A National Government would link income tax brackets to inflation, ensuring income taxes are adjusted every three years in line with the cost of living and allowing New Zealanders to keep more of what they earn, National Leader Simon Bridges says.
“New Zealanders’ incomes are struggling to keep up with the rising cost of living because this Government is imposing more red tape and taxes,” Mr Bridges said in his State of the Nation speech in Christchurch today.
“Over the next four years, New Zealanders will be paying almost $10,000 more per household in tax than they would have been under National. The Government is taking more than it needs, only to waste billions on bad spending.
“On top of that, by 2022 New Zealanders on the average wage will move into the top tax bracket. That’s not right or fair. So in our first term National will fix that by indexing tax thresholds to inflation.
“We will amend the Income Tax Act so tax thresholds are adjusted every three years in line with the cost of living. That will mean that within a year after every election, Treasury will advise the Government on how much the thresholds should be adjusted for inflation.
“This would prevent New Zealanders from moving into higher tax brackets even when their income isn’t keeping up with the rising cost of living. It would ensure New Zealanders keep more of what they earn to stay on top of rising costs of living such as higher prices for necessities like petrol, rent and electricity.
“We will include a veto clause so the Government of the day can withhold the changes in the rare circumstances there is good reason to. But it will have to explain that decision to New Zealanders.
“The changes would make a real difference. Assuming inflation of 2 per cent, someone on the average wage would be $430 a year better off after the first adjustment, $900 after the second and $1,400 after the third.
“A family with two earners - for example, one earning $80,000 and the other $40,000 - would be $600 better off a year after the first adjustment, about $1,300 after the second and $1,900 by the third.
“That’s more of their own money in their own bank accounts.
“The first adjustment would prevent Kiwis from paying an extra $650 million a year in tax based on today’s estimates. We can afford that by managing the books prudently and spending wisely.
“We will also do more on tax – but add no new taxes – and I’ll continue talking about our plans between now and next year’s election.
“National is committed to helping New Zealanders get ahead. This step means that as well as cancelling new taxes this Government has piled on, we won’t allow future governments to use inflation as an annual tax increase by stealth.”