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Most households would be better off under National’s plan to cut taxes and boost support for families – except those who have two-year-old children, analysis shows.
National revealed its plan on Wednesday morning, which includes an adjustment of tax brackets, rebates for childcare and a boost for Working for Families.
The tax adjustment would deliver a maximum fortnightly saving of $51 a fortnight, to those earning $54,000 to $66,000 a year.
The childcare rebate would be available at a maximum of $75 per week per household to families earning up to $180,000 although support tapers off for those on the highest incomes.
Labour, for its part, would offer the 20 hours’ childcare subsidy to two-year olds, adjust Working for Families in the same way and cut GST on fruit and vegetables.
Analysis by Brad Olsen, principal economist at Infometrics, shows that a family with three children and two earning parents, earning a combined $92,966.80 a year would be $30 a year better off under Labour’s plan, if they had no two-year-olds, and $163.20 if one of their children was two. Under National, they would be $117.54 a week better off.
A household with four kids and a combined income of $115,000 would experience the same benefits from Labour’s plan, or be $122.35 a week better off under National.
A single person with no kids would be $5 a week better off under Labour’s plan, assuming that is the saving generated by the removal of GST, and $25.38 a week better off with National. (See the table at the bottom of this article for all the scenarios.)
Olsen said it was clear that both parties were aiming for the lower- to middle-income vote.
Stuff
Chris Hipkins and Christopher Luxon are offering households relief in different ways.
He said for people without two-year-olds, anyone who was on the full-time minimum wage or more would get more from National than Labour.
“It’s targeted to politically a group that will want to be targeted. It’s more targeted than the original edition of National’s tax plan announced last year, this is a lot more targeted on those lower-to middle-income earners. It’s certainly a lot more targeted than Labour’s GST policy, which is untargeted.”
He said there were also questions about whether the GST cut would deliver the $5 a week that Labour had suggested as a saving for households, but people would be able to count on the tax saving happening if National took power because it was within the Government’s control. “The National Party tax plan is certainly more comprehensive and far more targeted. This is quite directly going to affect household finances week to week.”
He said, while on the face of it, the Labour policy looked the most generous for people with two-year-olds, it was not necessarily so straightforward.
“It’s true at a high level that having a two-year-old makes a difference. But that goes as a subsidy to the centre, not the household. Given ECE rates have climbed, it’s not a direct one you see as a household. There’s not as much choice.
“If I had a two-year-old, for example, and or a one-year-old or a three-year-old that I wanted to put into childcare, under National I can choose where they go and get money back to me directly. I can choose to put them in an expensive one or a non-expensive one. If you’re getting 20-hours free for a two-year-old you’ve got to have that two-year-old and that rebate is effectively off the charge that I would get from my childcare centre, it’s still set by the childcare centre.”
University of Otago associate professor Dennis Wesselbaum said middle-income families were a sensible group to target.
“You can’t go wrong with that. I think that’s where the evidence says we will have most of the gains. Whether this is a lot or not, that’s always a question which is more philosophical than economical.”
National would also slowly reintroduce property investors’ ability to claim interest costs off their taxable income and would end the fare reductions Labour introduced on public transport for young people.
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