How to stop bracket creep

Stuff reports:


New Zealand’s tax brackets don’t accurately reflect what counts as “high earning” in this country, critics say.
Since 2008, the highest personal income tax rate has kicked in on earnings over $70,000 a year.  …


In 2008, there were 335,000 people paying the top tax rate. By the 2016-2017 tax year, that number had risen to 665,000 people. People earning over $70,000 pay 63 per cent of all income tax.

The average (mean) FT salary is now $63,000 so we have a top tax rate that is barely above the average wage.

Craig Howarth tax partner Craig Macalister said there should be a mechanism that triggered a review when inflation reached a certain level.
“If you hold tax brackets in place, every year you increase your tax take as people’s incomes creep up with inflation. But the Government knows if it’s holding them in place they’re getting an increase without telling anyone.”
The Tax Working Group has acknowledged concerns about “bracket creep” and the suggestion they should be indexed to inflation but said that would increase compliance costs
“The group believes that bracket creep is best dealt with through the periodic review of the rates and thresholds of income tax to ensure they remain appropriate rather than some form of indexation assessment.”

With respect to the TWG, but that is naive crap. It simply doesn’t happen as Government’s like getting the extra tax revenue through bracket creep.

How often has the threshold for the top tax rate been changed since 2000?

In 2008 it went from $60,000 to $70,000. That’s it. In 19 years it has increased $10,000.

If the threshold for the top rate was keeping pace with inflation, it should be $90,000 by now – not $70,000

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