A major announcement by Simon Bridges:
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 is a huge and great announcement.
For decades Governments have benefited from bracket creep, where inflation pushes people into higher and higher tax brackets. It means the amount of tax you pay increases every year, even if your income is just keeping pace with inflation.
National’s pledge to prevent bracket creep via automatic threshold adjustments is huge, because if they get to implement it, no future Government would dare to reverse it.
“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.
This shouldn’t be thought of as a tax cut. It is more saying the Government will no longer do a stealth tax increase due to inflation.
An excellent announcement by National to start the year off. They’re talking how to stop New Zealanders being taxed more, while the Government is focused on how many new taxes can they introduce.