OK, that’s not the actual title of Peter Dunne’s press release. The real title is:
(Notice how ‘income splitting’ has been replaced with ‘income sharing’, sharing sounds so much nicer and more innocent, more innocent than ‘tax breaks for wealthy nuclear families with stay at home mums’ at any rate, also notice weasel phrasing ‘could’ and ‘up to’ – Dunne’s selling this like a late night ad for ab machines).
Statistics New Zealand tells us there are 1,600,000 households in New Zealand. And my calculator purports that 310,000 is 19.3% of 1,600,000.
Labour estimates income splitting will cost $500 million a year.
So, 19.3% of households get an average of $1,600 each. Everyone else gets nothing because they aren’t in nuclear families or mum and dad are in the same tax bracket (most of us are in the 21, soon to be 17.5% tax bracket), or they face no net tax thanks to Working For Families anyway.
But wait, there’s more.
The money for these cuts doesn’t come out of thin air (or even that right wing cornucopia that always turns out to be empty – ‘slashing government waste’). It comes from spending cuts and higher borrowing. Ultimately, those cuts and that borrowing are paid for by New Zealand households.
So, 19.3% of households get $1,600 on average from income splitting and 100% of households pay an average of $312 to fund it.
But wait, there’s still more.
On average, the lucky few who get income splitting will get $1,600 per household but, as with everything this government does, the real money goes to an even smaller rich elite.
If the couple’s incomes are pretty similar, the advantages of income splitting are small. For example, a couple with incomes of $45,000 and $55,000 would get $375 a year, $7 a week. But say you are a stay at home mum with zero income and your husband is, say, Prime Minister of New Zealand – your family’s tax cut is $9000 a year, or $173 a week.
So, of the 19% of households who are lucky enough to get anything from income splitting, most will get bugger all and a lucky few will win big, and when I say ‘win big’ I really mean ‘pocket cash earned by the 1.3 million households who get nothing at all out of income splitting’.
Incidentally, I’ve just calculated that John Key has voted himself $22,000 worth of tax cuts on his PM salary alone since taking office, paid for with canceled tax cuts for lower income workers and government borrowing.
What do you think the odds are he will get National to back Dunne’s income splitting and pocket another $9,000 a year for himself? He’ll be tempted, but I don’t think even ol’ smile and wave would be able to convince the public that borrowing another $10 million a week to give him another tax cut is worthwhile.