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Progressive power prices among Budget ideas

Progressive power prices among Budget ideas to reduce inequality

A multi-billion dollar pre-Budget proposal from the Green Party shows how the Government can help New Zealand’s poorest families and help everyone else in the process.

“Everyone has an interest in narrowing the gap between rich and poor, because inequality hurts everyone,” said Green Party co-leader Metiria Turei. “It’s become one of the defining political issues of our time.”

The proposed Budget package suggests; progressive power pricing, a tax-free $10,000 for all New Zealanders, extending the In-Work Tax Credit to 140,000 of the country’s most disadvantaged families, reinstating a discretionary Special Benefit and building 6000 state houses. Costs would be off-set by a comprehensive capital gains tax (except on the family home).

“Inequality is hurting everyone in New Zealand,” Mrs Turei said. “It lowers life expectancy in all income brackets, it increases obesity in all income brackets, it fills our hospitals and our prisons and we all pay.

“The smart move is to focus on reducing the gap between the haves and the have-nots so that we are all better off. This Budget package shows that we can start to narrow the gap right now. Unfortunately, John Key’s Government is making the gap bigger not smaller.”

The Mind the Gap package notes that New Zealand has some of the worst income disparity in the OECD and, since the mid-1980s, real income has fallen for low and middle income New Zealanders while income for the wealthy has soared.

One effect was that many New Zealanders struggled to heat their homes, according to Mrs Turei, with some of the most vulnerable families forced to choose between eating and heating. Living in cold, damp houses was estimated to cost more than $50 million in hospital admissions each year, the Green Party co-leader noted, and 180,000 work days were lost to sickness.

The Mind the Gap package proposes a two-step progressive power pricing system to address fuel poverty. The first portion of every household’s power bill would be at a low price, giving many more householders the chance to get warm and healthy. Additional power would be charged at a higher price, keeping the incentive for New Zealanders to save energy.

“Progressive pricing would help all of us, but has the biggest positive impact on our poorest families,” Mrs Turei said. “There are direct savings on power bills and there are flow-on benefits of more productivity and less health spending.”

Similarly, the Green scheme suggests making the first $10,000 of income tax-free, a system used in countries such as Australia, Canada, France, and Germany. While every New Zealander would benefit, those on low incomes gain the most proportionately.

Of all the proposed measures to reduce the income gap in New Zealand, the tax-free threshold would have the greatest fiscal impact, reducing tax revenue by approximately $3.2 billion each year. The package’s total cost is estimated at $4.46 billion per year, offset by a comprehensive capital gains tax that excludes the family home and is estimated to raise up to $4.5 billion annually.

Link to the Mind the Gap package


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