Guest column: tax cuts and social (in)equality

By Anita

When National offered a tax cut for "all hard-working New Zealanders" I thought, as I guess we all did, "Excellent! I'm hard-working: I wonder how much they're offering" and then, having checked out their calculator and figured out exactly what to spend it on, the next thought was "How on earth will they afford it?" Again, a quick search on the net, or glance at the media answered that question. So I'm good and informed, and I can make my voting decision knowing that National is happy to pay for my overseas holiday, as long as I don't want to rely on them being able to pay for my health, education and superannuation, let alone the rest of New Zealand's.

That seems like a nice simple decision: money in my pocket or money in theirs - and when we look at it on a purely individual basis, it is that simple.

But let's say, for a moment, that we all do want the tax cut, that we do want to take the money. Why won't we all be taking a nice overseas holiday next winter?

The answer is that while we may all be hard-working New Zealanders, National doesn't treat us equally. Their tax cuts benefit the high-earning New Zealanders disproportionately. According to National’s online calculator, someone earning $25k will get $400 extra a year, someone on $100k will get $400 a month. Four times the base salary, but twelve times the tax cut.

This disparity gets even worse when we look at the gender imbalance National creates. New Zealand women earn, on average, less than New Zealand men. Measurements vary, but roughly speaking, women earn on average 85c for every $1 a man earns.¹

National's tax cuts magnify that gap. On average, a woman in fulltime employment will get 65c from National for every $1 a man will get.²

The following graph³ shows how this happens. At lower wage rates, where women and men are roughly equally represented, tax cuts are tiny. At the high paid end - where men outnumber women 4:1 - the tax cuts are very generous.

This is not to say there won't be any women getting a very generous tax cut. The women earning over $100k will get the full $4,800, along with four-and-a-half times that number of men. But while, as individuals, some of us will do ok, some of us will do far far worse than ok.

The same calculations would show the same disadvantage for other groups: look at a disadvantaged group in New Zealand society, and you'll find that National will give them less than an equal share of the tax cuts. When you look at the group again, you'll find they'll be even more hurt by the spending cuts National will need to make to pay for the overseas holidays of those of us lucky enough to be the winners in this ideologically pure election bribe game.

It would be unfair to call National deliberately sexist, so we have to assume that they've fallen prey either to sloppy thinking, or to the kind of ideological zeal that just doesn't care about people. Whether they intend to or not, their proposed tax cuts would make the rich richer and the poor poorer, they would magnify the divisions within our society, and take away the supports from the poorest and most needy of our community.

Footnotes:

1. Based on hour-for-hour calculations (weekly earning differentials are greater). See Pay Inequality between men and women in New Zealand and Next steps towards pay equity: a discussion document [doc].
2. The figures for all women and all men show an even greater gap, but are confused by the presence of beneficiaries in the figures. National has pretty clearly stated that they have no intention of allowing beneficiaries to benefit from tax cuts. If beneficiaries were permitted the (trivial) tax cuts National's plans would give them, then overall the average woman would receive 52c in tax cuts for every $1 a man receives.
3. Based on 2001 Census Figures, adjusted for wage increases to give projected pay rates at 31 March 2006. Tax cuts are plotted at the midpoint for each wage band. A full spreadsheet is here.