Speaker 1: Kyoda. I'm Georgina Campbell in for Chelsea Daniels and this
Speaker 1: is the Front Page, a daily podcast presented by the
Speaker 1: New Zealand Herald. The government's long awaited tax cuts are
Speaker 1: finally coming into effect from today. National campaigned strongly on
Speaker 1: the cuts and on Budget Day announced a fourteen billion
Speaker 1: dollar tax package for the next four years. The average
Speaker 1: kiwi should soon receive an extra forty dollars a fortnight
Speaker 1: to spend how they wish, with more benefits coming for parents,
Speaker 1: but the lowest income earners are only set to gain
Speaker 1: nine dollars. So is this tax package fair for all?
Speaker 1: And will it provide the cost of living relief the
Speaker 1: government promised? Later we'll get more inside on how to
Speaker 1: best use your tax cut from Auckland Central Budgetings Theresa White.
Speaker 1: But first on the front Page, we'll get the political
Speaker 1: rundown from New Zealand Herald Deputy Political editor and my
Speaker 1: on the Tiles podcast co host Thomas Cocklin. Thomas, who
Speaker 1: are the winners and losers from the tax cuts and
Speaker 1: working for families changes coming into effect?
Speaker 2: So the big winners are people who work and all
Speaker 2: of those workers proportionately. It's people who and what you'd
Speaker 2: call the middle income range a sort of sixty thousand
Speaker 2: dollars popping up seventy thousand dollars. The government made the
Speaker 2: decision or not to abolish or to shift that top
Speaker 2: rate of tax, which is thirty nine percent on income
Speaker 2: and over one hundred and eighty thousand dollars. So that
Speaker 2: basically means that after about seventy thousand dollars, you don't
Speaker 2: get any more money from this tax package than you
Speaker 2: would otherwise. So someone earning say five hundred thousand dollars
Speaker 2: would get the same from the tax cut part of
Speaker 2: it as someone earning about eight thousand dollars. Roughly there
Speaker 2: is I think the best way to think about the
Speaker 2: tax package is as two parts. One of it is
Speaker 2: just cutting your taxes. When you work, obviously, you pay
Speaker 2: tax at a rate which is determined by how much
Speaker 2: money you earn. What the government has done is adjusted
Speaker 2: all those brackets up would by eleven point five percent.
Speaker 2: Thereabout system changes apart from that top tax bracket, and
Speaker 2: that basically means that if you have a job, you
Speaker 2: will pay slightly less of your income and tax. That's
Speaker 2: the first part, very easy to understand. The second part
Speaker 2: is that. There are a number of schemes that the
Speaker 2: government has which are situational and that changes how much
Speaker 2: money you get depending on your situation in life. So
Speaker 2: the biggest part of that is probably a Family boost
Speaker 2: tax credit. Now that is for young families who have
Speaker 2: children in early childhood education. You can get up to
Speaker 2: seventy five dollars a week from that, which is a
Speaker 2: tax credit that basically world it's like a rebate on
Speaker 2: your early childhood costs. So you pay money for early
Speaker 2: childhood education and then at the end of every quarter,
Speaker 2: I believe id will give you a refund of some
Speaker 2: of your costs up to seventy five dollars a week.
Speaker 2: So that's a fairly massive tax cut. And as far
Speaker 2: as the income tax cuts are concerned, the most you
Speaker 2: can really get is about twenty dollars a week, but
Speaker 2: obviously you only get that if you have a young
Speaker 2: child in early childhood education and you spend rather a
Speaker 2: lot of money on early childhood education. So it is
Speaker 2: a lot of money, but not a lot of people
Speaker 2: get it. The other couple of things are changed to
Speaker 2: working for families, so that's a few hundred thousand families
Speaker 2: who are in work not on a benefit, they get
Speaker 2: more money through what's called an inwork tax credit up
Speaker 2: to fifty dollars a week. That is a very common
Speaker 2: tax credit. Many load of middle income families who work
Speaker 2: get it. Some people possibly even don't even know that
Speaker 2: they get it. It was introduced by Labor many years
Speaker 2: ago by the Hell and Clark government, and so that
Speaker 2: it's periodically adjusted. Labor was looking at adjusting it to
Speaker 2: it the election stune app So there you go. And
Speaker 2: the other one, the real hidden gem of this tax package,
Speaker 2: I think, is the Independent Earner tax Credit. This is
Speaker 2: a tax credit of ten dollars a week which is
Speaker 2: designed for people who don't have children and who aren't
Speaker 2: on a benefit, that are the sort of struggling middle
Speaker 2: if you like. So it has an income floor, so
Speaker 2: it means that if you're sort of a kid on
Speaker 2: a paper run, you don't get this tax credit. But
Speaker 2: if you basically if you have a full time job
Speaker 2: but you don't earn a whole lot of money, you're
Speaker 2: quite likely to get it. It's a ten dollars a
Speaker 2: week bolt onto the tax system. And what it basically
Speaker 2: means is that people who are on middle incomes, who
Speaker 2: aren't receiving any other support from the government. Think about
Speaker 2: someone in their twenties or thirties who doesn't have kids,
Speaker 2: working hard but probably not hitting the peak of their
Speaker 2: owning potential. They get an extra ten dollars a week
Speaker 2: through this tax credit, and that basically means that someone
Speaker 2: who's earning sixty five thousand dollars I think it caps
Speaker 2: out at sixty six it starts abating at sixty six
Speaker 2: thousand dollars now can take home about forty five dollars
Speaker 2: a fortnight from this package. So that's quite a lot
Speaker 2: of money for a text package, and it does help
Speaker 2: to kind of tilt the balance a wee bit at
Speaker 2: middle incomes. So what the government's done with the Independent
Speaker 2: and A tax creator has basically expanded its eligibility. It
Speaker 2: used to cut off much lower because inflations eroded the
Speaker 2: value of that. They've expanded the eligibility. So now it
Speaker 2: starts cutting off and I thinks sixty six thousand dollars
Speaker 2: and it's all gone by seventy thousand dollars, So that
Speaker 2: basically means that more people will be able to get it.
Speaker 3: This program has actually been designed to actually cap out
Speaker 3: so that actually someone like me, yes gets twenty dollars
Speaker 3: a week, but actually someone who's on lower middle income
Speaker 3: actually gets more than I get. That's exactly how it's
Speaker 3: been designed for lower middle income workers who actually that
Speaker 3: squeezed middle That's what we've done here. We've just lifted
Speaker 3: the tax brackets up and then we've kepped them at
Speaker 3: the top level.
Speaker 2: Now I'm getting around to the losers. The losers are
Speaker 2: beneficiaries who get nothing, and some people who are part
Speaker 2: time on the benefit will lose a small amount of
Speaker 2: money in order to for the scheme. One of the
Speaker 2: things that has been cut labors twenty hours of pre
Speaker 2: early childhood education being expanded to two roles. That's gone now.
Speaker 2: And the benefit and vexation changes that Labor had introduced,
Speaker 2: which meant that benefits would rise faster than they would otherwise. Well,
Speaker 2: those who have been rolled back to people who are
Speaker 2: on a benefit are not going to see the benefits
Speaker 2: rise as much as they would have done under Labor.
Speaker 2: So it's a real rebalancing of the transfer system towards
Speaker 2: young families and people who work against people who are
Speaker 2: on a benefit. And you can sort of see that
Speaker 2: at the election. Young women were the target voters for
Speaker 2: both parties, and so that early childhood education was designed
Speaker 2: to be a policy that appealed to those voters.
Speaker 1: This was obviously a major campaign promise for the government.
Speaker 1: How are they selling these tax cuts this week? And
Speaker 1: what does the opposition have to say about the cuts?
Speaker 2: It is excruciating. The government is selling them via social
Speaker 2: media blitz, they arranged post cabinet press conference around them.
Speaker 2: I mean, obviously, it's a fourteen billion dollar tax package
Speaker 2: over four years. It's a huge amount of money, so
Speaker 2: you'd expect them to make sure they get a good
Speaker 2: bang for their buck out of it. But I don't
Speaker 2: think New Zealanders will be able to move in the
Speaker 2: next few weeks without hearing some government minister talk about
Speaker 2: how great it is that New Zealanders are getting to
Speaker 2: keep more of their income. To be feared that it's
Speaker 2: the first time in fourteen years that the tax system
Speaker 2: has been substantially adjusted like this, so that actually is
Speaker 2: quite a big deal. Marginal tax rates did creep up
Speaker 2: for many New Zealanders, and it would have meant that
Speaker 2: this year, for the first time, someone earning the full
Speaker 2: time minimum wage would have had it part of their
Speaker 2: income tax at thirty percent. Not much, It would have
Speaker 2: only been a few hundred dollars tax at thirty percent,
Speaker 2: but it would be quite a historic event to see
Speaker 2: someone on the minimum wage, working full time being taxed
Speaker 2: at such a high rate. You can see why they're
Speaker 2: crying about it because it's quite significant obviously that it
Speaker 2: has come at a large cost. So labors sort of
Speaker 2: working up many examples of areas where the things that
Speaker 2: have been cut to pay for them would have made
Speaker 2: a greater difference to household budgets than the amount of
Speaker 2: money people will receive and tax cut. So I've got
Speaker 2: an example of a household income of one hundred and
Speaker 2: twenty thousand, which is two people earning sixty thousand each.
Speaker 2: And they look at sort of cuts to public transport subsidies,
Speaker 2: the prescription charge which has been reinstated, rates and insurance
Speaker 2: costs that have gone up, just to make the case
Speaker 2: that these tax cuts will obviously give people some money,
Speaker 2: but they will take it away in other areas and
Speaker 2: in some cases, in many cases, some people will be
Speaker 2: worse off at the end of the day. Interestingly, I
Speaker 2: spoke to Chris Sipkins, the labor leader on my podcast
Speaker 2: last week, and he didn't make the point that eventually
Speaker 2: Labor was going to have to look at adjusting the
Speaker 2: text thresholds, because if you don't adjust them, then people
Speaker 2: do start to get text at too high a rate
Speaker 2: of tax.
Speaker 4: Fiscal drag is a problem. I acknowledge that fiscal drag
Speaker 4: is a problem. We should always look at how we
Speaker 4: can support people on the lowest incomes, and text is
Speaker 4: one of those ways. But also one of the debates
Speaker 4: about income text that frustrates me is that the parties
Speaker 4: on the center right of the political spectrum have been
Speaker 4: stressing for decades now that the way you raise people's
Speaker 4: incomes is to cut their taxes. Actually, the way you
Speaker 4: raise their incomes is to make sure they're big paid more.
Speaker 2: And now obviously Labour's having this discussion about what will
Speaker 2: probably be a text switch of some kind of capital
Speaker 2: gains tax perhaps which will allow them to cut and
Speaker 2: come text breads elsewhere. But at the moment they're looking
Speaker 2: at the cost of living hacks that Labor had at
Speaker 2: the last election, which did reduce people spending in certain areas,
Speaker 2: and the fact that actually, you know, the tax cuts
Speaker 2: at the end of the day might not be worth
Speaker 2: some of those more targeted and dimensions that labor had.
Speaker 1: One thing that could eat into these tax cuts that
Speaker 1: sticks out for me, it's the sky high rates increases
Speaker 1: that councils around the country have just signed off on.
Speaker 1: But could there be more relief coming late this year
Speaker 1: with cuts to the official cash rate looking likely.
Speaker 2: It depends on everyone's circumstance. So two thirds of households
Speaker 2: own their own house. In March of this year, LGNZ
Speaker 2: published figures that said there would be an average rates
Speaker 2: rise of fifteen percent, which is huge CPI and FLASH
Speaker 2: and was tracking to come into the one to three
Speaker 2: percent band by the end of this year. Fifteen percent
Speaker 2: is a massive so certainly what the government returns to
Speaker 2: some households will be more than easing up by councils,
Speaker 2: and that is that is certainly something that the government
Speaker 2: is frustrated with. So there were oftenly a third of
Speaker 2: households own a house without a mortgage. Many of those
Speaker 2: are retirees. New New Zealand has just under a million
Speaker 2: people who collect superannuation and are retired. Many of them
Speaker 2: will own their homes outright without a mortgage, although some
Speaker 2: do still have a mortgage. A growing number. A third
Speaker 2: of households own their home with a mortgage, and I
Speaker 2: think have an average mortgage of less than three hundred
Speaker 2: thousand dollars. Another third of households don't have a house
Speaker 2: and therefore I don't have a mortgage. We have seen
Speaker 2: some evidence of rents moderating, so that third that rents
Speaker 2: might get some overdue relief. Rents have gone up massively
Speaker 2: the last few years, and yes, so as the year
Speaker 2: goes on, we've already seen the wholesale interest rates start
Speaker 2: to show signs of easing, which will we eventually passed
Speaker 2: on to people who have a mortgage. And the amount
Speaker 2: of pain that will relieve already depend on the size
Speaker 2: of someone's mortgage. So if you're in that third of
Speaker 2: households that does have a mortgage, certainly, if you have
Speaker 2: one of those larger mortgages, you know, my heart goes
Speaker 2: out to you because you've been on the front line
Speaker 2: of this interest rate spike and you've been doing the
Speaker 2: heavy lifting to reduce inflation. So some relief to those
Speaker 2: households will finally be coming. Obviously, if you have a
Speaker 2: smaller mortgage, you'll get proportionately less relief, but of course
Speaker 2: the cost of living prices probably hasn't hit you like
Speaker 2: it's at other households, because you know the interest rate
Speaker 2: hikes that you will have had on your rather smaller mortgage,
Speaker 2: what WI you have actually fed through into your household
Speaker 2: budgets as much anyway, So you know, swings and roundabouts.
Speaker 1: Thanks so much for joining us, Thomas. The government has
Speaker 1: sold these tax cuts as relief for struggling kiwi's so
Speaker 1: how far is that relief going to be felt by
Speaker 1: the average worker? To discuss more, we're now joined on
Speaker 1: the front page by Auckland Central Budgeting's General manager Theresa White. Theresa,
Speaker 1: what do you make of these tax cuts, like how
Speaker 1: far will they go to providing people relief from the
Speaker 1: cost of living?
Speaker 5: Well, I mean, I think we all appreciate a little
Speaker 5: bit of money in a bake pocket right now. So
Speaker 5: it is tough out there. It's tough for everyone. Everyone's
Speaker 5: struggling in their own way. Our numbers have increased year
Speaker 5: on year in terms of people coming in to see us.
Speaker 6: We've had a.
Speaker 5: Probably one hundred percent increase in case numbers in the
Speaker 5: last couple of years and across the board throughout the country.
Speaker 5: Services like ours have had the man and forty percent
Speaker 5: increase in people coming in and using our services. So
Speaker 5: that kind of indicates that there's a level of financial
Speaker 5: distress out there that it's a little bit unprecedented. I've
Speaker 5: never seen it in the time that I've been working
Speaker 5: in our service, and it's gotten more since COVID. But yeah,
Speaker 5: a little bit of money is good, and I think
Speaker 5: that a shift in the tax bracket is long over due.
Speaker 5: But I think if it's at the expense of essential services,
Speaker 5: my personal values is that I would much rather make
Speaker 5: sure that everything's paid for properly. Some of the people
Speaker 5: at the lower end of the income scale aren't going
Speaker 5: to see any real relief at all, So it is
Speaker 5: really you know, beneficiaries, people on low incomes are it's
Speaker 5: going to be very, very nominal and they're just not
Speaker 5: going to see it. It's just going to go straight
Speaker 5: on household expenses, living expenses, for costs.
Speaker 1: And when you say you know that people are really
Speaker 1: struggling and you're seeing more people through your doors, can
Speaker 1: you give some examples of the types of things that
Speaker 1: they're struggling with.
Speaker 5: Yeah, So, I mean we have had an increase with
Speaker 5: people under more good stress. So that's definitely grown in
Speaker 5: the last year. It's the interest rates that have gone up.
Speaker 5: Its people that have bought recently. People are losing their
Speaker 5: jobs and then struggling to pay mortgages and with the
Speaker 5: higher interest rates that makes it much harder.
Speaker 6: That's a big thing going on, and.
Speaker 5: It's just those little things and these are some of
Speaker 5: the things that happen traditionally, but it's getting a little
Speaker 5: bit more market and pointed. You know, we've got super
Speaker 5: innuitance who aren't using heaters in the middle the winter
Speaker 5: because they're having to make the choice between buying food
Speaker 5: and putting the heat on, and that's not okay. You know,
Speaker 5: we've got an aging population in a period of time
Speaker 5: where we've got lots of people going into retirement who
Speaker 5: don't own their own home outright, So we're going to
Speaker 5: see kind of even more stress on that as time
Speaker 5: goes on. And when times the good people take on
Speaker 5: dish and then something happens and they can'tfford to pay it.
Speaker 5: And that's one of the biggest things that people come
Speaker 5: to see us about is debts that they've got and
Speaker 5: more and more is just the general cost of living.
Speaker 5: So like with the tax relief across the board, it
Speaker 5: might be fifteen to twenty dollars for kind of average
Speaker 5: to middle income that our rents in Auckland have gone
Speaker 5: up by about forty bucks a week over the last year,
Speaker 5: so it just gets canceled out in terms of that relief.
Speaker 5: So yeah, it's going to help a little bit.
Speaker 6: But it's not going to make a major impact to
Speaker 6: most petal swifts.
Speaker 7: Sam Summers runs a small business delivering food during the week.
Speaker 7: But along with today's onions, he also had this interpretation
Speaker 7: of his government tax cut.
Speaker 2: Is what the tax cuts represents to me? For me,
Speaker 2: it is equivalent of two dollars fifteen a week or
Speaker 2: free chubber chop lollipops.
Speaker 1: What do you think people will be spending their tax
Speaker 1: cuts on to improve their situation? You know, given their
Speaker 1: existing costs are already so high, you know, do you
Speaker 1: think they'll be putting that money towards paying off debt
Speaker 1: or mortgages or be soaked up by other household costs?
Speaker 5: Yeah, well, I mean my expectation is that most people's
Speaker 5: tax cuts will likely be swallowed by household bills.
Speaker 6: I mean, if you kind of do a bit of
Speaker 6: the math. I just did a quick calculation for me.
Speaker 5: I'm set to get maybe fifteen dollars a week, but
Speaker 5: my rates are going up, and my insurance has gone up,
Speaker 5: and I have to pay full price for my daughter's
Speaker 5: school bus fares, and the doctors have gone up and
Speaker 5: all of those things.
Speaker 6: So I think that's the thing.
Speaker 5: It will help pay for those things that are already
Speaker 5: risen or already gone and kind of bring us back
Speaker 5: to where we were maybe six months ago. But it's
Speaker 5: my expectation it's going to get swallowed by household living costs.
Speaker 5: If you are lucky enough to have it as extra
Speaker 5: money in your back pocket, I would just suggest people
Speaker 5: save and build up a buffer.
Speaker 6: That's my biggest.
Speaker 5: Learning from where I work is that people don't have
Speaker 5: money put aside, and when times are tough, they've got
Speaker 5: nothing to dip into. So I would really encourage people
Speaker 5: to do that, and yeah, pay down debt, get rid
Speaker 5: of it while you can. And it's just that interest
Speaker 5: on debt as an absolute killer.
Speaker 1: What else would you like to see from the government
Speaker 1: to improve people's lives and relation to the cost of living?
Speaker 1: If most of these tax cuts for some people are
Speaker 1: just going to be eaten up immediately.
Speaker 5: One thing is our benefits are very very low, and
Speaker 5: I you know, there's a lot of talk about how
Speaker 5: that works, but we see people who literally just don't
Speaker 5: have enough money to pay for food so after rent costs,
Speaker 5: so rents are really high. So if we have something
Speaker 5: that can help bring rents down to make people's lives
Speaker 5: affordable even housing costs, you know, there is some fundamental stuff.
Speaker 5: And you've got rents, how much they've increased. So we've
Speaker 5: gone from maybe you know, thirty percent of your income,
Speaker 5: which is still pretty high, to fifty percent of your
Speaker 5: income and then even maybe more so people are paying
Speaker 5: up to eighty percent of their income just to put a.
Speaker 6: Roof over their head. So that's one of the things
Speaker 6: that really needs to change, I think in our world,
Speaker 6: you know.
Speaker 5: And there's been some good stuff with it, you know,
Speaker 5: the family tax credits and we're tax credits, so they've
Speaker 5: been risen, but the threshold the entry threatshold to get
Speaker 5: them hasn't. So that would be really good to lift
Speaker 5: that as well, so more people can access that support
Speaker 5: and to make it available for beneficiaries as well. So
Speaker 5: what I say is We've got a little bit of
Speaker 5: adjustment for you know, low to middle income workers and
Speaker 5: those in the h higher brackets, but those in the
Speaker 5: lower thresholds have really really missed out in this package,
Speaker 5: so that gap between the haves and the have nots
Speaker 5: is widen considerably again, and I don't think that that's
Speaker 5: good for society.
Speaker 1: Thanks so much for joining us, Theresa, I really appreciate
Speaker 1: your time. That's it for this episode of the Front Page.
Speaker 1: You can read more about today's stories and extensive news
Speaker 1: coverage at zidherld dot co dot mzed. The Front Page
Speaker 1: is produced by Ethan Sills and sound engineer Patti Fox.
Speaker 1: I'm Georgina Campbell. Subscribe to The Front Page on iHeartRadio
Speaker 1: or wherever you get your podcasts, and tune in tomorrow
Speaker 1: for another look behind the headlines.