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Nasty attacks on workers hidden in Budget

Written By: - Date published: 11:25 pm, May 23rd, 2010 - 30 comments
Categories: budget 2010, class war - Tags:

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 payout—and some people who have worked for 17 or 18 years in a particular place might be entitled to something like that—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.

30 comments on “Nasty attacks on workers hidden in Budget ”

  1. Jim Nald 1

    They are showing their real colour despite recent months trying to suppress it.
    They can’t help themselves. And some of us erroneously thought they have changed.

  2. Lanthanide 2

    Wow, that’s really shocking. So much for wistfully thinking National might back compulsory redundancy clauses for all employees.

  3. tc 3

    Why am I not surprised…..the ruling class are true to form. The arrogance continues at a breathtaking pace.

  4. lprent 4

    I suspect that the National party just doesn’t like redundancy payments

  5. really 5

    You mean because the income tax brackets have fallen so much that any redundancy packages will be taxed way less anyway.

    Shouldn’t the headline read ” Govt. reduces tax on redundancy payments”

    • A Nonny Moose 5.1

      Please. When you’ve already been kicked in the teeth once from redundancy, you don’t need the extra financial stress.

      National – lacking in empathy since.. well, forever.

    • Lanthanide 5.2

      If you were in the <$14k bracket, and your redunancy put you over it, previously you would pay 15% tax on the redundancy instead of 21% (-6).

      If you were in the <$48k bracket and your redundancy put you over it, previously you would pay 27% tax on the redundancy instead of 33%.

      If you were in the <$70k bracket and your redundancy put you over it, previously you would pay 32% tax on the redundancy instead of 38%.

      The new rates for the same situations:
      17.5% instead of 15%
      30% instead of 27%
      33% instead of 32%

      So no, the Govt has not "reduced tax on redundancy payments" for anyone.

      Perhaps you should try actually analysing the facts before you open your trap to parrot blind praise for National.

  6. randal 6

    everywhere you look the government, and local bodies for that matter are seeking to maximise revenue by venal underhand tactics that would put a roman tax gatherer in biblical times to shame.
    we have truly entered the age of progress where everything is withering on the vine except the rapacity of the birrocasee.

  7. toad 7

    Marty, can you give us a link to the extension of fire@will to Job Ops jobs.

  8. Croc 8

    I haven’t seen anybody mention the effects of the ETS yet:

    When New Zealand’s emissions trading scheme (ETS) starts in just over a month households will be paying a “modest” $3 a week, Prime Minister John Key says.

    Petrol prices were expected to rise by three cents a litre and electricity by 5 percent when the ETS starts on July 1.

    “The question is for a household, are they prepared to pay $3 a week for the insurance premium of our environment and I think the answer to that is yes,” he told TVNZ’s Breakfast.

    1. This further erodes the latest tax cuts.

    2. The ETS will do nothing to protect the environment.

  9. Nick 9

    The Redundancy Tax Credit was introduced for the sole purpose of avoiding redundancy payments being taxed at 39%. Because the 39% bracket was now been reduced to 33%, e.g minus 6%, the 6% Redundancy Tax Credit’s purpose has been, if you will pardon the pun, made redundant.

    So do you take back the false claims made in the original post? E.g “In 2010, the same question is asked as National removes that protection and others for workers.” Even someone who had given a cursory glance at the budget coverage should know this was not the case.

    And are you thanking National for reducing the top tax rate for hardworking kiwis to 33%?

    I will not hold my breath on both counts.

    • Anita 9.1

      We can discuss the supposed rationale behind the removal of the 6% rebate, but let’s talk about the reality for real hard working New Zealanders.

      After a quick glance it appears to me that every single person made redundant will pay more tax on their redundancy payment after these changes (and yes, I am taking into account the reduction in tax rates). Do you disagree?

      • Anita 9.1.1

        I think we can assume, given Nick’s lack of reply, that he has checked the numbers and realised that every single person made redundant will pay more tax on their redundancy payment after these changes.

    • Bright Red 9.2

      No Nick. It was introduced to protect any worker who would be pushed into a higher tax bracket by a redundancy pay out.

      Tell me, are there still tax brackets after the Budget changes? Yes? Then the rationale still exists.

  10. Nick 10

    “No Nick. It was introduced to protect any worker who would be pushed into a higher tax bracket by a redundancy pay out.”

    So you know the purposes of the policy better than the Minister of Revenue himself?

    • Anita 10.1

      Nick,

      a) You are not, as far as I am aware, the Minister of Revenue; so it’s presently Bright Red vs Nick. If you want to provide some evidence of Peter Dunne’s understanding of the situation go for it, but you haven’t thus far.

      b) You don’t use the handy reply functionality, and you don’t attribute your quotes, which makes your comments really hard to follow. Could you please do at least one of these.

      • Nick 10.1.1

        Here you go Anita:

        http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10646690

        “But Revenue Minister Peter Dunne said the tax credit was introduced to prevent redundancy pay being taxed at 39 per cent.

        “With this tax rate being reduced to 33 per cent the original purpose of the tax credit no longer exists,” he said.”

        So, do the two of you still think you know the purposes of the policy better than the Minister of Revenue?

        • Bright Red 10.1.1.1

          If the quesiton is ‘why was this introduced’ I would rather go off what was said by the people introducing it when it was introduced then by the people repealing it as they try to justify themselves.

          And it’s quite clear that its point at introduction was to undo National’s previous repeal in 1992 and restore protection for workers who would otherwise end up paying higher tax on their redundancy. Nothing to do with the 39% bracket, no one mentions the 39% bracket in the debate when the law was passed.

          As long as there are any brackets, there is a reason for this rebate.

          sounds to me like you’re just making up excuses to justify higher taxes on workers who lose their jobs, a lot like your hero Dunne.

    • Bright Red 10.2

      I’m going off the quotes from when the rebate was introduced, like the one in the post/

      • Anita 10.2.1

        I stand corrected, it’s now Paul Swain and Hansard vs Nick.

        I’m thinking Nick really needs to come up with some evidence to back up his assertion he is speaking on behalf of Peter Dunne.

  11. Nick 11

    A more contemptible man than Peter Dunne you would struggle to find.

    However both of you seem to think that you know better than the Minister of Revenue, both at the time of the introduction of the bill, and now.

    Ah, the arrogance of the left.

    • Lanthanide 11.1

      Yes, the arrogance of “the left”.

      Did you know, Nick, that actually the 39% tax rate did not exist in 1992? Therefore Peter Dunne’s reasoning is completely fallacious.

      captcha: holes

    • Anita 11.2

      Nick,

      Do you have any evidence, any evidence at all, of what Peter Dunne knows or believes?

      You keep asserting that you know what he knows, but short of evidence of your own psychic abilities you’re going to need to link to some material produced by Peter Dunne.

      Unless, of course, you’re just making it up.

      By the way I’m making no claims about this particular matter, I freely admit to knowing nothing of the history of the taxation of redundancy payments. What I am saying is that you are making unsubstantiated claims … again.

  12. Rich 12

    Overseas, rendundancy payments are entirely tax free. That’s in the UK. In Switzerland, you get about 80% of salary from the state for the first six or so months.

  13. Gazza 13

    National only came into power because a lot of young immature middle income earners thought they where going to get rich quick.
    Now they are paying the price of defection as their jobs quickly disappear and now they are the first to start bitching.
    It was always on the cards that they where going to play with the tax for the benefit of their mates and keep the poor under foot, and it will continue as they sell our last kiwi owned bank then allow foreigners to take over our dairy farms.
    It is now to late as by next election time the damage will be irreversible.

  14. randal 14

    some call this the hip pocket budget but I call it the brown budget.
    why?
    because it is full of crap.

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