Bracket Creep is a $2.1 Billion Problem in New Zealand

April 13, 2016 New Zealand Taxation

24-02-2005Outdated tax brackets and creeping inflation are leeching away billions each year from taxpayers in New Zealand.

On April 12th the ACT Party issued a statement claiming that between 2010 and 2017 New Zealand taxpayers would have lost as much as NZD 2.1 billion due to “bracket creep”.

Bracket creep is a situation whereby growth in nominal wages does not lead to real increases in spending power, due to the twin effects of rising inflation levels and the taxpayer moving up to a higher tax bracket.

According to the ACT Party, over the years between 2010 and 2017 the average New Zealand household would have lost NZD 2 500 in total due to bracket creep, leading to a loss at a national level of approximately NZD 2.1 billion.

In the new statement, the ACT Leader David Seymour was quoted as saying “…National has been signalling tax cuts for next year, but it’s not clear whether these tax cuts will even be enough to offset the cost of seven years of bracket creep. Unless bracket creep is stopped, minor tax cuts will be a purely tokenistic gesture from another tax-and-spend government.”

Photo by thornj