Monday, May 30, 2005

Income splitting

United future have just released their policy on taxation and I must admit it is looking pretty good. I did not vote United Future in the last election but am quite impressed with their taxation policies. Income splitting for couples with dependent children is a fantastic way to invest into the family and give mothers a chance to stay home with their children(if they choose to). I think it would need clear guidelines around it and I would have a limitation of about 30k that could be passed to a partner.

The Threshold changes and first 3k being tax free are also quite reasonable in the context that they are also proposing income spliting

I am however very surprised for them to say that their total tax package is only going to cost 2 -3 billion and am suspicious that this may be just the threshold changes without taking into account the income splitting side of it.


Karen said...

I did also get a little excited when I read about UF's policy on income splitting and know that this would be a big help to our family. I feel that if you are a two-income family sure pay heaps of tax but if I choose to invest in my kids by not going to work full-time why should we still pay so much tax. I just hope that the other parties will see the fairness in this and follow suit. And yes I also didn't know how the figures would stack up.

SubversNZ said...

I think the tax policy is a pretty good idea in the long-run, but it would have to wait at least until next year's budget (which it will) to ensure that it doesn't spike inflation. The Reserve Bank has only just said that inflationary pressure is down.

Aside from that, my only other objection is that UFNZ would sell NZ assets (such as NZ Post) to fund the tax cuts.

However, targeting families in such a way would be good.

What would be better, however, would be increasing funding for schools and healthcare, thereby reducing the costs for people who need it most.

Aaron said...

One of the ways they could fund income splitting is by putting a stop to the progressive roll out of the new "Working for Famlies" package. The government has gone way to far with the increase to family support.
Family Support was due for an increase and the changes effective from the 01/04/05 in my mind were a fair increase. However the progressive increases over the next two years are extreme overkill. Over a three year period some people (and I don't just mean a tiny minority) will have had their family assistance increase four fold. What is the problem with this? Quite simply Family Assistance encourages welfare dependance and can actually end up being a disencentive for people to work 40 hours weeks (as soon as they are earning over 38k each dollar they earn is only worth 22c in real terms, assuming they don't have a student loan in which case it would be 12c ). Where income splitting encourages wealth creation and for people to earn a living themselves.

SubversNZ said...

Yes, instead of putting the money into income supplements they could put it into healthcare and education.

I think that targetted welfare encourages dependence, which is why I advocate an increase in spending on those universal services.