Cullen's tax cuts will effectively be handouts for low income families

Did you know that a couple who have three kids and are earning $48,000 (or two kids on $38,000) effectively pay no tax? They get more from the Government for having these kids.

When Working for Families (WFF)handouts were announced, some described them as "tax cuts". Some may describe Michael Cullen's possible tax cuts as handouts - for WFF recipients.

If my calculator is correct, a family with two small kids earns $38,000, and pays $142.50 tax each week, and according to the IRD calculator they get about $187.00 back in WFF payments. A third child will get $57 extra.

If that family earned $35,000, they pay $131.25 tax a week and get back $199.00 in WFF payments - or $256.00 if they have three kids, $316 four kids. If the family had three kids and earned $48,000 they pay $200.19 tax each week and get back $204.00 in WFF payments.

Lets look at the family earning $48,000. Along with all earners on that salary, if the bottom tax rate was lifted to $50,000, they`d get a $20.00 weekly tax cut. If tax was not paid on the first $10,000 all earners will get an $18.75 weekly tax cut - enough for a block of cheese, (or, rounding up, exactly a third of a child - heh.) Or two boxes of mentos chewing gum.

Will Cullen be that generous? Doubt it.

Michael Cullen may give these families a tax cut, but it is effectively a hand out - he may as well increase their WFF payments. But seems that two thirds of it will be taxed in the emissions trading scheme.

No wonder Cullen wants employers to pay their staff more - he rather recieve more tax to help fund his tax cuts and let people chew up their WFF payments on higher interest rates.

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