Labour on the in work tax credit

August 17th, 2012 at 12:00 pm by David Farrar

My Herald column:

If Labour vote for Catherine Delahunty’s bill, it will give National a very significant weapon to use at the 2014 election. They will portray it as making it more attractive for people to remain on welfare, rather than enter the workforce.

The alternative is for Labour to vote against the Delahunty bill. That may be better for them in the long-term, but will pose short-term challenges for them. Firstly they will be criticised for doing a u-turn, and having their third policy in two years on this issue. They will have been against the policy, before they were for the policy, before they were against the policy again.

And Steven Joyce will be delighted to read:

Labour will vote for the initial stage of a Green Party bill to extend Working for Families’ tax credits to beneficiaries, but will not commit to supporting it further or keeping the policy that was one of its main election pledges last year.

There is no way it will pass first reading, so Labour will go on record as having voted to give beneficiaries an extra $60 a week and working parents $0 a week.

 

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WFF changes will be post-election

March 24th, 2011 at 2:15 pm by David Farrar

Bill English just confirmed in the House that any changes the Government may make to Working for Families, will not take effect unti 1 April 2012 – after the election. This means that once again National is behaving entirely correctly – as with SOE sales.

They gave a pledge for their first term, and have kept their word. They will go into the 2011 election with a different policy for their 2nd term. This is exactly as it should be. If people do not want changes to WFF, then they will be able to stop them by voting Labour, Greens etc.

Promises are generally for one electoral term only. That is why we have elections – to decide on policies for the next term. Only when a party or politican explicitly states a policy is for longer than one term, do you expect it to never change. The most well known example of that is John Key’s pledge on superannuation, which he said was for as long as he is Prime Minister.

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Closing the loopholes

December 8th, 2010 at 10:00 am by David Farrar

Kate Chapman in the Dom Post reports:

A family whose company was making more than $700,000 a year used loopholes in the Working for Families tax credit system to claim $12,000 in government payouts.

Revenue Minister Peter Dunne revealed details yesterday of the lengths some well-off people went to to get the tax credits after he announced the Government was looking to tighten up access to the entitlement.

Mr Dunne said one family, whose trust-owned company made more than $700,000 a year in taxable income, were able to claim $12,000 a year in Working for Families tax credits.

In another case, investments were listed under children’s names. While the parents were shown to earn $36,000 annually, and therefore qualified for $13,000 in tax credits, their children had a combined investment income of nearly $90,000 a year.

“Another family’s children earned over $150,000 a year in investment income, yet that family was still able to claim more than $4000 in Working for Families tax credits,” Mr Dunne told Parliament.

Thank goodness that Labour’s loopholes are being plugged.

Under proposed new rules the definition of income for Working for Families, student allowances and Community Services Cards would be broadened and loopholes around loss-attributing qualifying companies, or LAQCs, closed to prevent people claiming losses against their personal income.

The changes were expected to save $32 million a year in Working for Families payouts alone.

That’s a lot of rorting.

Labour leader Phil Goff said he supported any changes that would prevent people rorting the Working for Families scheme, but he wanted to see more detail. “It’s important to clamp down on those who may be abusing the system.”

If it was important to clamp down, why didn’t Labour do it? Very easy to talk the talk in opposition, but did they walk the walk in Government?

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Working for Families and the workforce

July 19th, 2010 at 1:16 pm by David Farrar

The Herald reports:

Labour’s $1.5 billion Working for Families package has driven a net 1200 parents out of the paid workforce – achieving the opposite of its aim to “make work pay”.

An evaluation by Inland Revenue and Social Development Ministry researchers has found the $60 a week in-work tax credit lured 8100 sole parents into paid work.

And that is good. The Greens and some of the left have opposed the in-work tax credit, but I think it is a good thing that does encourage people to move from benefits into work. To give fair praise to Labour they even defended a human rights law suit against it.

But 9300 second-earners in two-parent families dropped out of work because higher tax credits let them stay home with the children.

This one is more difficult. It is good for the economy to have both parents working and earning, but it can be better for the family to have one parent not working. There is no universal right or wrong position – each family has to make up their own minds. What is most important is that at least one parent is working.

But Labour social development shadow minister Annette King said yesterday the contrasting results were “two good outcomes”.

“It enabled people [sole parents] on the benefit to go out and earn more and to reconnect with the workforce because it was worth their while,” she said. “And if people [in couples] who were doing part-time work are now able to stay home with their families, that’s a win too, because we have two groups that have different needs.”

Annette has a point here. But the money to pay WFF comes from those who are out working, and if you reduce the pool of those working, then a smaller number of workers are funding a larger number of non workers.

The most efficient tax and welfare system is one with the least churn. Taxing people more than you need, just so you can give some of it back to them as welfare is quite wasteful.

Ideally I want a system where people pay little or no tax until they are earning enough to pay for their own direct costs of living. But once they are earning enough to pay for themselves, they should receive little welfare – I don’t want people earning $100,000 receiving taxpayer handouts from those earning just $45,000.

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$150,000 and on welfare

August 21st, 2009 at 10:00 am by David Farrar

The Dom Post reports on Labour’s legacy:

Thirty-five families with a household income of more than $150,000 are pocketing Working for Families cash.

Welfare should be for those on low incomes who need support to cover the essentials. Not to give rich people extra money because they choose to have some more kids.

Labour revenue spokesman Stuart Nash said families earning more than $150,000 were not the type envisaged for the scheme.

If there were abuses, then loopholes should be closed.

But Working for Families had lifted thousands of children out of poverty and it was the most effective income-redistribution policy “ever”.

Over-taxing New Zealanders so you can give them some of their own money back as welfare is now what I call effective. Well it is effective at turning more families into welfare recipients I guess.

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The great WFF rip-off

August 18th, 2009 at 8:09 am by David Farrar

Vernon Small at the Dom Post writes:

More than 9700 families receiving Working for Families credits own rental properties and are using losses on them to boost the amount they get from the taxpayer.

Other recipients of the scheme, introduced to help struggling families, are using trading companies, sheltered within trusts, to pocket tax credits even though they are earning well over $70,000, a high-powered review of the tax system has found.

Ipods for everyone!

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