Tax changes to benefit families on low income

Press, 20 December 1985, Page 4

Tax changes to benefit families on low income

PA Wellington Tax changes and family assistance measures to be introduced next October will greatly benefit very low income families and families with several children, according to a report released yesterday by the Committee for Children. However, a one-child family supported by an earner in a traditional 40-hour-week, poorly paid occupation will gain little, if anything. The report was prepared by an Auckland economist, Mrs Susan St John, and analyses the impact of this year’s Budget on families. The Budget heralded some “momentous changes” to financial help measures for low income families, particularly the family support package and the guaranteed minimum family income for all earners with dependent children. f ‘Unfortunately, however, these changes do not give any immediate relief to hard-pressed families and have been introduced without any form of automatic protection from the ravages of inflation,” the report said. “The new proposals . . . will not take effect until October, 1986, so that from December, 1984, a period of 22 months, there will be no adjustment to any of the existing family assistance measures.” The report said prices

and average weekly earnings were both estimated to rise about 30 per cent over that period. The report said households with incomes of about $215 a week, or about half the average wage, would see a substantial improvement in their lot next October. However, the price of the improvement was likely to be a removal of any incentive to work any more than necessary to gain the guaranteed income. For other families the gains were mixed, with lowincome families with several children, and those with quite high incomes gaining because of the increased generosity towards extra children and the rather lower level of abatement of family support.

“Of most concern is the small family' on a low income of around 0.6 of the average wage up to the average wage,” the report said.

“The guaranteed income tax credits are not applicable and the change to family support does nothing to enhance the level of assistance for these families.

“Over all, the tax and tax credit changes to be made in October, 1986, will only partially compensate this Bfor the effects of drag and for goods and services tax. When the erosion in the real value of family assistance is taken

into account, some of these families will in fact be considerably worse off compared to their position in December, 1984, and compared to how they were treated in the early 80s.” The report said payment of family support to both parents equally was a welcome innovation that recognised the equal responsibilities of both parents whether or not directly responsible for the day-to-day care of the children.

However, it called the draft legislation “exceedingly complicated” which should be simplified if some who were eligible were not to miss out on benefits.

The report said a prime concern was the lack of any automatic adjustment to any of the family assistance measures. “There is no halt to the erosion of family assistance over the long period from December, 1984, to October, 1986. It is also likely that low income families have been more adversely affected by high interest rates and rises in food prices than the average household so that the decline in spending power as deflated by the C.P.I. understates the position for these households. “It is regrettable that there is no indication that any of the new family assistance measures will be regularly adjusted, like other benefits, in line with inflation.”