Let's look at the costings first.
Each Citizen's Income would be $19,400 annually. At December 2025 there were 4,161,400 aged 18 and over, so the "headline CI cost" would be $80.731 billion.
Because TOP's proposed income tax rate up to $50,000 is 28 percent, there is "Tax Clawback." Above they have calculated it at 33.57% which on the updated headline cost would be ($27.101 billion). The CI is not tax-free as Lisa Owen reported it on RNZ last week.
The current cost of the benefits being replaced is:
That leaves a Net cost of CI at $20.438 billion. (TOP's 2024 costing is $15.788 billion)
The next item is Net Supplementary Support cost. Now it starts to get complicated (especially for a system that is apparently simple to administer and will save $3.825 billion in MSD and IRD administrative costs.)
According to their document:
Let's look at each of those items.
Child Support
According to the IRD, in the 2023-24 tax year (the period 1 April 2023 to 31 March 2024), 328,400 eligible families representing 656,500 children received a total of $3.043 billion from Working for Families, or an average of $9,269 per family.
TOP's proposed Child Support Incomes appear well in excess of this averaging approximately $8,500 per child - not per family. The supplementary support abatement may reduce this but at face value their child support bill would be $5.58 billion.
Sole Parents
There are more than 100,000 sole parents. That's around $1 billion.
Superannuitants
There are 928,000 superannuitants, with around a third single. So $3 billion for singles and $3.2 billion for couples. Again the supplementary support abatement will claw back some.
Disability and Housing
Disability and housing support currently cost the government $4.55 billion so the replacement support is unlikely to be lower than that.
My running total for the supplementary support is $17.33
Can all of this be paid for out of the $15.614 billion listed? I can't answer this as I am not privvy to their workings but I am dubious.
And what does their abatement policy actually mean?
I asked an economist for their take writing:
The economist's response contained the following possible interpretation:
More complexity?
On the information provided it is impossible to know whether TOP's supplementary costs are valid. If the government makes a change in tax settings affecting families they usually provide examples of how typical households will be affected. TOP doesn't do this. Quite possibly because it would highlight the complexity of their supplementary support regime.
Back to the costing table above, on the right side of their ledger (how to pay for it all) TOP proposes a Land Value Tax and administration savings:
Two points:
1/ Their costings are based on 2024 numbers. Already supplementary support costs have risen. Pensioners, for example, are growing rapidly in numbers. Land values, on the other hand, are static. What happens when TOP's tax pushes land values down?
2/ The assumption that this policy will save almost $4 billion in administrative savings is highly dubious. In fact, elsewhere in the tax reset document it is stated: "Simplified welfare with savings of at least $1.5 billion in administration costs."
In summary, the net CI cost is higher than depicted as is the revenue required to pay for it.
But there's another glaring problem.
TOP claims that, "The current benefit system punishes work through devastating effective marginal tax rates." Removing EMTR's is the big selling point.
Yet the new policy also abates away income. Again: "Each type of support will gradually reduce by 10 cents for every extra dollar earnt, starting from household income between $50,000 and $75,000. This efficiently ensures that the most support goes to those who need it the most."
Also known as targeting or means testing. How is this any different to how the current tax/benefit system works?
The problem TOP claim to be solving is very much a feature of their replacement.
Continuing on the same theme TOP say, "In all cases, eligibility is based on straightforward criteria and does not require complex administrative assessments, namely means testing or job search requirements. Applications will be made online through My IRD or MyMSD and automatically approved if criteria are met."
All recipients of the Citizen's Income will find any supplementary assistance they receive abated if their incomes rise. That IS means testing.
Means testing requires enormous bureaucracy. It also motivates dishonesty and reduces work effort. Yes, that occurs presently but don't pretend it won't under this system.
And "automatic approval" will not be as straightforward as is being made out. Where is the proof of disability? Where is the proof of sole parenthood? Where is the proof of rental amount on your home? Where is the proof the child you say is in your care full-time actually is? If you share care, who decides the split of Child Support? When is the supplemental support paid and when does it become debt if income rises? There are tens, if not hundred's of questions like these that arise from each individual's personal circumstances.
All of the expensive admin TOP says they will be doing away with is pie in the sky.
Traditionally, though the current execution is poor, because benefit money comes from the taxpayer, obligations can be imposed, and the type of assistance can be tailored to incentivise self reliance where that is a possibility (most cases.) That's the only effective traditional charity model I know of. Expectant giving. (Yes, the govt isn't a charity but that is the uncomfortable reality of where we are at).
TOP just wants to redistribute more than ever before, with no strings and no obligations, all the while pretending they have a magic bullet to do away with complexity, EMTRs and to fire-up the economy.
I don't think they understand human nature.
___________________________________________________
Afterword: Having written that last sentence earlier in the week, I read Liam Hehir's blog today:
"I should nail my own colours to the mast here. I would never vote for TOP. Its technocratic, clever-person-at-a-whiteboard politics cuts contrary to everything I believe in. I do not want a politics run by people who think society is just waiting to be optimised by the right policy dashboard. The whole anthropology of the party is the antithesis of what I think politics is and should be about.
A UBI would be spiritually disastrous because work is not just a way of allocating money, but one of the ordinary disciplines that attaches people to duty, competence, service and reality. The idea that if necessity is softened people will naturally become creative, civic-minded and fulfilled, rather than often drifting into dependency and uselessness, cuts hard against human nature. And a land value tax offends me because it treats the most settled, intergenerational form of property as a convenient hostage, forcing families to keep paying tribute on property they may have spent several lifetimes building or preserving."
Well said Liam.
Up to $15,600: 10.5%
$15,601 to $53,500: 17.5%
$53,501 to $78,100: 30%
$78,101 to $180,000: 33%
Over $180,000: 39%
TOP proposes:
Because TOP's proposed income tax rate up to $50,000 is 28 percent, there is "Tax Clawback." Above they have calculated it at 33.57% which on the updated headline cost would be ($27.101 billion). The CI is not tax-free as Lisa Owen reported it on RNZ last week.
The current cost of the benefits being replaced is:
Jobseeker Support and Emergency Benefit $4.614 billion
Sole Parent Support $2.255 billion
Student Allowance $0.574 billion
Supported Living Payment $2.558 billion
Super $23.191 billion
Totaling: ($33.192 billion)
That leaves a Net cost of CI at $20.438 billion. (TOP's 2024 costing is $15.788 billion)
The next item is Net Supplementary Support cost. Now it starts to get complicated (especially for a system that is apparently simple to administer and will save $3.825 billion in MSD and IRD administrative costs.)
According to their document:
"For most people, the Citizens’ Income will not be enough to live on. Many New Zealanders need additional income to support themselves and their families, and can not necessarily be expected to obtain it from employment. The current system of benefits and tax credits is complex, punitive, and expensive to administer. We will replace the bulk of it with the following universal supplementary supports:
• All parents will receive the following tax free Child Support Incomes
• First year: First child $18,250 ; Each subsequent child $17,250
• Second year: First child $13,750 ; Each subsequent child $12,750
• Third year: First child $13,750 ; Each subsequent child $12,750
• Years 4-18: First child $7,750 ; Each subsequent child $6,750
• These Child Support Incomes replace: Working for families payments (family
tax credit and in work tax credit), Paid Parental Leave payments, and Best
Start payments. They will be available for all parents, are not reliant on parents
attending work, training, or study nor children attending a daycare service. This
saves extensive bureaucratic costs and gives parents more freedom of choice.
The 20 hours subsidy for children aged 3 and over to attend Early Childhood
Education is unchanged.
• Sole parents will receive an additional allowance of $9,500 per annum
• A disability allowance of $6,000
• Superannuitant top-ups of $5,250 in total for a couple or $10,000 for a single
person
• Housing Support Income payments based on regional housing costs but
averaging $10,500 for families and $6,500 for couples and singles.
Each type of support will gradually reduce by 10 cents for every extra dollar earnt,
starting from household income between $50,000 and $75,000. This efficiently
ensures that the most support goes to those who need it the most."
Let's look at each of those items.
Child Support
According to the IRD, in the 2023-24 tax year (the period 1 April 2023 to 31 March 2024), 328,400 eligible families representing 656,500 children received a total of $3.043 billion from Working for Families, or an average of $9,269 per family.
TOP's proposed Child Support Incomes appear well in excess of this averaging approximately $8,500 per child - not per family. The supplementary support abatement may reduce this but at face value their child support bill would be $5.58 billion.
Sole Parents
There are more than 100,000 sole parents. That's around $1 billion.
Superannuitants
There are 928,000 superannuitants, with around a third single. So $3 billion for singles and $3.2 billion for couples. Again the supplementary support abatement will claw back some.
Disability and Housing
Disability and housing support currently cost the government $4.55 billion so the replacement support is unlikely to be lower than that.
My running total for the supplementary support is $17.33
Can all of this be paid for out of the $15.614 billion listed? I can't answer this as I am not privvy to their workings but I am dubious.
And what does their abatement policy actually mean?
I asked an economist for their take writing:
TOP says "Each type of support will gradually reduce by 10 cents for every extra dollar earnt, starting from household income between $50,000 and $75,000. This efficiently ensures that the most support goes to those who need it the most."
So, for example, one type of support is a sole parent allowance of $9,500. Am I correct in calculating that the sole parent could earn a further $95,000 (over her nominated household income threshold) before losing her sole parent allowance?
How does that square with support going to "those that need it the most?"
Or am I misunderstanding the reduction?
The economist's response contained the following possible interpretation:
"Your reading seems to be the natural one but they could have higher abatement rates for incomes above $75k, just unstated."
More complexity?
On the information provided it is impossible to know whether TOP's supplementary costs are valid. If the government makes a change in tax settings affecting families they usually provide examples of how typical households will be affected. TOP doesn't do this. Quite possibly because it would highlight the complexity of their supplementary support regime.
Back to the costing table above, on the right side of their ledger (how to pay for it all) TOP proposes a Land Value Tax and administration savings:
Two points:
1/ Their costings are based on 2024 numbers. Already supplementary support costs have risen. Pensioners, for example, are growing rapidly in numbers. Land values, on the other hand, are static. What happens when TOP's tax pushes land values down?
2/ The assumption that this policy will save almost $4 billion in administrative savings is highly dubious. In fact, elsewhere in the tax reset document it is stated: "Simplified welfare with savings of at least $1.5 billion in administration costs."
In summary, the net CI cost is higher than depicted as is the revenue required to pay for it.
But there's another glaring problem.
TOP claims that, "The current benefit system punishes work through devastating effective marginal tax rates." Removing EMTR's is the big selling point.
Yet the new policy also abates away income. Again: "Each type of support will gradually reduce by 10 cents for every extra dollar earnt, starting from household income between $50,000 and $75,000. This efficiently ensures that the most support goes to those who need it the most."
Also known as targeting or means testing. How is this any different to how the current tax/benefit system works?
The problem TOP claim to be solving is very much a feature of their replacement.
Continuing on the same theme TOP say, "In all cases, eligibility is based on straightforward criteria and does not require complex administrative assessments, namely means testing or job search requirements. Applications will be made online through My IRD or MyMSD and automatically approved if criteria are met."
All recipients of the Citizen's Income will find any supplementary assistance they receive abated if their incomes rise. That IS means testing.
Means testing requires enormous bureaucracy. It also motivates dishonesty and reduces work effort. Yes, that occurs presently but don't pretend it won't under this system.
And "automatic approval" will not be as straightforward as is being made out. Where is the proof of disability? Where is the proof of sole parenthood? Where is the proof of rental amount on your home? Where is the proof the child you say is in your care full-time actually is? If you share care, who decides the split of Child Support? When is the supplemental support paid and when does it become debt if income rises? There are tens, if not hundred's of questions like these that arise from each individual's personal circumstances.
All of the expensive admin TOP says they will be doing away with is pie in the sky.
Traditionally, though the current execution is poor, because benefit money comes from the taxpayer, obligations can be imposed, and the type of assistance can be tailored to incentivise self reliance where that is a possibility (most cases.) That's the only effective traditional charity model I know of. Expectant giving. (Yes, the govt isn't a charity but that is the uncomfortable reality of where we are at).
TOP just wants to redistribute more than ever before, with no strings and no obligations, all the while pretending they have a magic bullet to do away with complexity, EMTRs and to fire-up the economy.
I don't think they understand human nature.
___________________________________________________
Afterword: Having written that last sentence earlier in the week, I read Liam Hehir's blog today:
"I should nail my own colours to the mast here. I would never vote for TOP. Its technocratic, clever-person-at-a-whiteboard politics cuts contrary to everything I believe in. I do not want a politics run by people who think society is just waiting to be optimised by the right policy dashboard. The whole anthropology of the party is the antithesis of what I think politics is and should be about.
A UBI would be spiritually disastrous because work is not just a way of allocating money, but one of the ordinary disciplines that attaches people to duty, competence, service and reality. The idea that if necessity is softened people will naturally become creative, civic-minded and fulfilled, rather than often drifting into dependency and uselessness, cuts hard against human nature. And a land value tax offends me because it treats the most settled, intergenerational form of property as a convenient hostage, forcing families to keep paying tribute on property they may have spent several lifetimes building or preserving."
Well said Liam.
Current tax rates:
Up to $15,600: 10.5%
$15,601 to $53,500: 17.5%
$53,501 to $78,100: 30%
$78,101 to $180,000: 33%
Over $180,000: 39%
TOP proposes:
• 28% for income up to $50,000 p/a
• 34% for income between $50,001 and $200,000 p/a
• 39% for income at $200,001+ p/a
• 34% for income between $50,001 and $200,000 p/a
• 39% for income at $200,001+ p/a
