FAMILY ALLOWANCES

Greymouth Evening Star, 6 October 1945, Page 3

FAMILY ALLOWANCES

OLD AMD NEW SCALES WELLINGTON, October 5. The Government’s family allowance proposals will give a net benefit of £43 a year to a man with a wife and two children, earning £4OO, The cost of the universal family allowance to the State has- been variously estimated but £9,000,000 a year, is probably somewhere near the mark. Other increases in Social Security benefits were estimated in the Budget to cost a little less than £4,000,000 a year, but some additional concessions have been made on the Budget proposals, and the total cost of all increases in benefits will probably be about £ 13,500,000, which is about the same as the yield from a wages tax of 1/- in the pound. Against this cost, the Government will get some advantage from the proposed abolition of the income tax exemptions for children, less the increase in the exemption for Wives. No reliable estimate of what this will amount to has been made yet, but it may be about £2,000,000.

The "ordinary income tax exemptions will apply to income taxation to be paid next February, and the. increase in exemption for a wife and the abolition of the exemption for children will not operate until the following year. The universal family allowance, however, will be paid from April 1 next. The Government has not indicated how this allowance will be 1 paid or whether it will be paid direct to mothers. Until the new universal allowance comes into operation the .basic qualification figure of £5/10/-' a week has been raised to £6/10/-. How the universal family allowance and the alteration in income tax exemption will affect typical cases is shown in the three tables below. In these instances it should be noted that the man on £3OO a year obtains no benefit, because he was entitled to get the family allowance in the past. The net advantage shown is the family allowance at £26 a year for each child less the increase in taxation or, in the case of a married man without children the advantage is the reduction in taxation as a result of the wife’s exemption.

The increase provided for in the universal superannuation is a longrange proposal which will have no practical effect for many years. It is an increase in the period during which the superannuation is increased by £2/10/- a year, and does not alter the rate of that increase. The superannuation will still amount to £22 this year, and £25 next year. It will reach the new maximum of £lO4 a year in 1979. How direct tax rates have varied since the beginning of the war is shown by the following tables. The first gives The total of income tax and employment charge in the year before the "war, and the second the total of income tax, Social Security charge and National Security taxation next vear at the present rate of taxation, but taking into account income tax exemption variation. However, it is generally expected that there will be some reduction in direct taxation — possibly 6d of the National Security tax.

Income Tax Paid on Present Basis £600 £ £300 £ £400 £ Man and wife 8 1-3 25 5-6 65 5-6 With two children 0 8 1-3 45 With three children 0 0 35 Income Tax on Proposed Basis £300 £400 £600 £ £ £ ' Man and wife 0 16 2-3 55 With two children 0 16 2-3 55 With three children 0 16 2-3 55 Net Advantage £300 £400 £600 £ £ £ Man and wife 8 1-3 9.1-6 10 5-6 With two children 0 43 2-3 42 With three children 0 61 1-3 56

Pre-War £300 £ £400 £ £600 £ Man and wife 13 3-8 25 5-6 53 1-6 With two children 10 16 3-4 42 3-8 With three children 10 13 1-3 37 1-3 1945-46 £300 £400 £600 £ £ £ Man and wife 37 1-2 66 2-3 130 With two children 37 1-2 66 2-3 130 With three children 37 1-2 66 2-3 100