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Working for Families fails the poor

Hon Lockwood Smith MP
National Party Revenue Spokesman
30 March 2006

Working for Families fails the poor

Labour’s Working for Families policy not only extends welfare to the wealthy but also fails the poor, says National’s Revenue spokesman Lockwood Smith.

Yesterday in Parliament he quoted Inland Revenue’s annual report that said one of the three main aims of Working For Families was to ‘Make work pay by ensuring that people are better off by being in work’.

“But IRD’s own figures show that doing more work to try and get off a benefit is simply not worth it,” says Dr Smith.

“IRD’s figures showed that a person on the Domestic Purposes Benefit with three children and trying to work their way off the benefit quite rightly still retains most of their benefit if they earn $10,000 a year through work. The family’s net disposable income would be $27,347.

“If however that person tried to become independent of the benefit and earned another $15,000 a year, their net disposable income would increase to only $29,041. In other words, they would get to keep only $1,694 of the extra $15,000 earned. The Government would take $13,306.

“This is because of the combined effect of benefit abatement and the progressive income tax system.

“When the Government takes 89 cents of every dollar you try to earn through work to get off the benefit, the policy has certainly failed to make work pay.

“Handing out welfare to families on $142,000 a year does not make much sense while you take almost 90 cents of every dollar earned by a much poorer family earning $10,000 to $25,000 through work effort,” says Dr Smith.


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