National announces policy to address tax bracket creep

The last two governments and their finance ministers persistently refused to address tax bracket creep, which is seen as tax increases by stealth – as inflation increases incomes it pushes more income into higher tax brackets.

The incoming Labour led government actually did something, but that was negative – they scrapped catch up tax cuts put in place by National.

Today Simon Bridges announced that a future National government led by him would legislate to raise tax brackets in line with inflation every three years.

National would introduce rolling tax relief

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.

“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.”

In response Minister of Finance trotted out the overused and irrelevant ‘they didn’t do it in their nine years in office’.

But this is a smart move by National. Not only does it allow them to campaign on not raising taxes or allowing taxes to rise ‘by stealth’, they can compare this with what is predicted to be some sort of capital gains tax that will tax inflation affected increases in value of assets.

Of course Labour can come up with a competing policy, but that could be some time away as they ponder the Tax Working Group recommendations.

This looks a bit corny though:

 

75 Comments

  1. PDB

     /  January 30, 2019

    Long overdue. It will be very hard for the Coalition govt to defend overtaxing workers if they are true to their word in wanting a ‘fair’ tax system.

    • Kitty Catkin

       /  January 30, 2019

      I remember someone who was delighted to get a pay rise years ago….until she discovered that she was worse off, because her higher tax rate meant that she was taking home less than she had been on the lower income !

      • That can’t happen on straight wages. Extra pay is taxed at the highest bracket rate you have to pay, but all your other pay is taxed at exactly the same rate as before.

        • PDB

           /  January 30, 2019

          Though it could happen if the higher income meant losing some govt benefits.

        • Duker

           /  January 30, 2019

          Kitty is a bit confused with numbers…. So often some’ commentators say ‘ I remember’ but mean ‘i made it up’

        • Kitty Catkin

           /  January 31, 2019

          It does now, it didn’t then ! I remember hearing about the injustice of someone working towards promotion and being worse off.

  2. lurcher1948

     /  January 30, 2019

    YEEHAAAA Simon MUMBLER Bridges is on to a winner,the national party Union of taxpayers and the National party kiwiblog are giving the big thumbs up,just one small detail,sir key and english never bought it in SO IT SMELLS OF DESPERATION BUT IF kiwiblog is winding his ferals up who knows

    • PDB

       /  January 30, 2019

      “sir key and english never bought it in”

      English was bringing it in but Labour stopped it when Winston gave them the keys to the economy – do keep up Lurch.

      • Duker

         /  January 30, 2019

        English wasn’t bringing in indexation…you are making that one up.

        • PDB

           /  January 30, 2019

          No, but he was bringing in tax relief in order to deal with tax bracket creep which is the opposite to Lurch saying English was not dealing with the underlying issue, unlike Labour. Bridges is simply suggesting doing it another way.

          • Blazer

             /  January 30, 2019

            you were caught with your pants down…again! 😉

            • PDB

               /  January 30, 2019

              Only if you look at the world with only your left eye open Blazer…

          • Duker

             /  January 30, 2019

            Bridges will be lucky to last out the year…this is what this is all about.
            Last. Election national promised a minor tax cut..labour opposed it.
            National lost…. Dont try the Hillary Clinton defence to explain how they won

            • PDB

               /  January 30, 2019

              Doesn’t matter how long Bridges lasts, the policy is simply the start of a fresh opposition narrative that the Coalition govt is fleecing taxpayers which will continue right through to the election regardless of who is leader.

            • Duker

               /  January 30, 2019

              Fresh opposition narrative that something might happen in 5 years…is there a poll coming up in 2 weeks…is that the narrative Bridges is only concerned with

            • PDB

               /  January 30, 2019

              Of course the Coalition govt doesn’t care about polls…

            • Duker

               /  January 31, 2019

              Bridges ‘life’ dpends on the poll results or its back to being a small court prosecutor

  3. Duker

     /  January 30, 2019

    Election year policy announced 18 months early. Bridges must desperate.

    More motorways but no new petrol taxes

    Tax indexation( the Aussies tried it for a few years then gave it up as there was no political payback) but no mention of what will be cut to pay for it.

    • PDB

       /  January 30, 2019

      Plenty of failing govt policies (that would hardly affect most New Zealanders) could be cut to free billions of $ – The Shane Jones slush fund, Kiwibuild, 1st year free students, billion trees joke, Winston’s Pacific Island slush fund rort just to name a few.

      • Duker

         /  January 30, 2019

        Kiwibuild sells to new owners, aren’t keep on the books. There is no aPacific islands slush fund…. Just moving aid money from Saudi Arabia..etc
        National had it’s own slush fund with Niue resort where taxpayers subsidise the airline trips to a resort built by taxpayers and operatored by a ‘friend of national’

        • PDB

           /  January 30, 2019

          Kiwibuild ties up money that could used elsewhere as too the money for Winston’s pointless Chinese fight in the Pacific. The fact remains there is plenty of money tied up in failing or wasteful Coalition policies.

          • Duker

             /  January 30, 2019

            Forgotten NZ taxpayers paying to fly sheep to Saudi Arabia have you, or giving $35 mill to the owners of Bluff smelter, or the hundreds of millions that goes to Hollywood movie moguls……oh you forgettful innocent child

            • PDB

               /  January 30, 2019

              Now you are getting silly & also resorting to name calling – you can’t defend the govt wastage now that could be put to better use – essentially saying ‘that’s all right Jack, National did it too’.

              Not to mention that your examples (some of which I wouldn’t call wasteful considering the benefits they have brought this country – e.g. Hollywood movies) come from nine years of govt whilst we have a shed-load of wasteful policies in just over 1 year of this govt.

            • Duker

               /  January 31, 2019

              We were left with $90 bill of borrowing after 9 years…something tells me that was spend spend and not enough taxing

            • PDB

               /  January 31, 2019

              Grant Robertson – Stuff Feb 2018: “In that capacity, he recently took to Radio NZ to assure the country that we are well placed to weather any global economic shock. The fundamentals of our economy are strong, he says.

              Why should we be so confident? “The low level of public debt is a really important part of it,” Robertson told Guyon Espiner”

            • Blazer

               /  January 31, 2019

              private debt is the big problem.Reckless bank lending on overblown property prices.
              Banks say they can weather a 40% decline…pure b/s.
              Banks rely on tacit Govt/taxpayer support.

    • Duker

       /  January 30, 2019

      Australia’s example , again with a conservative government.
      Tax bracket indexation was tried once by Treasurer [Phillip] Lynch, it lasted a year and failed, and was cancelled. I don’t suspect that any government of either persuasion is going to go down that path again,”

      Bridges clearly finds himself surrounded by his brains trust…. Amy Adams, Paula Bennett, mMitchell…. No wonder they came up with a failed idea like this

      • PDB

         /  January 30, 2019

        You are wrong in both your initial conclusions;

        1. There will be ‘political payback’ for this if National pitch it correctly, especially with this govt seen as the ‘tax and spend’ merchants & with their promise of providing a ‘fair’ tax system.
        2. Plenty of money available to cover tax reduction by cutting expensive govt policies of little value of which there are many as I list above.

        • Duker

           /  January 30, 2019

          And this works elsewhere?
          I wonder why. You lie about English bringing in indexation …so why believe your other lies

          • PDB

             /  January 30, 2019

            See my answer above, you’ve taken my reply to Lurch out of context – you’re getting desperate as your arguments (again) fall over.

          • PDB

             /  January 30, 2019

            Duker: “And this works elsewhere?”

            Let’s do this!

            • Duker

               /  January 30, 2019

              Let’s crush boy racers cars….let’s knock on the windows of those living in cars…let’s have 2 flag referendums… Let’s wimp out should be Nationals slogan

            • PDB

               /  January 30, 2019

              I think the heat may be getting to you…

        • Duker

           /  January 30, 2019

          Who’s going to pay for M bovis cow disease? That’s reckoned to be $800 mill…maybe $1 bill eventually

          And South Canterbury Finance, that was $1.5 bill payout, English kept renewing it’s gurantee until it failed.

          You sweet innocent child about who ‘wastes’ money… I suppose you still think that working for families is communism and interest free student loans will be cut

          • PDB

             /  January 30, 2019

            Who’s going to win the Super Bowl? Who thinks English is a “sweet innocent child”? Did he steal your lollipop in the past?

            • Duker

               /  January 30, 2019

              You another property flipper who thinks the most crazy things.
              Why isnt Bridges promising tax rate indexation to apply from his first budget, not 5 years from now.
              Is that like English promising to raise the pension age in 30 years time….after he’s dead

            • PDB

               /  January 30, 2019

              Only ever owned a family home actually. As I point out above this is the start of an opposition narrative in preparation for things to come like a possible CGT. You’re getting all heat up over the actual policy and missing the big picture here.

            • Duker

               /  January 30, 2019

              I forgot the one about taxpayers paying Jason Ede to supply material for Farrar and Slater

            • PDB

               /  January 30, 2019

              As you’re reminiscing…..what about Labour’s pledge card rort eh! What a doozy! And who can forget the nationwide defacing of National party election billboards being run right out of ole Russ Normans office? The good ole days…

      • david in aus

         /  January 30, 2019

        It is because governments are duplicitous. If you don’t’ index tax thresholds to inflation, it is effectively an annual tax increase.
        Better for politicians to say they are giving a tax cut before an election, but in reality, it is nothing of the sort. Both sides of politics use this ruse as it is useful to garner more revenue when there are budget deficits or they want to spend to buy votes without the financially illiterate public and media noticing.

        • Duker

           /  January 30, 2019

          National promised not to increase gst..that was a pre election lie….

          • david in aus

             /  January 30, 2019

            What is that got to do with indexation of tax thresholds?

            Unfortunately, there aren’t many honest governments that index tax thresholds. If National do fulfill their promise, hopefully, it will change people thinking on this.

            Questions like: “Why are they taxing more every year?” would be more frequent. The reason we are not hearing this from the media is due to left-wing bias or financial illiteracy. I will give journalists the benefit of the doubt and say they are dumb, most are living hand-to-mouth for a reason.

            • Duker

               /  January 30, 2019

              It doesn’t seem to a real indexation….just a report from Treasury every 3 years on a ‘possible’ tax cut.
              Pensions are indexed every 6 months and it’s spelt out the method of indexation.
              Why can’t Bridges promise a real indexation every
              18 months at least.
              I bet his indexation won’t apply till 5 years from now……. So brave

            • david in aus

               /  January 30, 2019

              @Duker. True, Good point, they should be annually indexing tax threshold or explain why it is not happening.

              You and everybody else should be demanding better transparency and fairness.

              However, it is better than what happens now.

            • Duker

               /  January 30, 2019

              You know why it’s not a real indexation…..they know it won’t work…pre election Treasury report indeed….they are going to rip into Bridges on this

      • Blazer

         /  January 30, 2019

        nice Duker…you shot down all the acolytes before they got off the…runway!

        • PDB

           /  January 30, 2019

          Duker just shoots themselves in the foot on here, you’ve got competition in that respect now.

    • PartisanZ

       /  January 30, 2019

      It’s great being “bright and early”! If the government think its a winner they can copy it …

      I seem to remember this was a fairly frequent occurrence under National … copying the Opposition … a form of ‘policy creep’?

      • david in aus

         /  January 30, 2019

        Great, if Labour copies the policy. It will hamper their spending plans.

        • Duker

           /  January 30, 2019

          Libs in Australia tried it..it was a real annual indexation too…..then ditched it

          • PDB

             /  January 30, 2019

            Your alternative then Duker is to do nothing about tax bracket creep? Bugger the taxpayer? That’ll win some votes.

          • david in aus

             /  January 30, 2019

            The Liberals in Australia are big spenders too: Baby bonus anyone?
            As I said, honest politicians are hard to come by.

        • PartisanZ

           /  January 30, 2019

          @david in aus – ” … hamper their spending plans” …

          Nah! Nothing a bit of tax reform including “Capital Income Tax” won’t fix.

          • Corky

             /  January 30, 2019

            ”Nah! Nothing a bit of tax reform including “Capital Income Tax” won’t fix.”

            It may fix election results , Parti.

          • david in aus

             /  January 30, 2019

            What next? Death tax…CGT is just the start if they stay in power.

            You are right, everybody should know their inclinations. Tax tax tax, spend spend spend.

            • Duker

               /  January 31, 2019

              After 9 years of national government , we are left with almost $90 bill of borrowing.
              Who was spend spend?

            • PartisanZ

               /  January 31, 2019

              And when it becomes a fiscal crisis this time – without 1984’s & 91’s orchestrations – there isn’t even much in the way of public assets left to sell … Bugger! A Right Royal Rogering!

            • PDB

               /  January 31, 2019

              Duker: “After 9 years of national government , we are left with almost $90 bill of borrowing. Who was spend spend?”

              Yet another GFC, earthquakes denier. Would have been far worse under ‘the cupboard is bare’ & ‘decade of deficits’ Cullen. Unfortunately for Duker even his own side don’t believe their nonsense.

              Grant Robertson – Stuff Feb 2018: “In that capacity, he recently took to Radio NZ to assure the country that we are well placed to weather any global economic shock. The fundamentals of our economy are strong, he says.
              Why should we be so confident? “The low level of public debt is a really important part of it,” Robertson told Guyon Espiner”

    • Gezza

       /  January 30, 2019

      Election year policy announced 18 months early. Bridges must desperate.

      Having to use a cartoon caricature to advertise it – that’s horribly desperate !
      What does that suggest their focus groups are saying ?? 😮

      • PDB

         /  January 30, 2019

        Probably says more about the mentality of the floating voter Gezza…

        • Gezza

           /  January 30, 2019

          I suspect it says more about the mentality of National voters – he’s a goner. You know it and they know it.

          • PDB

             /  January 30, 2019

            Bridges is on borrowed time but the ‘Labour are all about tax and spend’ narrative will continue.

            • Gezza

               /  January 30, 2019

              Of course. So the big challenge for Labour will be to provide evidence come election time that their spend is paying dividends to NZ society as a whole.

              Robertson’s been reasonably cautious so far. I don’t think he’ll change that approach. But it will have to be about working out how to target their spending are those who are likely to vote Labour & those who might, or might not, depending on what’s in it for them.

              Same as National.

            • Gezza

               /  January 30, 2019

              *at those

      • Corky

         /  January 30, 2019

        Obviously not telling him to step aside.

  4. Alan Wilkinson

     /  January 30, 2019

    Smart timing. Do you want money in your pocket or just to tax Cullen’s rich pricks and watch Labour spend it on building flash houses for rich kids?

  5. Finance Minister to Simon Bridges: Show me the money
    https://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=12198710

    Comment: Simon Bridges makes his first big grab for middle NZ
    https://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=12198731

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