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    Essential Information on an Essential Issue

    Letter No.38

    8 May, 1996

  • SPECIAL ISSUE: The Tax Cuts and Social Policy Bill
    The government's tax cuts legislation is being given urgency in Parliament. The Finance and Expenditure Select Committee's report on the legislation has been accepted, and the Bill is now in its committee stage.

    Labour and the Alliance voted against the adoption of the Select Committee's report. NZ First supported it (they say they will put up amendments at the committee stage), and support also came from United, the Christian Democrats, the Conservative Party and the independent Ross Meurant.

    While the debate over the relative benefits of the tax cuts has been well covered by the press, our Media Watch reports that many of the social welfare changes in the "Tax Cuts and Social Policy" legislation have not been widely reported, nor nor has there been much publicity over the submissions made by community groups to the Parliamentary Select Committee.

    It seems clear that the tax-cut benefits are not going primarily to low and middle-income families, as was suggested when the package was announced in February. And the legislation is probably also the most comprehensive reform to the welfare state that we have seen in the last decade. Some of the community advocates appearing before the Select Committee have said that the provisions of this Bill will have a more negative impact on the unemployed and the poor than the 1991 Benefit Cuts.

    In this special issue of The Jobs Letter, we give an essential guide to some of the more controversial aspects of this legislation and the community debate on the changing welfare provisions that it contains.

    Bonnie Robinson and Dr Paul Dalziel on the Tax Cuts benefits.
    on the social policy changes ... from unemployed and beneficiary groups.
    -- do they work?.
    How much are we talking about?

    Among the many complex provisions in this Bill, it
  • introduces tax and benefit changes which will happen in two stages on July 1st 1996, and July 1st 1997. The legislation now before parliament provides for both stages.
  • drops the tax rates. The 24c tax rate on income less than $30,875 will fall to 21.5c. The income level where the 33c tax rate starts will rise from $30,875 to $34,200. And, in July 1997, the 21.5c tax rate will fall again to 19.5c and the income level for the 33c tax rate will rise again, from $34,200 to $38,000.
  • increases Family Support payments by $2.50 a week for each child from July 1996, and by another $2.50 for each child after July 1997.
  • increases the Guaranteed Minimum Family Income by $6 a week from July 1996, and by another $6 a week after July 1997.
  • introduces a new Independent Family Tax Credit, giving many families up to $7.50 a week for each child from July 1996, and another $7.50 a week for each child after July 1997.
  • introduces a dual abatement regime to take effect on 1 April 1996.
  • for widows, domestic purposes and invalids beneficiaries, there will be an abatement rate of 30% for income between $80 and $180 per week, with 70% abatement for income that is more than $180 per week.
  • for all other beneficiaries, there is an abatement rate of 70% for income that is more than $80 a week.
  • extends work-testing from 1 April 1997 to those whose youngest child is over 14yrs of age to (a) Domestic Purposes Beneficiaries and Widows Beneficiaries, and (b) spouses of those on the Unemployment Benefit.
  • introduces mandatory interviews from 1 April 1997 to Widows Beneficiaries, Domestic Purposes Beneficiaries, and spouses of those on the Unemployment Benefit.
  • introduces a system of graduated reductions and loss of benefit for 13 weeks for non-compliance with the work-test or with mandatory interviews.
  • the existing 2-week and high income earner stand-downs are replaced by a minimum one week stand-down, and a 1-10 week stand-down depending on both the gross income in the 26 weeks before the benefit application, and the family circumstances. The income thresholds are more generous for applicants with dependents.
  • reduces the stand-down period from 26 to 13 weeks for voluntary unemployment or for dismissal for misconduct.
  • introduces a new method for calculating the stand-down period for new applicants for income-tested benefits.
  • makes changes to the `clean slate' provisions from April 1997
  • gives Social Welfare the power to direct beneficiaries, who have been over 13 weeks on a benefit, to participate in a Community Task Force Scheme.
  • delegates authority for administering some aspects of the work-test to the Department of Labour, and revises the review procedures relating to decisions made by the Department of Labour.

    Independent Family Tax Credit
    a new tax refund programme only available to working low-income families who are not beneficiaries or on ACC weekly compensation.

    accommodation supplement
    an extra benefit available to low-income people who are paying a major amount of their benefit on house or flat rentals or mortgages.

    dual abatement regime
    the amount a person pays back to the government from what they earn from working while they are also on the benefit. This is a dual regime because it is now set at different pay-back schedules for different types of beneficiaries.

    being able to demonstrate that you are available for work now. (see box for the many ways a person can fail this test)

    mandatory interviews
    a time when you have to go to Income Support Service or the NZ Employment Service and explain your present circumstances for entitlement to a benefit. These are also a time for staff to offer guidance about possible training, education and employment opportunities.

    the period of time a person will have to wait for their benefit to start being paid, or a penalty time of non-payment for failing to follow the rules.

    clean-slate provisions
    good behaviour ways that a beneficiary can escape having their benefits reduced or cut off for not following the rules.

    voluntary unemployment
    choosing to leave a job for your own reasons, rather than being laid off or dismissed.

  • next : WHO BENEFITS?

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