Blow-out on Tax Cuts for Wealthy Results in Tax Increase on Graduates
Reports that Prime Minister John Key wishes to increase the repayment rate on student loan borrowers has been slammed by the New Zealand Union of Students’ Associations as a tax increase on graduates to pay for a blow-out in the tax-cuts that the government gave to the wealthy.
“Increasing the repayment rate is a tax increase for the 500,000 New Zealanders who have student loans. Student loan repayments are a tax, since they are collected by IRD, straight out of your pay, just the same as PAYE. It’s outrageous that graduates should have to pay higher taxes to pay for a budget short-fall which has been caused by the tax-cuts that the National government gave to high income earners,” said Pete Hodkinson, president of the New Zealand Union of Students’ Associations.
“Many of those with loans are struggling to make their minimum repayments already, since obligations start at such a low level ($19,084 compared with $48,000 in Australia).”
NZUSA points to Inland Revenue Department figures that show that loans are currently being repaid as expected, except for by some people who are overseas. The “cost” that Government claims of the loans scheme is that it takes time to pay them back, and an account is made for the time cost of the money.
“Higher income earners pay back faster, so higher wages improve repayment times. Slower payers ‘cost’ more because they take longer. Therefore, the way to increase repayments is to increase wages and to get graduates into jobs. Better paid graduates pay their loans back faster. More jobs and better pay in New Zealand will reduce the incentive for people to stay overseas, where repayment rates are poor, and encourage New Zealanders who live overseas to come home and contribute to their country,” said Hodkinson.
“The National Government has got themselves into this situation because they gave tax-cuts to the richest New Zealanders. That is what has blown-out the Budget. The implications of a generation of former students carrying onerous huge debt repayment burdens because those who came before them, and had free education, want lower taxes is not fair. It is not sustainable, and will lead to intergenerational frustration and anger.”
NZUSA is the national representative body for tertiary students and has been advocating on student issues since 1929.