The bracket creep ‘stealth tax’

Increasing tax through inflation and a creep up the tax brackets has long been a bone of contention, with successive governments largely letting it happen to presumably get more tax without having to announce tax increases, It hasn’t just happened.

This week National pledged to adjust the brackets for inflation every three years – see National announces policy to address tax bracket creep.

How much more tax do we pay? Tax brackets were last adjusted in 2010 – so according to a NZ Herald calculator:

  • if you earn $30,000 bracket creep would have cost you about $86 per year
  • if you earn $50,000 bracket creep would have cost you about $336 per year
  • if you earn $70,000 bracket creep would have cost you about $614 per year
  • if you earn $70,000 bracket creep would have cost you about $799 per year

NZ Herald:  The $1.7bn ‘stealth’ tax grab – work out how much ‘extra’ tax you have been paying?

Wage and salary earners paid out $1.7 billion in “stealth” tax last year after inflation increases pushed workers and their pay packets into higher tax brackets, according to advice to the Tax Working Group.

Officials have warned the public could see the money as having come through a stealth tax and Government may want to change it as a “value judgment”.

They have also said if the Government did change tax rates it would increase transparency and account for inflation but money would need to be found to pay for public services.

The extra tax was scooped up after the former government left tax brackets largely unchanged during its time in office, with the highest tax bracket fixed to kick in at $70,000.

I have seen criticism of this Herald article as a promotion of National’s policy, but bracket creep has been grizzled about for a long time – Michael Cullen was slammed for allowing it and that contributed to Labour losing the 2008 election.

National under John Key allowed it while they ran Government but they did adjust thresholds in 2010 and also legislated to adjust them again in 2018, but those were overturned before they happened by the incoming Labour led government.

Tax, especially increasing tax, is always a contentious issue.

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12 Comments

  1. PartisanZ

     /  February 2, 2019

    “Natipledged” … Damn!!! … I wish I’d invented that word!!!

    Reply
    • PDB

       /  February 2, 2019

      Try ‘PartinsanityZ’ – a form of delusion in the merit of one’s own comments.

      Reply
  2. PartisanZ

     /  February 2, 2019

    So the foundation ‘problem’ which neoliberalism set out to address isn’t inflation after all?

    Reply
  3. Duker

     /  February 2, 2019

    Election policy ?
    Nugh…. Its the polling in the next week or so thats of most concern to Bridges.

    Whats forgotten is that is the $90 bill of debt that National left after their 9 years in office. Cullen didnt leave anything like that , indeed he started the Cullen Fund which is now worth $40 bill. Whos going to pay down the $90 bill in the way that Cullen did when the good times rolled

    Reply
    • PDB

       /  February 2, 2019

      The Coalition govt could easily start paying down debt (as National said they would do now at the last election) but chose not to to any great extent and instead have had a taxpayer funded lolly scramble on ‘nice-to-haves’ & voter bribes of little benefit. They have been awash with money for debt repayment if they wanted to.

      Lets try a third time Duker as you obviously don’t want to answer – your position is that NZ do nothing about tax bracket creep? The Coalition govt position should be to just ignore over-taxing? Is that part of their ‘fair’ tax system for all?

      Reply
      • Duker

         /  February 2, 2019

        Could easily ? No they werent- they were offering tax cuts – during a boom which just sets off inflation.
        better to do what Cullen did, which is create an investment fund worth $40 bill out of the $7-8 bill he put in- oh and he payed down the debt as well.
        Tax bracket creep clearly wasnt something Key and English werent concerned about during their last 5 yrs or so and the last election tax cuts offer wasnt anything near bracket creep at all.

        national has never had a ‘plan to pay down debt’, they were borrowing $7 bill in the year before the election. Was that like their ‘plan’ to raise the super age – in 30 years time !
        hahahaha

        Reply
        • PDB

           /  February 2, 2019

          So your answer to tax bracket creep is…not to answer? All diversion/ whataboutery, no show – somewhat your forte on here.

          Reply
          • Duker

             /  February 2, 2019

            national arent offering a ‘real bracket creep tax ‘ promise. merely a possible AFTER ELECTION Treasury report, every 3 years.
            I see they offering to stop fuel tax increases as well. Way to go big on promises they never made or would keep in government. What was the fuel tax extras they piled on over 9 years ? 17c + gst
            Sniveling Soimun is really desperate for his poll numbers to rise in the next week or so.

            Whats going to pay for the promise – another GST rise like last time ( oh they promised not to raise GST …but they lied and blamed that on their Tax Working group at the time)
            And the last election while they legislated for some tax cuts – not bracket creep adjustments, they removed one tax break for ‘independent earners’ for those between $22-44K.
            Watch the pea as its a game of give with one hand and take away with the other

            Reply
            • PDB

               /  February 2, 2019

              “Whats going to pay for the promise”

              Obviously yesterday’s discussion you’ve conveniently forgotten – billions of $ can easily be freed up by getting rid of wasteful & useless Coalition policies such as 1st year free students, fighting the Chinese in the Pacific, billion trees, Shane Jones – NZL First slush fund, winter heating payments for rich listers – just to name a few. Even reversing the oil & gas ban will long-term stop what will become heavy expenditure/loss of revenue in the future if the Coalition govt has its way.

              Your blind hatred of Bridges is clouding your thinking in what is a very good political policy that has put Labour on the spot & of which they have only provided very feeble argument against thus far.

            • Duker

               /  February 2, 2019

              national could have save borrowing so much but not paying $950 mill for 45% of Chorus ( didnt we sell off telecom yrs ago, why buy back some it) , $30 mill for Comalco ( because it asked) , $800 mill for Hollywood and Wellywood, and the Fibre roll out , where well off people get a $1000 install for free and Chorus gets to borrow the money from the government at low interest for the fibre lines in the street.
              Then there was the ‘investment’ with Peter Theil in buying shares of Zero where he walked off with most of increase in value. ( Buying speculative shares ?)
              Then there is the $100’s mill dished to the maori partys ‘Whanau-ora” , which had liitle to show for it. I think they spent $30 mill for 17 homes, thanks to Flavell.

              You have earplugs on when it comes to nationals wasted money , as you [deleted unsubstantiated accusation]

            • PDB

               /  February 2, 2019

              The whataboutism is strong in you Duker – so essentially your argument amounts to nothing regarding Labour’s wasted billions (which National could simple reverse those policies as they are doing nothing) that could then be used to address tax bracket creep. Instead you want to divert discussion to ‘National wasted some money too in their 9 years’. Righto!

  4. Finbaar Rustle

     /  February 2, 2019

    One of the “advantages” of always having been low income
    I have always been on the lowest tax rate so it hardly concerns me.
    But tax “Creep” ?
    Tax “Creep” is so yuk.
    So open to comedy 🙂
    “Stealth” tax is way better.
    Sounds exciting, deadly yes but a better way to go
    All over quick
    Going out in style 🙂

    Reply

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