Significant income redistribution after tax reforms

  • Steven Joyce

New data from the Treasury shows that income redistribution across New Zealand’s income tax and support system continues to increase, with the top 10 per cent of households forecast to pay 37.2 per cent of income tax in 2016/17, compared with 35.5 per cent in 2007/08.

“This latest data confirms that New Zealand’s income tax and support system significantly redistribute incomes to households in need,” Acting Finance Minister Steven Joyce says.

“Higher income households are paying a larger share of income tax than they were in 2008, and lower income households are paying less – the 30 per cent of households with the lowest incomes are forecast to pay just 5.4 per cent of income tax, compared with 6.3 per cent in 2007/08.

“This is before the effect of redistribution from Working For Families and benefits. The Government has increased support for low income families to help New Zealanders through times of need. So at any particular time, a large number of households effectively don’t pay income tax,” Mr Joyce says.

Treasury estimate that in 2016/17 42 per cent of households will pay less in tax than they receive from welfare benefits, Working for Families, New Zealand Superannuation and accommodation subsidies. This compares with 39 per cent in 2007/08.

“For the 30 per cent of households with the lowest incomes, the $1.7 billion of income tax they are expected to pay will be more than offset by the $10.6 billion they will receive in income support,” Mr Joyce says.

“It’s appropriate to maintain a tax and income support system that helps low and middle income households when they most need it. The Treasury data shows exactly how much re-distribution is occurring, and how much it is growing.”


Recent Government initiatives to support low-income families:

  • From 1 April this year, the Government:
    • increased benefits for children with families by $25 a week – the first real increase since 1972
    • increased WFF payments to very low income working families by $24.50 a week, and to other working families by up to $12.50 a week
    • increased childcare assistance for low-income working families.
  • On top of this, the Government has introduced:
    • free GP visits and prescriptions for under-13s
    • breakfast in all schools that want it
    • social workers in all low decile primary schools
    • the Youth Service, for young teen beneficiaries
    • Investing in Educational Success
    • insulating every state house that could be insulated
    • rheumatic fever prevention
    • Whanau Ora
    • the changes to Child, Youth and Family services
  • The best thing we can do for children in hardship is get their parents into sustainable, fulltime work where that is possible.

The number of children in benefit dependent households has fallen by around 40,000 over the last three years.