John Key has announced Working for Families would be kept unchanged by a National-led government. That’s the same Working for Families that National attacked endlessly. Key himself said “Working for Families is a real ‘Maharey special”. It started as a mess, it was completed as a mess, and it will remain a mess the whole way through.”
National was particularly concerned about two things: that a few high income ($100K plus) families with a large number of children (4+) get small Working for Families payments ($1.1 million in total was paid to 1000 families earning over $100K in 2007) and that the abatement rate on Working for Families is too high (for every extra dollar of family income of $35,000, 20 cents is taken off WfF payments) meaning that for every extra dollar you earn you only get 80 cents richer, before tax. Of course, simple maths shows you can solve one of these ‘problems’ but not both – if you want WfF to not be available to families earning over 100K, you need a steeper abatement rate (a cut-off point is just an even higher abatement rate), or if you want a shallower abatement rate so that people lose less of their WfF payments for every extra dollar they earn, then people will still be eligible for payments at even higher incomes. The only way to solve both issues would be to make all WFF payments lower.
Labour chose a middle path between abatement rates and high income recipients but that didn’t stop National attacking. Now, they’ve been forced to concede they can’t do better.
The tens of thousands of Kiwi families who pay little or no tax thanks to their WFF tax credits will be breathing a sigh of relief but National now has a real problem. They’re still promising big tax cuts and there’s no money left to pay for them – they’ve guaranteed all major spending. That just leaves borrowing. Will Kiwis vote to borrow for tax cuts for the rich?
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