The Rates Blog points out a very interesting exchange between John Key and Phil Goff – they have the video available here. The transcript is:
Hon Phil Goff: Is it correct that low-income families with children will get nothing from the tax cuts today, and that that is why the Prime Minister told high-income earners who get hundreds of dollars extra in tax cuts that they should give to charities, in line with his trickle-down theory?
Hon JOHN KEY: No, that is not true. They get a Working for Families increase, which started on 1 October. Let me make this one point: let us take somebody on $44,000 a year, with two children. It is true that he or she gets a small tax cut—
Hon Phil Goff: No tax cut!
Hon JOHN KEY: On $44,000 the person does, Phil; do the maths. But that person does not pay any tax. Somebody on $44,000 a year, with two children, pays zero tax.
So many people are talking about the fact that low income people are getting a small tax cut – but even a “standard” family on $44,000 is effectively paying zero tax. Note that as our tax system is progressive this implies that all “standard” families earning below this level are actually paying negative tax. When it is framed that way, the fact that this group getting a bigger tax cut makes a bit more sense doesn’t it 😉