Editorial: Labour could spend all National's tax cut on the needy

Labour leader Andrew Little speaks during the 2017 budget presentation at Parliament, May 25, 2017. Photo / Hagen Hopkins

Editorial

Credit where it is due. It takes courage to say that if elected, you will cancel a tax cut.

That is what the Labour Party has announced with its promise to direct the money instead to additional spending, particularly on assistance for low income families.

In doing so it has presented the voters with a clear choice which, for those without young families or earning above the income limits, will mean deciding whether to take the tax cut or give the benefit to children of the less well off.

Labour has also neatly blunted National's intention to cast the tax cuts next year as an act of social conscience.

The cuts announced in the Budget will be delivered by raising the thresholds of the lower tax rates, leaving the top rate unchanged.

While that will disproportionately favour the lower paid, it will benefit all income taxpayers since all have some of their income taxed at the lower rates.

Since the Budget, National has not made too much of its promised cuts. The thresholds were overdue for adjustment in line with rising incomes and the higher thresholds it has set do not match the "bracket creep" of incomes since they were last adjusted.

That means the state has been steadily taking a greater share of the wealth generated within the economy under this Government and will continue to do so.

Labour does not hold that against National, in fact Labour would make no change to the rate of bracket creep, giving itself an extra $1.5 billion of revenue for election promises.

Of that money, it plans to use just over half, $890 million, to boost Working for Families tax credits.

The rest, says leader Andrew Little, will go into public services and infrastructure. Families with one child will get an additional $20-$47 a week up to an income of $75,000 annually.

Those with two children, an extra $47-$69 a week, cutting out an incomes of $90,000 and with three children, $74-$100 on incomes up to $100,000.

These benefits dwarf the $10-$20 a week that National's tax cuts would leave in the pockets of all earners.

Most people would gladly donate $10 or $20 a week to a fund that would alleviate child poverty, a subject we hear so much about.

They might wish Labour intended to direct all of that money to poor households rather than retain so much for largely unspecified "public services and infrastructure".

Labour does not claim its "Best Start" package will finally lift all children above the poverty line so why is it not putting all the bracket creep revenue to that purpose?

Even within the Best Start package, some of the money is to be wasted on a payment of $60 a week for all children, regardless of family income, in their first year of life.

Like paid parental leave, this money is effectively wasted on households that can well afford to have children.

Likewise for a winter heating subsidy, $140 a month, Labour is promising to all superannuitants as well as other beneficiaries.

It is worthwhile redistributing income to those who do not have enough but when it is "redistributed" back to self-supporting taxpayers it is worse than pointless, it is costing money to collect and return. Labour should collect no more than necessary.

- NZ Herald Staff writers