Dear ,

While the team at the Taxpayers' Union are flat out on the 'Scrap Three Waters' campaign, and exposing David Parker's awful replacement to the Resource Management Act – we also have an eye on Grant Robertson's election year budget to be delivered in just a few weeks time.

Yesterday, The Dominion Post / Stuff published an opinion piece I wrote on the indexation of income tax brackets – another major campaign focus of the Taxpayers' Union.

You can read the piece on the Stuff.co.nz website here.

Without indexation, each year, as inflation rises, New Zealanders are dragged into higher tax brackets and pay a higher share of their income in taxes despite being no better off in real terms. Economists call this ‘fiscal drag’ or ‘bracket creep’ and it means that someone on the minimum wage working more than 40 hours a week now pays 30% tax on any additional earnings.

If tax brackets had been indexed with inflation since 2010 – like we already do with welfare or superannuation payments – someone earning the median wage of about $62,000 would have an after-tax take-home pay packet $2,000 more than they receive today.

Grant Robertson should be reining in inflation by limiting the splurge of taxed and borrowed money into an overheated economy. But here’s where perverse incentives kick in: How can any finance minister be trusted to fight inflation when, thanks to bracket creep, they profit from it as more money pours into the government coffers?

It’s a glaring conflict of interest that frankly I should have addressed and we adopted our pioneering inflation-targeting regime 33 years ago when I was Minister of Finance.

I won’t hold my breath that Grant Robertson will buck the trend in the budget next month, but it is certainly something Jordan, Callum, and the whole team will be making sure isn't lost in the government's election year spending splurge.

The full opinion piece is here.

Thank you for your support.

Ruth @ the Taxpayers' Union.

~

Hon. Ruth Richardson
Board Member
New Zealand Taxpayers’ Union