Loading...
You are here:  Home  >  24/7 News  >  Current Article

New report: Bracket creep costing average Kiwi worker $500/year

By   /  March 27, 2017  /  Comments Off on New report: Bracket creep costing average Kiwi worker $500/year

    Print       Email

MIL OSI – Source: Taxpayers Union – Release/Statement

Headline: New report: Bracket creep costing average Kiwi worker $500/year

NEW REPORT SHOWS BRACKET CREEP COSTING AVERAGE KIWI WORKER $500 / YEAR
MONDAY, 27 MARCH 2017FOR IMMEDIATE RELEASE

The Government’s failure to index tax brackets to inflation since 2010 now costs the average Kiwi income earner almost $500 each year according to a new report released today by the Taxpayers’ Union. The report, “5 Options for Tax Relief in 2017″, models five options to deliver meaningful tax relief packages which could be part of Budget 2017 with fiscal implications of $3 billion or less.The report is available for viewing and download at www.taxpayers.org.nz/5_options. Taxpayers’ Union Executive Director, Jordan Williams, says, “The National Government likes to talk the talk on lower taxes, but this report shows very clearly that they are simply not walking the walk.  Because tax thresholds have not been adjusted with inflation, the average Kiwi worker is now paying $483 more per year in tax than in 2010.” “By 2020, Government surpluses expected to be $8.5 billion per year.  With Bill English having pumped $10.36 billion into new spending, and only $415 million allocated for tax relief in that time, if now isn’t time for meaningful tax relief it never will be.” “In addition to modelling various options for tax relief to compensate New Zealand families who are paying more, the report calls for tax thresholds indexed to inflation going forward.  That would prevent Wellington increasing the average tax rate paid by New Zealanders every year, raising extra revenue for the Government, in real terms, without the transparency of actually raising taxes.”  “If we instead indexed thresholds to the growth in average earnings, dating back to 2010, the average earner would save $1,350 each year, or $26 each week.” “With the Government set to make a decision on Budget 2017 and its tax relief package in the coming weeks, we hope this report gives taxpayers assistance in understanding what is realistic for Budget 2017.” The paper was prepared by the Taxpayers’ Union, with input from Research Fellow, Jim Rose, former IRD head of policy, Robin Oliver, and a former team leader of revenue forecasting at Inland Revenue, Dr Michael Dunn. NOTES:  5 Options for Tax Relief assumes the Government commits to a $3 billion tax relief package. When asked in 2016 how substantial a tax relief would be on the cards in 2017, John Key said “$3 billion I reckon”. There is a distinction between inflation-indexation and average-earnings indexation. Inflation-indexation involves adjusting the thresholds of each tax bracket to inflation. Average earnings indexation involves adjusting the thresholds to the growth rate of average earnings. For example, if average wage growth is 3% in 2017, the thresholds of every bracket will increase by 3%. The options with a fiscal impact of $3 billion or less which are modeled in the paper include:

a tax-free threshold up to $13,000. This would save all taxpayers earning more than $13,000, $1,295 each year;
a reduction of the marginal tax rate of earnings between $48,001 and $70,000 to the lower rate of 17.5%, and an increase of the 10.5% threshold from $12,000 to $24,000. This would benefit all full-time income earners but especially targets middle-income earners. For example, a dual-income earning household with a combined income of $100,000 would save over $4,000 a year;
reducing the tax burden of high income earners by eliminating the top tax bracket and reducing the $48,001+ rate to 26%. The model also reduces company and trust tax rates are reduced to 26% – reducing incentives to income shift and minimise administrative burden. This option would save a professional, earning a salary of $120,000, more than $4,300 each year; 
an increase to every threshold without adjusting any of the tax rates; and
a reduction of the company tax rate to 13%. This would make New Zealand the second most tax competitive country in the OECD.
ENDS

ENQUIRIES:

Jordan Williams 021 762 542 

NOTES TO EDITORS:

The New Zealand Taxpayers’ Union is an independent and membership-driven activist group, dedicated to being the voice for Kiwi taxpayers in the corridors of power.

The Taxpayers’ Union operates a 24-hour media line for comment on taxpayer issues. Representatives are available on (04) 282 0302.

High-resolution images and logos are available on request or online at http://www.taxpayers.org.nz/resources

    Print       Email

You might also like...

Police officer seriously assaulted in Rotorua

Read More →