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Why Peter Dunne's Income Splitting Bill should be dumped

by Whaleoil on August 31, 2010

I don’t like Peter Dunne. I haven’t liked him since he was still in Labour. I think he is a self-absorbed pompous twat with a silly hair cut. That however is personal and somewhat silly on my part. What I really don’t like about Peter Dunne is that he has squatted in the Revenue Minister’s job for quite some time leveraging power that far exceeds his station in life.

Now he has come over all po-faced and serious and pushed his income splitting bill into the house. Quite simply the bill will provide a hideous distortion in taxation, far worse than Working For Families has already provided, and no good can come of it.

I was contacted via Facebook by a concerned parent who thought that though Peter Dunne won’t listen to her, he might listen to a pushy blogger ( I understand she has got the fob-off from the bouffant tosser in the past). This is her message, and it is one I 100% agree with.

I’m a single working mother; I work extremely hard to support my daughter on my own. I don’t receive any government assistance (no Working for Families, miss out on that too), and I’m quite happy about that. I’d rather pay my own way, than rely on a handout.

However, if this bill is passed, I will be paying an additional $4,000 tax per year than a family with exactly the same total income as myself (Around $70k). However, I’ll still have to pay $85 per week for after-school care. That figure triples in school holidays. A family with two parents might not have that expense (particularly if one parent is at home with the kids). In addition, my daughter doesn’t get the benefits that other children with stay-home mums do – such as the opportunity to attend after-school activities like ballet, netball, and so on. So my daughter is doubly disadvantaged.

I find the income-splitting bill incredibly unfair; basically, it suggest that single parents should be subject to a higher tax rate than married or defacto parents, simply due to their relationship status. In effect, it says that the children of two-parent families are more deserving of additional support than the children of single parents. And, quite frankly, I feel that my daughter should be just as valuable as any other child in NZ – and I strongly oppose ANY legislation which would suggest otherwise.

Peter Dunne’s income splitting bill should be dumped and so should he. It is unfair, discriminatory and creates distortions in our already bloated and distorted tax system.

Peter Dunne purports to represent some of the christian vote, perhaps he should consult Jeremiah 49:11 when pushing this bill thorough.

Jeremiah 49:11 (King James Version)

11Leave thy fatherless children, I will preserve them alive; and let thy widows trust in me.

In my book sole parents are the modern day equivalent of the “widows and orphans”.

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  • dave

    yes, Dunne’s Bill should be dumped but the sole parent in your example, with one kid on 70K can get a childcare subsidy through winz of $2.57 an hour – even on 70k. for up to 20 hours per week during term time, and up to 50 hours during school holidays.
    http://www.workingforfamilies.govt.nz/childcare-assistance

    According to the IRD website she can also get $14 a week on In Work Tax Credit – thats $728.00 a year
    can you tell her that?
    However its true that she’ll be comparatively worse off than others on income splitting.

  • titanuranus

    The last thing anybody should do is consult that ridiculous book “the holey babble” in regards to making political decisions,far better for them to deal with reality .
    No matter what taxation changes are implemented there will always be those who will claim to be disadvantaged,one way or another.
    Really,what`s another distortion to our fucked tax system going to do ? Nothing.

  • http://www.facebook.com/profile.php?id=1201173949 petal

    Cry me a river.

    Anything a government implements has winners and losers.

    Good on her for having the capacity and capabilities to generate a single income large enough to avoid WFF payments. Well done. Be proud. Have a think about how *above-average* that income must be to even achieve that.

    There may be valid reasons not to adopt income splitting, but that isn’t it. It may quite validly mean the proposed law needs fine-tuning. But it isn’t the basis for rejecting it altogether. She’ll and her daughter will survive just fine. To twist this into a point view where the law values her *child* less is word play.

  • orange

    More whining. So the married worker who has to support kids as well as a non-working spouse but on the same income has to work less hard for the money? You know it costs more than $4000 to keep a spouse around for a year eh?
    NZ has a proud tradition of thinking they can advance themselves by keeping others down. Someone else gets a little less tax? HOW UNFAIR!! not.

  • robf

    I am for Income splitting if for no other reason than it is Pro Family. Mum, Dad and the Kids. How often have we heard of Families splitting up because it is financially more advantageous for mum to be on a benefit.
    Support the Family unit I say.

  • jman

    I totally disagree with you here Whale as well as the writer of that letter. Income splitting encourages families staying together. ie mom and dad remaining together and raising their kids. It helps mothers stay home to look after their own kids which is better than having to put them into daycare from the age of 6 months like many kiwi families have to do.

    For once lets reward people who do the right thing instead of always rewarding people who do the wrong thing.

  • blondie

    Robf, I’ve never heard of any family splitting up for that reason. Maybe that’s something that some fathers like to tell themselves after their wives leave them?

    And Orange – as the single mother in question here, yes, I’m well aware that it costs more than $4,000 pa to support a spouse. However, I’m also of the opinion that any spouse of marriageable age is quite capable of earning a living and supporting themselves. If they choose not to – well, hard luck for choosing such a lazy spouse.

    And no, Dave, I’m not entitled to a cent in WFF. I will admit, I am entitled to about $1.57 per hour for afterschool care – as is any family on the same income as myself.

    I’m not asking for a handout. I just don’t want to support those who are capable of supporting themselves. The DPB and other benefits should, in my opinion, be a safety net for those who are incapable of supporting themselves; and I don’t see how introducing a new “benefit” for stay-home mums with high-earning spouses is going to result in a better NZ. It’s not even as if this bill was restricted to families with pre-school kids.

  • blondie

    Quite frankly, I’m surprised at you all. All I want is to be taxed at the same rate as anyone else on the same income as myself.

    But somehow, that’s an unfair thing for me to wish for. I’m not sure why, exactly. But, reading some of these posts, it seems that single parents should be financially penalised for having the audacity to be dumped, for leaving an abusive relationship, or for being widowed.

    As Petal says, I’ll be fine. I earn enough to support myself, and I’ll probably meet some lovely gentleman who is more than happy to cohabit with me and split expenses. But what about the other single parents who earn considerably less than me – who will also be disadvantaged by this rule; who already struggle to make ends meet and to put food on the table?

    And what about the married couples, on low or middle incomes – who actually won’t benefit from this bill anyway, because they already pay less tax (because of being on two lower incomes)? You do realise, Jman, that the “average” family won’t benefit for doing the “right” thing by staying together under this bill – well, not beyond $5 a week. Whereas the pampered trophy wife will get an extra $180 a week to spend on manicures and botox. Who’s this bill really helping?

  • hagues

    Good on ya blondie, totally agree that this bill is just stupid. At the end of the day if the govt. is taking too much tax resulting in families struggling to make ends meet then they should be reducing the tax rates. This bill is poorly targeted in that those who get the most benefit are those with the highest incomes. I don’t mind tax cuts for the wealthy in and of itself, but this bill is claiming to support struggling families and it does not do that. Never mind the increased inefficency into the system etc. A nice simple flat tax would solve this problem. It also removes all discrimination from the tax system.

  • The Gantt Guy

    Really, all Dunne Nothing’s bill is doing is levelling the playing field for those families who can’t, for whatever reason, structure their income-earning activities into corporate and trust vehicles. That is, those stuck in “permanent employee” status. The income-splitting bill is, IMHO, the second-least-worst option.

    Of course, a far more equitable solution would be to dispense with the marxist idea of graduated tax rates and move to the infinitely fairer flat tax (at say 20%). Balance that with a GST also at 20%, or even 25%, and income splitting wouldn’t even be close to the agenda.

  • blondie

    I agree with Hagues and Gantt Guy; a flatter tax structure would be a much better option. And would make the whole income-splitting issue a completely moot point.

  • jman

    “Whereas the pampered trophy wife will get an extra $180 a week to spend on manicures and botox.”

    blondie your post seethes with envy. It’s the usual kiwi tall poppy syndrome. What you don’t get is that income splitting helps ordinary middle class families. The rich already hide all their income in trusts, offshore accounts and whatever else their tax lawyers can get them.

    The middle class are the backbone of this country and they get almost nothing for their taxes (as you yourself point out). That’s why they’re leaving for Australia in droves and the country is the poorer for it.

    To me this idea is a winner – encourages families to stay together, and rewards the hard-working breadwinner.

    • blondie

      Jman, believe me – I have had plenty of opportunity to be a trophy wife. And may yet do just that, so long as I actually fall in love with the man in question (I draw the line at screwing for a living).

      And I’m well aware of mechanisms available to hide income in trusts and the sort. I help such people every day in my line of work.

      But, as you pointed out, the middle class workers are the backbone of this country, and, as you agreed, they get very little for their taxes, and even fewer tax breaks.

      Where you are wrong is in your assertation that this bill would help the middle-class. Do the math; it won’t.

  • jman

    Ok I will do the math. Lets take an example of a family of 4 where the sole income earner is on a salary of $80k p.a. (if you’re a labour voter you will probably say this makes them rich not middle class). At this pay scale they will not be eligible for any benefit except $40 a week from WFF.

    Under the current regime the families tax bill will be $20233, not counting ACC earners levy. With income splitting, if both spouses were then taxed as if they separately earned $40k p.a., their combined tax bill would come to $14420. Thats a saving of $5813 per year. Pretty significant if you ask me.

    The one big change I would like to see with the way it’s been proposed currently, is that the income gets split by the number of dependents you have regardless of whether those dependents are a spouse or a child. That way the childless couple and the single mother with 1 child both get to split their income in the same way. That seems fairer to me. I wonder if you would be happy with that?

    • blondie

      Jman – I’m sorry, but I still don’t have any sympathy for the family with the sole bread-winner on 80k. It was THEIR choice to have 4 kids, not mine, and if they can’t afford to look after them on the one income, then they either shouldn’t have had them, or should bite the bullet and send Mum back to work. After all, the family on two incomes of $40k – who currently have the same overall income of $80k and $5,813 less tax to pay (I assume your figures are correct), has had to bite exactly that same bullet.

      I tend to think that people should take responsibility for their own families, rather than expecting the taxpayer to pay for them. So if someone chooses to have kids, they pay for them. If someone chooses to have a hot young trophy wife – they pay for them. If someone chooses to have all of the above – again, they can pay for it themselves, and stop expecting everyone else to dig deep to support them.

  • The Gantt Guy

    What I’m seeing here is fierce agreement that there is a problem (that is, gutless governments addicted to stealing good peoples’ money) but disagreement on the way to solve it.

    Blondie … welcome to gotcha!

  • jman

    Actually my example was of a family of 4 – ie. mom, dad and 2 kids. Not a family of 4 kids. I chose those figures as being representative of a typical kiwi family on an ordinary middle class income, and how income spliting WOULD help them, since you challenged me to do the math that income splitting won’t help a middle class family.

    blondie you seem to be confused about the difference between paying less taxes and receiving a benefit. When you pay less taxes you are keeping more of your OWN hard earned money. You are not burdening other taxpayers in any way with having to pay for yourself. The family in my example are still net tax contributors, not beneficiaries. If they didn’t exist, the country would be financially poorer. So in no way are they placing any burden on you or any other taxpayer by getting a tax restructure that enables them to pay less tax. Get it yet or do I have to still spell it out even clearer for you?

    • Blondie

      Jman -

      OK, I’ll spell it out back to you.

      Why the hell should a single parent on 80k pay more tax than a married man on 80k?
      Both parents have kids to support; both have to put a roof over their kids heads. The married man doesn’t need a larger house than the single parent, cos (presumably) he shares a bedroom with his non-working wife.

      The main difference between the two families? The non-working wife. And for some reason, you think the husband on 80k should get some tax credit to account for the fact he’s supporting her. Well, if they’re finding it so hard, they still have the CHOICE to send the wife out to work. If she’s at home knitting sweaters for the kids and making choc chip cookies, that’s great, but it’s THEIR CHOICE. I don’t care what choice they bloody make, but I do care that they expect to get a tax break to accomodate that choice.

      Do YOU understand ME yet? Or do I have to spell it out even clearer for you?

  • Blondie

    Oh, and Jman? This stupid bill will cost the country what, 460 million if it goes through?

    That’s over three-quarters of the expected final cost of the SCF fiasco. Just think about it.

  • jman

    “Why the hell should a sin­gle par­ent on 80k pay more tax than a mar­ried man on 80k?”

    Why the hell should a person on 80k with 3 dependants pay the same amount of tax as a person on 80k with only 1 dependant?

    See what I did there?

    “The mar­ried man doesn’t need a larger house than the sin­gle par­ent, cos (pre­sum­ably) he shares a bed­room with his non-working wife.”

    Actually I think a family of 4 generally speaking will need a bigger house than a family of 2.

    “if they’re find­ing it so hard, they still have the CHOICE to send the wife out to work.”

    No they would have that choice if income splitting was in place. Let the wife stay home and raise the kids (something which is known to be good for kids and a positive benefit for the country) without taking a major hit to the family finances, or the wife can keep working if that is her choice and not much would change. As things stand right now, the only real choice is for the wife to keep working and put the kids in daycare, or else suffer a major loss of income.

    Regarding the cost, it’s my belief that the net benefit of this policy would easily outweigh the so-called “cost”. It would help families with being more involved in the raising of their kids. It would encourage families to stay together. It would be a huge financial boon to middle-class families. It would be the biggest incentive yet to not migrate to Australia.

  • Blondie

    Jman – your logic is flawed. The family with 3 dependents will be entitled to WFF; the family with 1 dependent won’t. Income-splitting isn’t depenedent on the number of kids – it’s dependent on the existence of ANY children, and two parents.

    I’m tired. I don’t want to argue anymore – you don’t care, you don’t understand,, and you never will. You have no idea how hard it is to be left, literally, holding the baby when the father meets someone else and falls in love with them instead. To keep holding onto the hope that maybe, one day, if you’re nice enough, if you’re pretty enough, one day they’ll come back and your child will have a father again. To make up excuses to your child for years and years, about how daddy does love them, he’s just so busy working hard….. To work doubly hard, trying to provide on one income what most families do on two, because you so badly want to give your child everything…..

    Tell me, Jman, how would the income-splitting policy have kept me and my daughter’s father together? When he was in love with someone else? I keep hearing that this policy would keep families together – believe me, I wish with all my heart that my daughter had a father – but for a million reasons that have nothing to do with any kind of tax incentive.

    • http://whaleoil.gotcha.co.nz Whaleoil

      Good answer B.

      Jman doesn’t have any logic…your logic is to treat all taxpayers the same, his and others answer is to prefer certain classes of taxpayers. There should be no favour in our tax system. If someone proposed tax breaks for Samoan or Maori families then there would be an outcry, but slamming sole parents by ignoring their tax status and placing favour on “families” with two parents is A-Ok.

      God this country is fucked up…everyone looking for their slice of the pie….well this cook ain’t baking no more pie.

      • The Gantt Guy

        Watch out, threadjack follows

        “God this coun­try is fucked up…everyone look­ing for their slice of the pie….well this cook ain’t bak­ing no more pie”

        Sorry Whale, gotta disagree with you there. I’d suggest most of your audience are not looking for their slice of the pie, we just want those skunks in Wellington to get their thieving fingers the FUCK out of our pockets and stop giving our hard-earned to someone else (whether by way of benefits, WFF, ETS or race-based handouts). Anything which depletes the government’s coffers and brings closer the time when New Zealand is forced to wake up to the fact it is bankrupt because of the culture of welfare redistribution and entitle-itis, is a damn fine thing. We appear to not understand that the most deserving recipient of money I earn is … ME!

        On any measure, this argument is about the symptom, not the disease. The only truly equitable tax system is on which applies a single, low flat rate to income (with a compensating tax-free threshold) and a comparatively high rate to consumption. Ergo, no disincentive to earning more, coupled with an incentive to spend less. Sad, the cowards in Wellington won’t go near anything close to this level of fairness and equity.

  • hagues

    jman “Why the hell should a per­son on 80k with 3 depen­dants pay the same amount of tax as a per­son on 80k with only 1 dependant?”

    I think you might be onto something. The person with 3 dependants is a much bigger drain on public services, what with all the doctors visits, 3 kids going through the education sytem etc. Lets charge them more to account for the extra burden they are imposing on the public. Ok we will let couples split their income for tax purposes but the rate at which we tax them increases by 10% for each kid. Sounds good to me.

  • jman

    Brilliant hagues. Why don’t we change govt policy to encourage people to have NO kids at all. That should really ensure the future of our country eh?

    Blondie and Whale, you both seemed to ignore what I wrote earlier which was to income split based on number of dependents, not on number of parents.

    Blondie the argument is not about you and your personal circumstances although I do feel sorry for what has happened to you. However you fail to point out that you will be entitled to maintenance from the father.

    The real argument is about whats best for the country. It’s the governments job to try arrange the tax system such that we can maximize the economic performance of the country thus increasing incomes for everybody and ultimately increasing the tax take, which benefits everyone including yourself. I have pointed out a number of positives that this policy will encourage and no-one has yet been able to dispute them or point out any negatives aside from wishy-washy claims that it is “unfair”.

    A few more points – whale, the tax system right now doesn’t treat all taxpayers the same. Higher income earners pay way more tax than low income earners. As long as we are going to persist with an inequitable tax system, then this is an invalid argument to make against income splitting. If blondie were arguing along the lines of the Gantt guy that all taxpayers should be treated equally with a flat tax, then I would agree there would be no need for income splitting.

    wff – Firstly I completely disagree with wff. It’s nothing but middle class welfare and income churn. But in the example I gave the family would be entitled to $40 a week from the scheme. A pittance and presumably a lot less than the ex has to pay for maintenance. Also, a single mother with 2 kids on $80k would be entitled to the same benefit.