The Budget

Although it is over one month since the budget was announced to the public the effects on students warrant another look. At present NZUSA is negotiating with the government to revise some of the more pernicious proposals and it is important if these negotiations are to be successful that students know exactly what the government has done and why.

Before discussing these moves, let's just see what the budget did for students. Consider the financial situation of four students earning $1000, $1200, $1500 and $2000 under the new budget proposals compared with their position under the old tax system (see Table One).

It requires no great financial ability to see the effects of the tax structure on students. It seems that the government has adopted the policy of taking from the poor and giving to the rich.

The Reality

Those who earn $2000 over the holidays (effectively excluding all female students and all but a few males) are able to receive one half of the nominal increase in the bursary, while those who earn only about $1000 (a common figure) end up losing money. For the mythical "average student" earning around $1200 in the holidays the benefit is negligible. So much for the "increased assistance....to be provided for tertiary students" (Budget 1978).

The government rationale for the new tax structure makes interesting reading.... "The effect of the (now abolished) rebate has been that no individual pays tax on his or her first $816 of annual income. The taxpayers who benefit most from this are part-time workers and those who...derive income for part of the year only...Typically these low-income earners are supplementing another primary source of income, either a husband's income, a social security benefit, or a student bursary, and there is no reason why they should pay stustantially lower rates of tax than low-income full-time workers." Muldoon states that on $5000 p.a. present tax is 20%, but on $2000 it is only 11%. Under the new scheme the tax rates will be 16.5% and 14.2% respectively.

Wouldn't it be Loverly

The biggest cut comes if you are on $10,000 p.a. (see Table Two).

(Figures from 1978 Budget)

Anyone for Overtime?

Muldoon claims the new scales encourage workers to do, overtime. He seems to think that the reason overtime is not worked at present is that employees shy at heavy tax. The real reason is that with the recession overtime is just not available. The tax reductions will benefit those who are on high wages and salaries, rather than those who are trying to supplement their inadequate wage by working overtime. If Muldoon had really wanted to remedy the anomaly of increased tax on overtime he could have done so by increasing the overtime rebate from the nominal 10c per hour to something more realistic.

Muldoon's reasoning is bankrupt. In these times of worker poverty, high inflation and increasing unemployment those who are taking part-time jobs are not, in general, doing so to get extra money for a colour TV, a trip to Tahiti or a new car, but rather just to get enough money to provide them with the basic necessities of life.

As wages continue to lag well behind prices, those on marginal wages find it progressively more difficult to make ends meet.

National's John Elliot speaking at Vic last term.

For a man on $100 pw the tax cut of $3.31 will be offset by the $1.50 increase in tax that his wife (working for about $30 pw) will pay. Who's kidding whom?

With the present job situation many of those taking part-time jobs are not doing so from choice but rather because the fulltime jobs are not available. Under the new system these people will not only suffer because they are not able to get the better paying full-time jobs, now they will be paying an increased tax on their poorly paying part-time jobs.

"Narrowing the Gap"

Muldoon says that he feels that these low-income workers are not paying a fair amount of tax (he talks of the new system "narrowing the gap" between the low and the very-low income groups). Muldoon seems to not understand the principle of the graduated tax scale. The idea is that people pay tax according to their ability to pay it. Consequently those on low incomes should pay proportionally less of their income in tax than those in higher income groups. If I earn $20 pw I am likely to need every penny of it to survive, but if I earn $100 pw I would be able to afford to pay a small amount in tax. On $200 pw, an even greater proportion could be fairly exacted.

Instead, the new rates move even further away from a graduated tax scale. Muldoon has simply improved our existing flat tax rate.

Muldoon's main thrust in the budget is that those on incomes of less than $4000 are typically supplementing their other incomes, or in the case of a married couple, that of the husband. The evidence from the budget is that he wants to hit the two income family, ie. a family where the wife is working. Instead of placing a secondary and higher tax rate on women (which would provoke a justifiable public outcry) he has achieved the same through the higher tax rates for the lower earner, ie. the women He thus continues the National Party tradition of discouraging participation of women in the economy and sending them back to the home.

Muldoon has managed to clobber those least able to fight his measures (few part-time workers belong to unions, there is no union of social-security recipients), while few of his voters will suffer from it as the approach is more subtle than increasing tax rates for married couples.

Where do Students Fit in?

John Elliot, Chairman of the Government Caucus Education Committee spoke at a forum at Vic straight after the budget was released. Asked about the apparent anomalies for students he claimed they were an oversight and that he would make strong representations to the Minister to have them removed. Elliot clearly didn't know what was in the budget, as students are named as one group who "pay substantially lower rates of tax than low-income full-time workers". Yet government does seem to appreciate that many students are having big problems. At Gander's request NZUSA has made a submission on the effects on students.

A Student Tax Rebate

But what are the Government's proposals for removing these anomalies? NZUSA has been arguing for a special student tax rebate, the Government prefers a further increase to the bursary. The Government's objection to a special rebate for students is easy to see. If they make a special exemption (which would no doubt be well publicised no matter how they tried to play it down) other people might expect the same treatment. Attempts might start to broaden the criterion for this rebate. The Government could quickly end up looking rather stupid.

For all this, NZUSA's objections have even more substance. Taking Victoria as a typical campus, let's look at the proportions of people who receive the STB.

Present Bursary Ineffective

So an increase in the bursary would only alleviate the strain that the 70% of the fulltime students would feel, while the others would get no relief. Neither would the 40% of students who are part-time (although this proportion is higher for Vic than for the other universities) get any assistance.

As part-time students typically only hold part-time jobs, they will be adversely affected by the new proposals, yet would recieve none of the relief that the Government would be giving to other students.

Conclusion

Muldoon's reasoning in this budget can be exposed at many levels. He has reduced the sales tax on motorbikes "to encourage" their greater use; yet the registration fee has shot up!

The budget is a tactical devise, and any alterations to it which favour students, although needed, must also be recognised as such. Muldoon is attempting to isolate the low income earners from the rest of the public, by increasing the gulf between them and the next wage brackets. His solution to the problems of the economy which he has helped cause, taking money from those least able to afford it, must be denounced.

Peter Beach