Media statement
For immediate release
Tuesday, 15 May 2007

Tax bracket creep must end

United Future revenue spokesperson Gordon Copeland today strongly agreed with the conclusion of a new report from the Centre for Independent Studies calling for an end to “bracket creep” in the New Zealand tax system.

“This is a policy that I have consistently argued for since coming into Parliament in 2002,” said Mr Copeland.

“The failure of the Labour-led Government to end bracket creep by adjusting the tax thresholds to match inflation has seen real rates of income tax increase each year since the current rates were fixed by the Labour Government on 1 April 2000.

“Cumulative inflation for the 8 year period 1 April 2000 to 1 April 2008 will be about 22.6 %. This means that the tax thresholds should now be altered as follows:

19.5 cents per $1 from $38,000 to $46,588
33 cents per $1 between $38,000 and $60,000 to between $46,588 and $73,560
39 cents per $1 over $60,000 to over $73,560

“Although, through the Working For Families package, Dr Cullen has given significant tax relief to working families (which I applaud) this should not be allowed to obscure the reality that millions of other New Zealand taxpayers have seen their taxes increase, in real terms, by 22.6% over this 8 year period.

“The seriousness of this issue is illustrated by the figures set out by the Centre for Independent Studies.

"A person on the average wage in 2000 of $36,000 would now need to be earning $43,000 just to maintain an equivalent income in real terms.

"However, because no adjustment has been made to the brackets they are now paying an extra tax of $2,400 per year. Their after tax income – the amount they have to live on – has fallen by that amount.

“In the 2005 Budget Dr Cullen gave an undertaking that he would end “bracket creep” by adjusting the tax thresholds to match inflation but only for a 3 year period from 1 April 2005 and to take effect from 31 March 2008.

"Even if he carries through on that in Thursday’s Budget those millions of taxpayers will still be paying, in real terms, much higher taxes than they were on 1 April 2000 because Dr Cullen has failed to address the backlog from that date until 31 March 2005.

""His announced adjustment to the brackets was to $40,324 and $63,372, still well short of the $46,588 and $73,560 which United Future has been calling for and as set out above."

“I will continue to call on Dr Cullen to bring an end to “bracket creep”.

"As the Centre for Independent Studies points out, tax thresholds should be adjusted to match inflation every year just as benefits are (not to mention duties on petrol, alcohol and cigarettes!)

"The present lopsided approach is both unfair and inequitable and explains why all those who do not qualify for the Working for Families package are continuing to see the purchasing power of their after-tax income eroded year in and year out,” said Mr Copeland.

ENDS

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