Budget Turns $20 Hard Labour Into 16 Cents

The effect of the Budget's extension of the "poverty trap" to middle-income working families means many Kiwi families will now be effectively working for 16 cents an hour if they try to get ahead, ACT New Zealand Finance Spokesman Rodney Hide revealed today.

"A single-income family, on the average wage of around $40,000, is now likely to be paying 88 cents - effective - in the dollar marginal tax rate," Mr Hide said.

"This is because they have been brought within the strict abatement rates for accommodation supplement and family support, on top of the PAYE income tax. The ACC earner premium takes the tax rate to 89.2 percent.

"If the household is one of the over 300,000 with student loan debts, they are likely to be paying the minimum student loan repayment of 10 percent on their income.

"The total effective tax rate is therefore 99.2 percent. In other words, Dr Cullen will not even let these families keep one percent of their extra earnings.

"The average wage of around $40,000 works out to $800 a week, or $20 an hour for a 40- hour week.

"At the 99.2 percent effective tax rate faced by these households, earning an extra $20 an hour means keeping just 16 cents of it. Who would work overtime for just 16 cents an hour?" Mr Hide asked.

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