Gazumped

In the wake of a better-than-expected Pre-election financial update, Labour has come out and gazumped National on the tax front - not by cutting tax rates, but by massively extending the already generous Working For Families package. The abatement threshhold has been increased to $35,000 while the abatement rate has been reduced to 20%, meaning that an extra 60,000 families will benefit by around $50 to $100 a week. And it does all of this without breaking the bank, because targetted assistance can deliver far more to those it targets than across-the-board tax cuts. The extension is expected to cost around $400 million a year - compared with $600 million for National's proposed cuts to the company tax rate or almost $700 million a year to flatten the tax scale by cutting the top rate to 33% (neither of which will provide any benefit to the vast majority of New Zealanders).

As with the student loan policy, there's a calculator so you can work out how much you benefit by. I should add that the average net tax rate figure is more than a little misleading, as the calculator does not include the increased accomodation supplement which is a key component of Working For Families. Once this is taken into account, the point at which a family would be paying no net tax whatsoever would be somewhere around the $55,000 mark (depending on family size and location).

This is already being criticised as "redistribution", and yes, it is - and that is nothing to be ashamed of. Taking money from the rich via taxation and giving it to those in need via benefits and services is the foundation of any decent society. As I said when Working For Familes was first announced, if this is "communism by stealth", bring on the dancing cossacks!