from the education system, lack the social skills to be employed and be relegated to the status of untouchable in our economic system. So yeah, kill those people, that’s a legitimate position, right.

  19. ps you helped create this inequity with WFF and yet are unable to fix this when it is pointed out, can I ask why is that?

  20. Labour working hours have increased until we are approaching those of the Japanese who we used to feel sorry for. At the same time real wages for skilled people have dropped. 50% in my trade from 1982. (And we are the highly educated very skilled people the country has a huge shortage of. No one left between age 22 and 50. (Because we value those who can cut costs by the obvious means of exporting jobs rather than those of us with the ability to build a company up).
    You can hardly say the problem is of employees making.

  21. ‘It discriminates on the basis of marital status. It also discriminates on the basis of family status” So does the present system, The rich mum/dad on $100k pays $27.550 in tax, mum and dad earning $50k each pay $9550 in tax each. So a single earning rich prick family has to survive on $9550 less disposable income, and yet both could qualify for the same WFF benefits. Until tax and welfare are linked so as not to discriminate against one form of a family group than another the better. Yet you here wish to continual the discrimination that supposedly you are against how is that consistent?
    You like The Standard talk about what tax savings one group gets, yet will not comment on the tax this group pays and then display the inequity of it, and how this group is expected to survive onan inferrior amount that a dual income family receives. Perhaps the 2 income family is being too well looked after by the govt with this additional tax savings and WFF

  22. Photo
    Wrong. Wages have plummeted because the banking sector and company shareholders have taken a higher share of GDP. From less than 25% to 60% . This was supposed to result in more reinvestment by business. There has been less.

    All this would be is a redistribution.We should have a high value export sector selling high quality goods anyway. May be a lost hope as successive Governments of all stripes compete to see how many jobs they can lose from NZ and how much they can lower wages and send profits offshore.

    We now have the ridiculous situation where China lends us money from the money we paid them for their products so we can keep buying from them.

    And the finance sector clips the ticket at every turn. When they are not indulging in outright theft.

    Competing with every other country to see who can pay the lowest wages is killing NZ already. 30 years of going downhill proceeded by a decade of mismanagement by National. The reserve bank act being one of the main culprits.
    The reason why I gave up on my business was not wages. It was the lack of money locals had to pay for what I was doing, the excessive exchange rate from the RBA preventing me from exporting and the impossibility of getting capital at reasonable rates, beyond that I could borrow on my house.

  23. Nommopilot,

    This little tirade shows that you are completely without empathy (which I personally believe to be the key differentiator in human evolution). you think you’re cool because you talk like Dr Smith from Lost in Space but you’re actually extremely repugnant. I wish you all the best in your cold loveless universe…

    That tirade was quite deliberate, I was hoping that you would try to make a case that they were not, in fact, as I say.

    As to empathy, I am indeed without it. I hold this to be a good thing. If you believe empathy to be the key differentiator in human evolution then you are a fool; not only is it of minimal imporatance to being human but it is common in all social mammals and thus useless in defining humanity. Empathy is merely an incredibly primitive tool for communication and morality, humans capable of speech and thought have no need for it.

    I would make the point, also, that to be without empathy is not to be without emotion; the two are entirely separate. Empathy is merely a system of emulation.

    If only I could kill all my enemies there would be utopia!!
    SEEK PSYCHIATRIC HELP NOW!!!

    Unlike the aforementioned statement, this one was in jest. As usual though, it did have a point. The point being that many of our present problems come from the fact that these people are alive and using our resources but failing to make the contributions to society that they could; to me, that is disgusting.

    ~~~~

    Toad,

    No, I do not. I could not communicate in this manner on radio; it is too hard to drum up sufficient vitriol.

    What part do you find so disgusting?

    It is a fact that the carrying capacity of this planet is limited. It is a fact that we need to decrease the birth rate relative to the the death rate if we hope to survive without a new, and substantially greater, energy source.

    It is a fact that if this species is to survive the trials ahead of it then we will need to advance in technology substantially. The greater the rate of advance, the higher our chances of surviving. Thus it is of benefit to us, as a species, to have as many people advancing our knowledge, and supporting those whom advance our knowledge, as is practical.

    Those whom choose not to contribute all that they are able are doing so to detriment of the species and society and are using resources which could be spent on someone willing to do more than them. The less they contribute, the greater the harm they do to the species and society.

    Those doing less, be it failure or lack of effort, are expressing a phenotype. The more evidence we find, the stronger the case that these phenotypes are determined almost entirely by our genotype. Thus, given equal environmental conditioning, the individuals displaying phenotypes better for the advancement of the species are likely to hold genotypes better for the species; genotypes that the species would do better with in a larger proportion. While it is true that the conditioning experiences are not equal, even in unequal conditions the non-normal genotypes, those most beneficial to proliferate or rid ourselves of, will assume phenotypes indicative of their genotype.

    Thus, given limited resources, it is advantageous for society if those displaying superior phenotypes breed in greater numbers than those displaying the inferior phenotypes.

    My comment as to them being parasites is well grounded in reality, for all they do is drain resources better spent elsewhere while contributing naught or, at the least, netting us nothing.

    ~~~~

    Frog,

    Get over yourself, we have been over this. Eugenics is a legitimate position. There is no reason to censor discussion over this matter, especially given how it relates to the dysgenics promoted by this party. That I make such extreme examples is merely a result of exactly this.

  24. Kerry – and exports die. The counties balance of payments plummets.

    So Govt tax intake plummets. Then benefits have to be chopped. Health and education cuts have to be made.

    Simply paying higher wages will kill the economy if there isn’t also a relative increase in productivity. And for that we need more training and more investment in the productive sector.

    But Kiwis won’t invest there – they put all their money into non-productive investments like property. And most businesses make pretty fine margins so there’s not a lot spare for either training or capitsl expenditure.

  25. Photo.
    Prices may rise, but higher incomes compensate and the money stays in the country as wages instead of disappearing as profits offshore.

    Higher wages also mean more spent locally. Helping local business. Ordinary wage earners and beneficiaries spend their money close to home. It is the very rich who buy houses in Hawaii.

  26. toad –

    The difference is with income splitting families still fully support themselves.

    WFF is encouraging MORE people live off payouts from the taxpayer.

    I’m not actually strongly against WFF – just pointing out some of the negative aspects of it.

    Perhaps it’s levels should be looked at though. I think it’s rediculous that someone on $110,000 can claim WFF benefits.

  27. @photonz1 10:55 PM

    But earlier in the thread you were advocating income splitting, which would have the same effect of encouraging parents to leave full-time work.

    I’m not sure what your argument is.

  28. Frog says “Then cite the reports you claim shows that”

    The ones Metiria links to in her lastest blog
    Inequality in Aotearoa: updated statistics

  29. Kerry – Aw shucks. I think that’s the nicest thing anybody has said to me here.

    Companies could pay higher wages, but it would mean every product and service in NZ would be substantially more expensive than it is now.

    Those on higher incomes would be ok, but those on lower wages and benefits would be at a distinct disadvantage.

  30. Frog – not only is the negligible pay difference between welfare and work a poverty trap that stops people getting ahead – it also sucks people off work back into benefits.

    Reports have shown that WFF is repsonsible for significant number of parents leaving full time work.

    [frog: Then cite the reports you claim shows that.]

  31. @Sapient 9:40 PM

    You don’t work as a talkback host and a provincial lower North Island Mayor as you day jobs under your real name, by any chance, Sapient?

    Your 9:40 PM is the most disgusting comment I can recall ever having seen on this blog.

    [frog: I have seen worse, Toad, but have deleted them. The only reason the one you refer to (and its author) remain here is to show readers how easily eugenic “final solution” arguments can develop from bigotry. Sapient, take that as a warning.]

  32. Frog and Kerry – you both have an astonishing ability to take anything and paint it with your negativity.

    If working for families is nothing more than welfare for companies as you claim, then lets get rid of it.

  33. “With a little culling I could make a superior system work”

    If only I could kill all my enemies there would be utopia!!

    SEEK PSYCHIATRIC HELP NOW!!!

  34. “they are sh!t and that is all they deserve. They do not even deserve to be considered human; they are disgusting blights on the species; parasites.”

    This little tirade shows that you are completely without empathy (which I personally believe to be the key differentiator in human evolution). you think you’re cool because you talk like Dr Smith from Lost in Space but you’re actually extremely repugnant. I wish you all the best in your cold loveless universe…

  35. Kerry,

    Regarding your first point, “should” indicates a prescriptive statement, not a statement of what is. You would do well to learn such.

    Regarding your second point, Yes. I assume that there is some degree of elasticity in the market. There may not be elasticity for work units, but there certainly is for workers. If a worker becomes too expensive they become replaced. Farmers are replaced with machines, lumberjacks are replaced with machines, line workers are replaced with machines, food industry people are replaced with machines, your checkout person is replaced with machines, etc., etc., etc.. We see it everywhere that there can be substitution. Most of the success of places such as McDonalds lies in their systems and the ability of those systems to decrease labour costs; to decrease the number of workers and thus of jobs.

    An employer that cannot pay the wage as it is now should go out of business? Perhaps, but that is not really relevant. I would hasten to add that the wage is hardly miserly, that wage, even working part time, will grant one more than the kings of old. Full time is certainly enough to survive individually; if one cannot then one cannot budget and is a failure, again.

    ~

    nommopilot,

    wages should be a fair reflection of the value of someone’s time and effort. neither the minimum wage nor the ridiculously high top-end salaries of CEOs are this.

    The value of labour is determined by what individuals will pay for the product of that labour and the availability of that labour. As to fairness, it is nothing but a personal preference, it has no standing as an argument. While I agree that CEO’s get paid a great deal, this is a reflection of the above principle of availability. Fairness does not get to determine what ought be.

    For the record, I think it is fair that they get paid shit; they have not taken the effort to acquire skills that make them worthy of a higher wage; they are sh!t and that is all they deserve. They do not even deserve to be considered human; they are disgusting blights on the species; parasites.

    Why should it not be enough to support a family? Limited resources.

    We can only have so many humans; we have too many humans; thus we need to reduce the number of births relative to deaths so as to acquire a sustainable number of humans. It is better for the species to have a better genetic pool than a worse genetic pool and thus those births which are allowed should take place from genetically superior individuals. All desirable traits are distributed either equally throughout the population or in favour of those on moderate to high incomes; and example of the latter being intelligence. Thus, favoring decreased volume of breeding and a superior gene pool those with moderate to high incomes are desired over those with low to moderate incomes.

    Another argument, the more common one, is that by raising the minimum wage to the point where it can support a family we not only destroy employment and create a bigger bill for the state but we decrease the money to pay for that bill and we decrease the need for people to strive and thus the means through which we generate the money to pay that bill in the future. That is to say; doing what you desire results in bankruptcy, and that is before we take inflation into account.

    ~

    Sam,

    So far it is the only failed ideology to work with this imperfect species. That is, unless you have an alternative. With a little culling I could make a superior system work, but ultimately I could not get away with that culling; we will get there eventually, but we need capitalism in the meantime.

    As to your basic requirement; bullsh!t.

  36. Actually Kerry, as explained to my by Dr Cullen, WFF had more to do with getting rid of the huge spike in marginal tax as people passed through into the upper income brackets. Before it came along people who made between 60 and 75K paid an EFFECTIVE rate of 90 cents on every dollar they earned. Given that the headline rate of 39 cents was the most that anyone on anything over 100K should have been paying the inequity for the people who paid in PAYE was p!ssing off an awful lot of people and greatly exacerbating the issue of people using property LAQC schemes to avoid the full weight of the tax bite.

    respectfully
    BJ

  37. “Wages should be enough to support an individual, there is no reason it should be enough to support a family. If one can not provide for a family one should not have a family; to do so is simply irresponsible and paramount to child abuse.”

    If capitalism can’t provide the opportunites for ordinary people to access enough resources to care for a family, a basic requirement of any acceptable human society, it should crawl off and die in the cesspit of failed ideologies.

  38. “Wages should be enough to support an individual, there is no reason it should be enough to support a family”

    wages should be a fair reflection of the value of someone’s time and effort. neither the minimum wage nor the ridiculously high top-end salaries of CEOs are this.

    By all means a single full time income should be enough to support a family. What is your basis for saying it should not?

  39. Sapient.
    The minimum wage is not enough to support even a single person in a city especially as many minimum wage jobs are only pretend full time.

    You also assume that the demand for minimum wage workers is elastic. It is not. Hard to see how the number of employees in labour intensive minimum wage jobs could be reduced. Employment has gone up or down with economic cycles not wages.

    An employer who cannot even pay the miserly minimum wage we have now is obviously a poor user of economic resources and should go out of business to enable these resources to be used more efficiently. Instead of being propped up with corporate welfare.

  40. Kerry,

    While it is certainly a subsidy, one can not really say that the employers are not necessarily paying a living wage. The wage may be too small to support a family on but it may be well and truly enough to survive on as an individual. We could raise the minimum wage to a family-supporting level but then we would decrease job numbers and disadvantage those individuals whom wanted to work but did not need to support a family.

    Wages should be enough to support an individual, there is no reason it should be enough to support a family. If one can not provide for a family one should not have a family; to do so is simply irresponsible and paramount to child abuse. The employers certainly have a role to play, but it is ultimately the parents being poor; both in terms of quality and morality.

    That is why I am half serious about the infertility thing, at least then one would only be able to have children if one could demonstrate both an ability to support them and a good probability of maintaining that ability.

  41. WFF is basically a subsidy to poor employers who are too inefficient to pay a living wage from the taxes of those who work for employers who pay real wages.
    Welfare for economically ineffective business.

  42. Still sounds like.. best advantage goes to the ‘top end of town’ !?

    I cant believe anyone on the ‘average wage’ is taken in by this right-wing ‘Government’. Kia-ora

  43. OliverI @ 4:55 PM

    Yes, there are a lot of anomolies in the tax/benefit structure that result in really high marginal tax rates which make it difficult for people to get ahead financially until they get to an income level that they are not entitled to any tax credits or welfare assistance.

    WFF (which is based on Roger Douglas’ Family Care introduced in the 1980s – subsequent Finance Ministers have just enhanced it) acts as an effective subsidy for employers, because it reduces wage demands by employees who have dependent children, since a wage increase won’t make them much better off.

    How to get people out of that poverty trap is something I think all political parties, including the Greens, are struggling to deal with. The idea of a universal basic income together with a tax free threshold and significantly higher tax rates above that threshold is attractive, but no Party other than the Greens is prepared to give it serious consideration.

  44. The white elephant int the room is WfF and should be reworked, with the example of two adults, one baby, one income earner if they are earning.. .

    $38,500 PA they get net $704 per week
    $42,000 PA they get net $711 per week
    $50,000 PA they get net $722 per week.

    Difference between $38,500 PA and $50,000 PA is $18 per week.

    This is because their WfF drops off as their income increases, keeping people in a hole even if they are working harder to earn more.

  45. nomopilot – to get a tax cut, FIRST you have to actually pay some tax.

    With WFF, already 40% of workers effectively pay NO tax.

    However even someone on $30,000 will get a reduction of $5110 tax down to under $3920. – $1200 per year is quite a difference to a low income.

  46. “income splitting will save tax for ALL incomes – high or low”

    sure, but extremely regressively.

    “And you say the proposed income splitting doesn’t achieve the aim of income splitting????????”

    No I said it didn’t achieve the aim of recognising the input of a stay-at home parent, unless the couple are on a single high income. families on a single low income will hardly see any benefit.

    My point is that this move makes income tax more regressive and therefore less fair.

  47. nonmopilot – you completely missed the point.

    The point was that income splitting will save tax for ALL incomes – high or low – compared to incomes that are already split.

    Frogs examples were misleading because a high single income was compared to middle and low incomes that were ALREADY split.

    And you say the proposed income splitting doesn’t achieve the aim of income splitting????????

  48. “You could equally say it’s unfair because a couple who both earn a million each per year will get no benefit”

    If you think a couple who each earn a million dollars (even paying high tax on their HIGH INCOMES) need help from the government you’re on the wrong planet. You should think about relocating to Lichtenstein. They deserve to pay a high tax because they earn an obscenely high amount.

  49. “and should support any steps towards it no matter who proposes them”

    without a restructuring of the tax system this is not a step towards a system the greens favour it is a step away. without making changes to remove the regressive nature of the change this is exactly the opposite direction.

    I fully support income splitting as a way of recognising the hard work of stay-at-home parents, but the proposed change does not do this.

  50. frog – you are talking rubbish. Low earners will benefit.

    And your examples giving low results for middle and low earners is an example where income is ALREADY split. Are you trying to decieve?

    You could equally say it’s unfair because a couple who both earn a million each per year will get no benefit (despite paying three quarters of a million doallrs in tax between them), while someone on $30,000 will get over $1000 in tax savings, despite only paying $5000 in tax.

    Currently parents who earn of $30,000 – $50,000 pay $1100 – $1500 MORE tax per year if they decide one parent should stay at home, compared to those who earn the same with two working parents.

    Why should families who think it’s better for one parent to stay at home with their children be penalised?

  51. There’s almost no light but plenty of heat in this topic; all I can see is socialists shouting unfairness; there’s no discussion of whether it is better to teat a family unit as a single entity for tax purposes, or not.

  52. I wasn’t suggesting the current tax system is fair, photonz1. But let’s start addressing that by measures such as introducing a tax-free income threshold before looking at measures like Dunne’s, which gives the greatest tax relief to families where one partner is earning $140K and the other not working, very little tax relief to those on middle incomes, and none at all to those on low incomes.

  53. frog – so you think the current system is fair, when

    – a couple who earn $75,000 between them pay $5000 less tax than a couple who earn $75,000 with one working and one looking after children.

    – Kerry’s examples – a family with a stay at home parent and one working earning $50,000 will save $1500 in tax, $1600 saving for one parent on $37,000, and $1200 saving for an income of $40000, $2800 saving for $60,000, $3000 saving for $70,000).

    You seem to completely miss that point that to save tax, first you have to pay it.

    When 40% of workers effectively pay zero tax (i.e when you work out WFF benefits), then how do you give a tax break?

    Taod – the $1500 saving for Krry’s first example is $30 per week – not $5

  54. Yes I am and I think the Green party is too. We should have a clear idea of the tax structure we want to aim towards and should support any steps towards it no matter who proposes them.
    If NACT passes a bill which taxes on family income then it is hard for them to argue against welfare on the basis of family income.
    I do not think favouring higher income earners should automatically disqualify something which is fairer. Other taxes such as capital gains and higher taxes on very high income earners can claw it back.

  55. Kerry, you are proposing a substantially different tax structure, in which case income splitting may not be nearly as regressive as it would be under the current tax struacture. I’m actually a great fan of the universal basic income / guaranteed minimum income idea and of a tax-free threshold that you suggest.

    But under the current tax structure, income splitting significantly favours high income earners.

  56. Some form of income splitting would be a good thing from perspective of the Green Principles of Social Responsibility. It is socially just that a family of 5 with one earner on $50,000 gets to keep more after tax than a single income earner supporting him or herself on $50,000. The social welfare system recognises family groups, and it is reasonable that the tax system does the same.

    For the bill to be progressive and revenue neutral, and so not involve cutting services for needy New Zealanders, it could shift the threshold for each tax bracket down, and add a new higher top tax rate. This would compensate for the fact that wealthy families would pay less tax, and leave families which aren’t well oof better off.

    In terms of the child support, I think that it is actually fair that any new children are not made to suffer disproportionately because of new children. The income splitting arrangement should, to be fair, also mean that partner’s income is counted when computing child support (so if one partner earns income, they are liable for child support for the non-earning partner’s children). This should make the total amount of child support paid roughly the same, but with a more equitable distribution – more children would get paid child support, but those who did would get less on average.

    It might have the effect of reducing the workforce slightly – in times of high unemployment this is a good thing, and it could result in more volunteer work, time spent caring for children, and more self-reliance (e.g. partners focus on growing food for the household, rather than working and buying food shipped by burning oil). On the down side, however, it might accelerate the already unsustainable global population increase.

    Obviously, the discriminatory aspects would have to come out – I think that this reflects that the bill comes from the rather bigoted United Future, rather than discrimination being a fundamental property of income splitting.

  57. They will actually be better off. I can read tax and benefit tables too. I worked it out from when I was on a sickness benefit and my wife could not work as she had to look after our son.
    Also the principal needs to be established.
    Then it will be possible to sneak in some other things.
    A 45% tax rate on incomes over 150k (like the Aussies)should cover the 500m and make it more neutral on higher incomes.
    Further down the track when hopefully we get a no tax income threshold (See Gareth Morgan) couples on low incomes will be much better of with income splitting.
    Personally I would like to see a guaranteed minimum income through the IRD replacing all benefits.
    And trusts being illegal as they are just a way to dodge tax and responsibilities.
    This is another step in the right direction.

  58. @Kerry Thomas 9:08 AM

    Kerry, the first couple you cite will be better off by only about $5 a week under income splitting.

    And the second couple will be no better off at all.

    Income splitting is only advantageous if it reduces one partner’s taxable income to drop them to a lower tax bracket, while not increasing the other parner’s income sufficiently to push them into a higher tax bracket.

  59. You also failed to mention the couple on 50 000 a year from one income because Mum stays home to look after a mentally handicapped kid. With the very generous $75 odd a fortnight disability allowance.
    Or the couple on $35000 where the Dad stays home and they really struggle because they believe in giving kids a good nurturing start in life.
    Or the people who would like to do this which there are many.
    Most of the couples on lower incomes I know are both working out of necessity, not because they want to.

    Income splitting would be a lot of help for these people.

    The ones on high incomes are both working because money and possessions are their first priority.

    This is a good idea. Good ideas are good no matter who suggests them.
    Once the principle is established then we can work on people being treated as separate entities for benefits.

    Copied from my post in the Standard. http://www.thestandard.org.nz/more-tax-cuts-for-the-elite-coming/#comment-240968

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