There’s some mean little barbs for working Kiwis hidden in the Budget.
Currently, if you get made redundant from your job – something that happened to tens of thousands of Kiwi workers last year – you get a 6% rebate on the tax on your redundancy payment (if you’re smart enough to be in your union and have redundancy provisions). The reason for this is that your redundancy payment is there compensate you for lost earnings until you can find new work but because it’s a large one-off payment it can push your annual earnings into a higher tax bracket, which is unfair and not the intention of income tax.
Paul Swain offered a good explanation of the reason for the rebate when it was introduced:
What happens now is that people will be entitled to a rebate, which will be based on a flat rate of 6c per dollar up to $60,000 in redundancy. That means, for example, that if a worker gets a $60,000 redundancy payoutâ€”and some people who have worked for 17 or 18 years in a particular place might be entitled to something like thatâ€”that worker is entitled to a tax rebate of $3,600, which he or she applies for. If, for example, a worker is entitled to a $20,000 redundancy payout, then he or she is entitled to a flat-rate rebate of 6c, which comes out at a $1,200 rebate. This is money going back into the hands of those workers. I say to the National Party that this is a good thing.
In the old days, up until 1992, the tax rate on redundancy was 5 percent. Then the National Party changed that and introduced a system whereby people got taxed on their normal rate. The problem now is that workers can be earning during the year, then get laid off and receive their redundancy payment, and that takes them into the highest bracket, because the total income is assessed for tax purposes in that tax year. What we are trying to do is say that, in fact, the redundancy payment is different from so many other things. It is compensation for loss of earnings, and it will enable workers to try to put a bit away when they are out of a job, until they get a new one. In this situation we should tax people more fairly, and I say that is a good thing. People should be able to get some tax relief when they have lost their jobs through no fault of their own.
I come back to my fundamental question. If the basic argument is to help these people out a bit, because it is no fault of their own, why is the National Party opposing this?
So, a mean-hearted National government upped the tax on redundant workers in 1992. Labour restored the previous situation in 2007. National voted against it, without ever admitting that they just don’t believe in being fair to workers.
Also hidden in the Budget is a 55% cut to the fund for educating workers about their work rights and a new provision allowing employers who hired people with the Job Ops rort subsidy to fire them within 3 months for no legitimate reason under the Fire at Will law.
In 2007, Paul Swain asked why National would oppose tax relief for workers who are made redundant and shoved into higher tax brackets. In 2010, the same question is asked as National removes that protection and others for workers.
The answer is the same: because they are a party of the rich that governs for the rich, not hard working Kiwis.