9 June 2004 Media Statement

Working for Families package beats tax cuts any day

The government’s $2.75 billion Working for Families package boosts the incomes of working families more than any tax cuts package ever could, says Social Development and Employment Minister Steve Maharey.

Speaking at a post-Budget forum hosted by the Wellington People’s Centre this evening, Steve Maharey said it was time for those political parties advocating tax cuts to admit that slashing taxes would benefit single people and couples without children on high incomes – and would make no real difference to the weekly earnings of low-and-middle income working families.

“Tax cuts are not the solution for working families struggling to raise their children. They are a very blunt instrument and put most cash back in the pockets of those who need it least.

“That’s why the Working for Families package delivers, in effect, targeted tax cuts by using the existing Family Support system to significantly boost the weekly incomes of working families with children. Families start gaining in October, with substantial gains from Family Support changes beginning next April.

“For example, a two-parent single-income family with four children earning $55,000 will gain an extra $150 per week from the Working for Families package. Tax rates would have to reduce to a flat rate of 9-and-a-half cents in the dollar to boost their income by the same level. Even Act is only currently advocating taxes being cut to 18 cents in the dollar, with cuts to essential family services to pay for them.

“Other families do not even pay enough tax for tax cuts to deliver equivalent benefits to the Working for Families package. For example, a two-parent dual income family with two children earning $37,440 will gain an extra $160 per week from the package. Because they currently pay $140.24 per week in income tax there is no way to reduce the tax they face to ensure they gain the same or more income.

“It’s very plain that, when National and Act advocate cutting taxes, families are at the bottom of their priority list. This government puts families at the top of its list – that’s why well over half (61 per cent) of all families with children will benefit from the Working for Families package,” Steve Maharey said.

ENDS

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