Dunne: 80% of families will pay for income splitting & get nothing

Written By: - Date published: 9:28 am, August 17th, 2010 - 41 comments
Categories: class war, tax - Tags: ,

OK, that’s not the actual title of Peter Dunne’s press release. The real title is:

Income Sharing could benefit up to 310,000 families

(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.

41 comments on “Dunne: 80% of families will pay for income splitting & get nothing ”

  1. RedLogix 1

    Yet fundamentally the income splitting idea is is valid because our current tax system is unfair in the way it assesses income for tax purposes on individuals, but largely assesses income for benefit purposes on households. And the problem is exacerbated by very low the ‘partner qualifying’ income in this country.

    But you are right Marty, that income splitting done under the present regime does simply become another stealth tax cut for the wealthy. The failure of the current system to achieve fairness, even in the face of this fairly minor change…this tells you is that the current system is fundamentally flawed.

    By contrast the Universal Basic Income system inherently achieves income splitting …in fact the issue does not arise at all and achieves it for all taxpayers. UBI is not new, it’s been around for ages, and if the left really wanted to set the agenda around tax reform, this is the big idea that can get traction.

    • Draco T Bastard 1.1

      Well, we know that Labour won’t do UBI – I asked. David Cunliffe(sp?) said no.

      • Herodotus 1.1.1

        Any reason for this refusal to undo the inequity of the system re WFF and the difference in disposable earnings of a family unit vs individuals within the same unit. Especially as Govt Welfare views the family unit as one and IRD as individuals?
        Or is David comfortable with the current position?

        • Draco T Bastard 1.1.1.1

          I didn’t ask and he didn’t address those specific questions but, IIRC, he was comfortable with the current system.

  2. tc 2

    Couldn’t keep his own little christian party together (how hard can that be !)and now looks desperate with this extra lolly scramble for the already better off thanks to nat’s tax cuts…..in essence you don’t really know what you’re voting for with Dunne over any period of time.

    Looking forward to Chauvel seeing him off hopefully.

    • bbfloyd 2.1

      tc…. keeping his little christian party together was always going to be a hill too steep to climb. they spend more time sniping at each other, and rubbishing other denominations than actually despising us”heretics”. what chance a unified front? none whatsoever. they have neither the intellect or the maturity as a group to do any more than create an annoying background buzz.
      when you vote for dunne, you are voting to keep him in the manner with which he has become accustomed. there are always going to be enough religious bigots prepared to throw away their votes in order for him to get back.
      i’ll make a prediction… dunne will be the first “mp for life” when he drops dead of old age sitting on his seat in parlaiment.. just after he gets his knighthood.

      • Katherine 2.1.1

        As far as I know, Income Splitting has been a Dunne/United Future policy for a while. He probably thinks he actually has a chance of getting it through now. No chance with the last government obviously.

  3. Lanthanide 3

    Dunne is now saying ‘if you run a business then you can organise your incomes in such a way to achieve the same thing, this is just extending the same opportunity to those on salaries and wages’. So it’s the same National trick of “fixing a loophole” not by changing the rules correctly to close the loophole but by cutting a chunk out of the fabric instead, leaving an even bigger hole (in the public purse).

    Also I would suggest that those who are in a position of owning a business, and able to craft the salary so that both partners pay the same tax rate should probably be allowed to continue doing this. Running a business is risky and very hard work, and I think the fairly marginal/small tax benefits that can be derived from this sort of organisation is acceptable – we’re talking about a maximum of $9k a year here. Sheltering money in trusts for tax reasons is an entirely different matter, however (the sky’s the limit on the $$ there).

    • vto 3.1

      Lanthanide “Dunne is now saying ‘if you run a business then you can organise your incomes in such a way to achieve the same thing, this is just extending the same opportunity to those on salaries and wages'”

      I heard him say that too.

      Is this guy serious? He is the Minister of IRD for fucks sake and here he is telling all NZ business people that they can slot income all around to suit their tax purposes. Which is EXACTLY what the High Court has just ruled is tax evasion in the case of the two Christchurch surgeons who income-split in their business!

      Dunne does not know his shit. Dunne has just said it is ok to do what the courts have said is illegal.

      Maybe I am missing something but this seems like a pretty major mistake – both in not knowing his most basic tax law and in advising NZers that it is ok to do that which has been judged illiegal.

      (edite: to clarify. the case over the two surgeons turned on their business not paying them market salaries. Dunne has just implied that you can pay the non-working partner in the business a salary that suits tax purposes and not market salary for the work done in the business.)

      • NickS 3.1.1

        It’s because he’s utterly incompetent.

        And yet another Minister in the NACT government that really shouldn’t have a portfolio of any consequence.

  4. loota 4

    I cannot believe you have used a photo of Doctor Who on the front page with Dunne photoshopped in. Besmirching the name of the good Doctor, Time Lord extraordinaire!

    Hmmmm, disappointed in The Standard for once.

    • bbfloyd 4.1

      agreed…. bit of a brainfade there. the doctor cherishes the whole of humanity. dunne is picking and choosing which bits get help. and who gets the bums rush. isn’t he supposed to be a christian? looks more like one of the crowd thrown out of the temple.

  5. Herodotus 5

    So as this assists only 20% we should exclude this, even thogh there is an inherent error in the Labour welfare system that disadvantages one form of a family. As stated before a rick $100k single income family pays $8.45k more tax than a family with 2 $50k incomes, and both can get WFF.
    Perhaps this is a great reason for the tax system in conjuction with welfare should be reviewed. No one within Lab (Esp T Mallard) can even tell me what is a substainable income for a family to live on. perhaps we may be even giving valuable welfare to many who dont need it and this could be directed to those in need.
    I cannot see why let this progress to1-3 rd readings with improvements, limit amount of income applicable to be split.
    But we cannot be seen supporting this form of a family unit, or even place this in parity with other forms, no wonder some get the impression that the tradition family is under pressure, for me mainly due to little or no support from political parties. But we the tax payer pay the cost: financial, social, mental etc and the govt gives to their special niche groups that could vote for them.
    “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” so Marty from this logic you will be against the removal of GST off fruit and vege as most households will only benefit $1-$2 per week. And that is if all the savings are passed on thru the food chain!! As said before if you are worried limit the amount that can be split. Dont be against everything that this govt “is comfortable with” or “just kicking the tyres” see how it could be improved. Even the other side has ideas that could be incorp to improve NZ.

    • bbfloyd 5.1

      H.. another convoluted and untenable argument from yourself. if you can’t do any more than widen the discussion out into areas that have no semblance of relevance to the original issue at hand, then i suggest you write a couple more drafts, and then read them slowly.
      playing shallow word games is no substitute for substantive debate. reacting to certain phrases is nothing more than that. that doesn’t equate to a contribution to the debate.

      • The Baron 5.1.1

        Untenable evidently means something different to you than to every other english user. Here’s a hint – “I don’t like it” doesn’t equal untenable.

        There is a very clear and well made point about the relative benefit for two different families who are in the same net position. It has facts and figures in it, two things you seem to not have an affinity with. Here’s another hint – being a fanboy isn’t a substitute for substantive debate. If its the latter that you’re aiming for, can you please tell me where in this thread you have measured up to your own lofty pinnacle?

        So how about you go away, do form 2 english comprehension again, and try again when you have got a bit more of a clue?

        • wyndham 5.1.1.1

          Pardon my cynicism but doesn’t Peter Dunne, one of the the chameleons of politics, happen to have that rather prosperous area known as Karori within his electorate? ‘Splitting’ incomes, (now to be known as ‘sharing’)would go down very well in Karori. There’s an election coming up !

          • loota 5.1.1.1.1

            Awful of you to even suggest such a thing. 🙄

            • The Baron 5.1.1.1.1.1

              Pardon my cynicism, but aren’t there a lot of:

              – beneficiaries in south auckland
              – students in north dunedin
              – food purchasers in new zealand

              all of whom will benefit from labour policy? there’s an election coming up!

              your analysis is as juvenile as it is stupid. again, being a fanboy doesn’t substitute for substantive debate.

  6. stevo 6

    Negative knee jerk reaction to policy ideas like this will keep labour out of power for…ever.
    I have an email from Michael Cullen over this matter prior to the last election where his reply completely missed the point we were trying to make, that being where families, through no fault of their own, find themselves on a single income, say through caring with a family member with a disability. He wittered on about if we do it for you then we have to do it for everyone.
    Now he is gone, lets have some clear thinking on this.

    • NickS 6.1

      So we should just ignore that it doesn’t help single parents, nor those on middle to lower incomes? And it basically only benefits those who already have already quite significant incomes, and if they aren’t brainless at budgeting, should be more than enough to raise and care for any children. i.e. why exactly do the rich need more welfare? When they already have access to free childhood education and subsidised health and dental care.

      • KJT 6.1.1

        No true and you could limit the amount also. Say $80k.

        Though I am all for a minimum individual income administered through IRD. Save a heap of money used in deciding allocation also.

  7. dave 7

    I posted on this on my humble blog too. Dunne has also said that Income splitting would encourage mums to stay at home and look after their kids which is rubbish.

    Many low income families will get nothing from income splitting – but a childless couple on $120,000 could get up to $8480 tax free just by having a child. That’s more than nearly all couples – including the very poorest who get nothing from income splitting – get in Working for Families payments for having their first child.

    Its also more than many couples with one child, (and lots with two or more) get in WFF payments, tax cuts, and income splitting for tax purposes COMBINED.

    • Frank Macskasy 7.1

      “I posted on this on my humble blog too. Dunne has also said that Income splitting would encourage mums to stay at home and look after their kids which is rubbish. ”

      Perhaps he’ll suggest they wear a burkha as well?

  8. Frank Macskasy 8

    One thing that occurs to me with income splitting/sharing/stashing…

    According to our esteemed Minister of finance, we’re already borrowing $200 million a week to pay for a portion of state expenditure.

    Permitting relatively affluent folk further tax-cuts – which is what Dunne’s proposal really is – begs the questions;

    1. How much more will we have to borrow to make up for a lower tax-take?

    2. If we don’t borrow more, what State services will be cut? School funding and fewer books? Fewer nurses in our hospitals? Market rents for state houses? Fewer bullets for our troops in Afghanistan?

    3. If we do borrow more, will our children or grand-children be lumbered with this debt?

    I may be a left-winger, but even I know that “there ain’t no such thing as a free lunch”. Someone, sometime, will have to pay for tax-cuts or cuts in services. It’s basic arithmetic.

Links to post

Recent Comments

Recent Posts

  • Ministers visit Hawke’s Bay to grasp recovery needs
    Prime Minister Christopher Luxon joined Cyclone Recovery Minister Mark Mitchell and Transport and Local Government Minister Simeon Brown, to meet leaders of cyclone and flood-affected regions in the Hawke’s Bay. The visit reinforced the coalition Government’s commitment to support the region and better understand its ongoing requirements, Mr Mitchell says.  ...
    BeehiveBy beehive.govt.nz
    6 hours ago
  • New Zealand condemns malicious cyber activity
    New Zealand has joined the UK and other partners in condemning malicious cyber activity conducted by the Russian Government, Minister Responsible for the Government Communications Security Bureau Judith Collins says. The statement follows the UK’s attribution today of malicious cyber activity impacting its domestic democratic institutions and processes, as well ...
    BeehiveBy beehive.govt.nz
    12 hours ago
  • Disestablishment of Te Pūkenga begins
    The Government has begun the process of disestablishing Te Pūkenga as part of its 100-day plan, Minister for Tertiary Education and Skills Penny Simmonds says.  “I have started putting that plan into action and have met with the chair and chief Executive of Te Pūkenga to advise them of my ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Climate Change Minister to attend COP28 in Dubai
    Climate Change Minister Simon Watts will be leaving for Dubai today to attend COP28, the 28th annual UN climate summit, this week. Simon Watts says he will push for accelerated action towards the goals of the Paris Agreement, deliver New Zealand’s national statement and connect with partner countries, private sector leaders ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • New Zealand to host 2024 Pacific defence meeting
    Defence Minister Judith Collins yesterday announced New Zealand will host next year’s South Pacific Defence Ministers’ Meeting (SPDMM). “Having just returned from this year’s meeting in Nouméa, I witnessed first-hand the value of meeting with my Pacific counterparts to discuss regional security and defence matters. I welcome the opportunity to ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Study shows need to remove distractions in class
    The Government is committed to lifting school achievement in the basics and that starts with removing distractions so young people can focus on their learning, Education Minister Erica Stanford says.   The 2022 PISA results released this week found that Kiwi kids ranked 5th in the world for being distracted ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Minister sets expectations of Commissioner
    Today I met with Police Commissioner Andrew Coster to set out my expectations, which he has agreed to, says Police Minister Mark Mitchell. Under section 16(1) of the Policing Act 2008, the Minister can expect the Police Commissioner to deliver on the Government’s direction and priorities, as now outlined in ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • New Zealand needs a strong and stable ETS
    New Zealand needs a strong and stable Emissions Trading Scheme (ETS) that is well placed for the future, after emission units failed to sell for the fourth and final auction of the year, Climate Change Minister Simon Watts says.  At today’s auction, 15 million New Zealand units (NZUs) – each ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • PISA results show urgent need to teach the basics
    With 2022 PISA results showing a decline in achievement, Education Minister Erica Stanford is confident that the Coalition Government’s 100-day plan for education will improve outcomes for Kiwi kids.  The 2022 PISA results show a significant decline in the performance of 15-year-old students in maths compared to 2018 and confirms ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Collins leaves for Pacific defence meeting
    Defence Minister Judith Collins today departed for New Caledonia to attend the 8th annual South Pacific Defence Ministers’ meeting (SPDMM). “This meeting is an excellent opportunity to meet face-to-face with my Pacific counterparts to discuss regional security matters and to demonstrate our ongoing commitment to the Pacific,” Judith Collins says. ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Working for Families gets cost of living boost
    Putting more money in the pockets of hard-working families is a priority of this Coalition Government, starting with an increase to Working for Families, Prime Minister Christopher Luxon says. “We are starting our 100-day plan with a laser focus on bringing down the cost of living, because that is what ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Post-Cabinet press conference
    Most weeks, following Cabinet, the Prime Minister holds a press conference for members of the Parliamentary Press Gallery. This page contains the transcripts from those press conferences, which are supplied by Hansard to the Office of the Prime Minister. It is important to note that the transcripts have not been edited ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Lake Onslow pumped hydro scheme scrapped
    The Government has axed the $16 billion Lake Onslow pumped hydro scheme championed by the previous government, Energy Minister Simeon Brown says. “This hugely wasteful project was pouring money down the drain at a time when we need to be reining in spending and focussing on rebuilding the economy and ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • NZ welcomes further pause in fighting in Gaza
    New Zealand welcomes the further one-day extension of the pause in fighting, which will allow the delivery of more urgently-needed humanitarian aid into Gaza and the release of more hostages, Foreign Minister Winston Peters said. “The human cost of the conflict is horrific, and New Zealand wants to see the violence ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Condolences on passing of Henry Kissinger
    Foreign Minister Winston Peters today expressed on behalf of the New Zealand Government his condolences to the family of former US Secretary of State Henry Kissinger, who has passed away at the age of 100 at his home in Connecticut. “While opinions on his legacy are varied, Secretary Kissinger was ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Backing our kids to learn the basics
    Every child deserves a world-leading education, and the Coalition Government is making that a priority as part of its 100-day plan. Education Minister Erica Stanford says that will start with banning cellphone use at school and ensuring all primary students spend one hour on reading, writing, and maths each day. ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • US Business Summit Speech – Regional stability through trade
    I would like to begin by echoing the Prime Minister’s thanks to the organisers of this Summit, Fran O’Sullivan and the Auckland Business Chamber.  I want to also acknowledge the many leading exporters, sector representatives, diplomats, and other leaders we have joining us in the room. In particular, I would like ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Keynote Address to the United States Business Summit, Auckland
    Good morning. Thank you, Rosemary, for your warm introduction, and to Fran and Simon for this opportunity to make some brief comments about New Zealand’s relationship with the United States.  This is also a chance to acknowledge my colleague, Minister for Trade Todd McClay, Ambassador Tom Udall, Secretary of Foreign ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • India New Zealand Business Council Speech, India as a Strategic Priority
    Good morning, tēnā koutou and namaskar. Many thanks, Michael, for your warm welcome. I would like to acknowledge the work of the India New Zealand Business Council in facilitating today’s event and for the Council’s broader work in supporting a coordinated approach for lifting New Zealand-India relations. I want to also ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Coalition Government unveils 100-day plan
    Prime Minister Christopher Luxon has laid out the Coalition Government’s plan for its first 100 days from today. “The last few years have been incredibly tough for so many New Zealanders. People have put their trust in National, ACT and NZ First to steer them towards a better, more prosperous ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • New Zealand welcomes European Parliament vote on the NZ-EU Free Trade Agreement
    A significant milestone in ratifying the NZ-EU Free Trade Agreement (FTA) was reached last night, with 524 of the 705 member European Parliament voting in favour to approve the agreement. “I’m delighted to hear of the successful vote to approve the NZ-EU FTA in the European Parliament overnight. This is ...
    BeehiveBy beehive.govt.nz
    2 weeks ago

Page generated in The Standard by Wordpress at 2023-12-08T07:26:06+00:00