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New Zealanders on the average wage today could be paying higher taxes in three years’ time without enjoying a better lifestyle if tax thresholds aren’t adjusted for inflation.

Taxation bracket creep happens when income is adjusted for inflation and earnings are pushed into the next tax bracket.  More and more New Zealanders are moving into higher tax brackets solely because of inflation without being better off. In some countries, tax brackets are automatically linked to rising living costs but, in New Zealand, our tax brackets have remained unchanged for almost a decade. The result is that more New Zealanders are paying higher taxes without their incomes keeping up.

If you look at what you paid in weekly rent 10 years ago, or remember what your fuel and grocery bill was, you quickly realise that your money went further 10 years ago and that a dollar spent today doesn’t buy what it did back then. We’re all paying more for everyday items.

When tax thresholds were set almost 10 years ago, those tax thresholds would have looked about right. Today, $70,000 no longer seems appropriate to be New Zealand’s highest tax bracket. Most people would consider that to be better set at six figures. And people on the average wage are being hit hard too as they have seen themselves move over the last few years into the 30 percent bracket.

National believes it’s time to reset those tax brackets by linking them to the cost of living so that New Zealanders don’t move into higher tax brackets when their incomes aren’t keeping pace with rising costs of living. We even want to go a step further: to make certain the system is reviewed every three years so that correct adjustments are made for inflation.

Doing this would give New Zealanders earning $52,000 a year a saving of $430 when the brackets are first adjusted, with a total saving over 10 years of $5,990. Those earning over $70,000 could keep $620 more a year.

Responsible economic management means more money to benefit hard-working New Zealanders instead of being wasted on bad policies like the $300 million spent on Government’s working groups or the $3 billion given to a forestry trust led by a former NZ First MP.

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