Bludgers

Re this: http://www.stuff.co.nz/business/81429047/Small-number-of-taxpayers-bear-the-brunt-of-New-Zealand-tax-bill

Small numbers of New Zealanders bear the brunt of the child caring work

More than one in four households are contributing nothing to New Zealand’s child caring burden. Some leading political commentators, notably David Farrar, have barely done a day’s child caring work in their lives.

Hundreds of thousands of New Zealand men, millions even, had their nappies changed and were fed and played with by their mothers and yet do only a tiny portion of childcare for the next generation. Some of these men consider that the least they could do is happily pay taxes that are used to fund benefits and tax credits that support caregivers. Others, to use a colloquialism, are selfish pricks.

Mum-of-one Charley Monger said the limited tax credits that New Zealand makes available to caregivers had helped her when she returned to paid work after her son was born.

“I get mine paid weekly but salary is monthly so it is nice to get a little each week, helps when it’s near the end of the month and I’m running short. I couldn’t afford to live each week without it.”

She literally couldn’t. Without the various means-tested benefits, her rent combined with childcare costs would exceed her income – despite earning well above the minimum wage.

Households with no children are not required to pay for child care costs at all. By comparison, households with children are required to take time out of the paid labour force to raise them, or pay child care fees – which are only partially subsidised.

Mark Keating, a senior lecturer in tax at the University of Auckland Business School, said the idea of “net caregiving” – the amount of care contribution you make to society, taking into account volunteer work, parenting or looking after relatives, tax, and monetary donations, was hard for some people to get their heads around.

But he said people who received any social support themselves, such as funded education, healthcare, or being raised by attentive caregivers, and who then set up trusts to minimise their tax contribution, could end up with a net result that was negative or neutral.

“If you are working and earn $1000 a week but have four children, you might pay $200 a week in tax but get back $300 in Working for Families. This recognises that families have additional expenses, and that the value of caregiving to our society. They are contributing so much in raising the next generation, it’s really not fair to expect them to also have a high tax contribution at this stage of their lives.”

Peter Vial, New Zealand tax leader at Chartered Accountants Australia and New Zealand, said some people would be surprised to find out the monetary value of the care giving they received as children.

“It’s not a calculation they would do automatically. In an ideal world it would be good if there was more knowledge about the interaction between paid and unpaid labour, and how invisible unpaid labour is – even to those who benefit from it.”

Many were unaware how dependent New Zealand was on a small group of individuals, mainly women, who did the vast majority of care giving, he said.

“We never talk about that. It’s always a risk to our society because people are mobile and can move. But New Zealand wants to remain a country with people in it, so it’s important that we support families.”

In the year to March 2014, there were 361,200 families receiving Working for Families tax credits, and the average tax credit received was $6720 per family, or about $130 per week.

Other households received benefits including NZ Super, accommodation supplement, sole parent support and jobseeker support. Ironically, NZ Super is not means tested and has no work-based eligibility requirements, while Working for Families has bizarre and arbitrary rules of eligibility and causes punishing effective tax rates.

Gareth Kiernan, an economist at Infometrics, said the data showed that New Zealand did not provide the same level of social support to families as many comparable countries, including Australia, despite having the same need for children to be raised that has faced all societies since the beginning of humanity.

Susan St John, associate professor at the University of Auckland business school said that ensuring those who do the work of raising children receive adequate financial recognition from the state was key to solving poverty.

“We are all in a negative position when you look at what the state provides. If you have an individual on a given income with no children and someone else with the same income and multiple children, they are not in the same position to pay tax. This gives some degree of horizontal equity.”

Deborah Russell, a senior lecturer in Massey University’s accounting school, said it would be better to think of the tax credits as payments to children, rather than their parents.

“Everyone regards superannuation as an entitlement – they think older people are entitled to support because they cannot work any more.

“But why not apply the same thinking to children as well? They can’t go out and earn money. Children do not choose their parents. They are not possessions or commodity items. We need to think in terms of supporting vulnerable citizens – the sick, elderly and children.”

St John said it was appalling that the Working for Families criteria had not been inflation adjusted since 2012, while the pension was adjusted by $10 a week.

 

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